The Meat Racket: The Secret Takeover of America's Food Business

by Christopher Leonard

  In a normal corporation, an ultimatum like this would likely have been taken to the company’s board of directors. But at Tyson, it was taken directly to Don, through his old friend Leland. The board of directors had no real authority over operations. In many ways, the CEO was powerless as well. Don Tyson had authority to fire the entire board and any executive he chose. As long as Don owned the special class of stock that gave him 80 percent of the shareholder voting power, he was the ultimate authority over operations at the world’s biggest meat company.

  Don Tyson caught a flight home, and soon he was back at his small office at company headquarters. Johnny Tyson still resided in the CEO’s oval office, just down the hallway from Don Tyson’s more modest workspace. Don Tyson sent out word to more than twenty senior leaders of Tyson Foods. He wanted to meet with them in his office. He wanted to listen to them, hear them out on any problems they might have with where the company was headed. He wanted to talk to them about Johnny. The senior executives were free to air whatever grievances they had, and Don Tyson promised he wouldn’t hold it against them.

  For roughly three weeks, Don Tyson held court in his office, closing the door behind each executive as he came inside to talk. Just down the hall, Johnny Tyson continued to act as the company’s CEO, fully aware of what his father was doing, and he wasn’t good at hiding his feelings. The tension was thick inside the long corridor of executive suites.

  Don Tyson could not have been happy with the stories he heard. Managers below Johnny Tyson felt that he was dead-set on turning the company into a big, branded enterprise, like Kraft Foods. Johnny Tyson wanted the brand to be a household name, respected and loved by consumers around the country. But his managers didn’t think the company had the profit margins to support that vision. Tyson Foods was still a commodity company at heart. It was a business built around producing huge volumes of cheap, consistent meat, seven days a week, every week of the year. Tyson didn’t sell the kind of higher-profit foods that Kraft Foods sold, like Philadelphia Cream Cheese, Oreos, and Ritz Crackers. Those were products that lived or died by their brand names. Most of Tyson’s meat products didn’t even carry a label.

  It appeared as if Johnny Tyson had forgotten the fundamental lesson that was burned into Don Tyson’s consciousness during the poultry crashes of the 1960s and 1970s. The company’s core strategy was to make food more cheaply than the competitor. Adding in costs made a company vulnerable to the inevitable downturns. John Tyson was building a multilayered pantheon of costly initiatives on top of this business. The marketing costs, the advertising costs, and the personnel that were being added at headquarters were all making Tyson too top heavy. The company was vulnerable in a volatile meat industry with thin profits. This was what Johnny Tyson’s lieutenants believed. But they couldn’t get the CEO to listen to them. They felt like he was leading the company to inevitable ruin.

  Don Tyson heard these executives out. And then he had to decide what to do about his son.

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  Tyson’s board of directors gathered for their regular meeting in May 2006. They were told that Johnny Tyson had an announcement to make.

  Johnny Tyson told the board he was stepping down. In public, the company portrayed the move as part of a long-planned succession plan to hand leadership off to Richard Bond, the company’s chief operating officer and former president of IBP.

  Tyson Foods quietly scrapped its Powered by Tyson campaign. The company focused less on People Development than it did on running its slaughterhouses at full speed. It was time to realign the company with its primary goal of pushing down costs and selling meat for the highest profit it could.

  In a way, it didn’t matter too much who was in the CEO’s office by 2006. By that point, thanks in no small part to Johnny Tyson’s ambition and leadership, the company had become a system far bigger than any one person could control. It was the biggest meat company in the world. No other firm could claim as much power over all three major meat industries: chicken, beef, and pork. But Tyson had done far more than just become the biggest player in the business. As it expanded, the company had redrawn the rules of meat production, reshaped the markets by which meat was sold, and changed the power structure of rural economies across America. To truly understand the nature of the changes Tyson wrought, it is helpful to look at the company from below. To see it from the perspective of hog farms and cattle ranches that were once independent but that now operate in Tyson’s shadow.

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  1. The company was initially called Iowa Beef Packers.

  2. Anderson didn’t launch IBP alone. He was helped by his partner, Currier Holman, according to the excellent history The Legend of IBP.

  3. Typically the contracts called for delivery within a certain date range, which could be as wide as a matter of weeks.

  CHAPTER 8

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  Squeal

  (1996–2011)

  IN 1996, an Iowa farmer named Chuck Wirtz walked along a piece of property his father had owned, a plot of land where Wirtz would build his future as an industrial hog farmer. Wirtz was inspecting a new pair of buildings unlike anything that had been built on his family’s property. He had borrowed $300,000 to erect the twin buildings and invested hundreds of thousands of his own dollars as well. He was going all-in on the hog business.

  Wirtz watched over the construction crews as they laid the concrete foundations and installed the heavy timber trusses of the new buildings’ roofs. While the two long barns resembled chicken houses on the outside, they were far more fortified and technologically sophisticated on the inside. They had automatic fan systems that kicked on when the temperature rose, and a series of sprinklers that sprayed a fine mist if fans couldn’t cool the air fast enough. The floors were slatted to allow manure to fall through, and a mazelike series of gates would keep the pigs inside separated into manageable groups. Each house would hold about two thousand pigs.

  Just a decade earlier, Wirtz would have considered the idea of raising four thousand hogs preposterous. But by the time Wirtz built his first set of confinement feeding barns, it would have been economic suicide to raise a herd any smaller. The number of slaughterhouses in Iowa was decreasing, and those that were left were getting bigger. The companies wanted pigs by the semitruck load, and they didn’t want to deal with farmers who sold their animals in small batches at roadside sales stations. Wirtz wasn’t interested in committing economic suicide. He was ready to embrace the future and learn how to raise hogs on an industrial scale. And he was ready to mortgage his farm to do it.

  What Wirtz didn’t know at the time was that his success or failure as a modern hog farmer would not be determined by the verdicts of free market or competitive enterprise. The old rules of farming no longer apply. What determines the fate of industrial hog farmers is the raw power of companies like Tyson Foods. Open markets have been replaced by contracts. Independence has been replaced by close relationships with transnational corporations. Wirtz’s foray into the hog business would reveal just how much control Tyson exerts over the hog business and anyone who tries to make a living doing it.

  * * *

  Wirtz was raised on a farm in Iowa, near the town of Whittemore. Like its neighboring communities, Whittemore wasn’t much more than a few streets laid out in a neat grid, with a feed store, restaurant, and post office, surrounded by an oceanic expanse of cropland. Kids in Whittemore, like Wirtz, knew a life of pigs, cows, and combines. Wirtz rode on the back of his father’s tractor as it rolled over the emerald fields of baby corn. He felt the wind blow through his hair and saw nothing but blue sky and open land around him. Because of moments like that, Wirtz knew he would do nothing else with his life but farm.

  Wirtz owned his first pig when he was seven years old, and he named it Pinky. He fed Pinky grass clippings and table scraps. He held the piglet in his lap, and he watched it flap its ears and scamper around the grassy yard.

  One day, Wirtz’s father told him it was time to take P
inky to market. The pig was fully grown, and it would be shipped to a nearby sale barn and then to slaughter. Wirtz cried when it was time to load Pinky onto the truck. He had spent years coddling and raising the pig, and he knew Pinky’s quirks and character traits in the intimate way that city kids know their dog’s. But his father explained that pigs were raised to be eaten, just the same as a stalk of corn or soybeans. So Wirtz helped load Pinky onto a truck and took him to a roadside barn where his father haggled with a man and settled on a price for Pinky’s flesh, and he said goodbye to his pig.

  Pinky was the last pig that Chuck Wirtz cried over. As he grew older, he showed a real talent for raising hogs, and he evolved toward his father’s view of seeing the animals as a kind of crop. Wirtz and his siblings built a hog shed in the backyard: a squat, rectangular little building with a mud floor where the pigs gathered for shelter. There was a muddy pit and a feed bin in front of the little shed where the great fat pigs wallowed and grunted and ate grain as their floppy ears hung down over their eyes. Mother pigs are called sows, and Wirtz knew his sows by name. Each sow had her own little pen with a bed of straw where she gave birth to a brood of piglets. She would lie down in there and let the piglets suckle until Wirtz came and opened the pen’s gate, letting the sow out to root through the mud and have her dinner. When the sow was finished, she would walk back to her pen and wait outside for Wirtz to notice her and come to open the gate and let her back with her piglets.

  Over the years, Wirtz watched over countless generations of piglets, and he learned how to spot the sick and weak ones with a quick glance. In Iowa, pigs that grow the fastest are called the “best doers,” and Wirtz was quick to spot good doers in a litter. There was real money to be made in this skill. Pigs were steady earning machines. The animals were known as “mortgage lifters” because farmers used them as a source of cash to pay down the debt they took on to operate the rest of their farms. It was hard to lose money raising pigs, and easy to turn a big profit. Pigs earned good money because the grain to feed them was cheap and the market for pork was still strong, yielding high prices for hogs. If the market price fell, farmers could simply cut back the size of their hog herd and wait for the price to rebound before adding more piglets to their farm. The profits of hog farming drove jealous competitions at the county fair, where local boys showed off their prize hogs and competed to raise the finest, most succulent pork chop.

  Chuck Wirtz did well at hog farming. He added more sows to the shed behind his family’s house and a number of “A-hut” buildings in the fields out beyond their yard—triangular little huts where the pigs lived in an open field of grain, more or less feeding themselves and raising their piglets with relatively little supervision.

  Chuck Wirtz’s hog herd became his family’s mortgage lifter. It helped anchor his family to their land, as his brothers took on the job of tending their father’s fields of corn and soybeans. In this way, the Wirtzes became a wealthy family, in the quiet way that Iowa families do. But it was hard to look at Wirtz and see a rich man. He often wore beat-up collared shirts and worn work pants with mud along their hems. Because of the way he made his living, Wirtz constantly exuded the slight whiff of hog manure. But together, he and his brothers built a family farm worth millions.

  Such was the economy in Iowa during the 1960s and 1970s that hard work on a farm could still generate wealth for an extended family. The wealth supported an archipelago of clean, prosperous towns throughout the state, with busy town squares, bustling department stores, and a thriving middle class.

  Indeed, it is helpful to think of Iowa not so much as a state but as one enormous farm. A visitor can travel day upon day over the two-lane highways of Iowa and pass nothing but cropland, a broad expanse of corn and soybeans, wide as the horizon, whipping by uninterrupted. Iowa is a flat table of black soil, some of the richest in the world, and towns like Whittemore were built on top of it with the single goal of raising as much food as possible from the fertile ground.

  The most noticeable structures are the towering, concrete grain silos and the little clutches of houses built at their feet that make up Iowa’s towns. The ground is crisscrossed with railway lines that carry corn and soybean loads from little towns to river ports where it is shipped to a global market. In towns like West Bend and Emmetsburg, there are lighted marquees that in other states would display the time and temperature but which in Iowa carry the most important metrics of life: the going price for a bushel of corn or soybeans.

  Over several generations, families like the Wirtzes built Iowa into a food-producing machine that remains the envy of the world. It is more efficient to raise a hog on a plot of ground in Iowa than almost anywhere else on the planet, due in no small part to the abundance of cheap corn and soybeans. Feed rations are the most expensive part of raising livestock, and it is cheaper to buy corn in towns like Whittemore, West Bend, and Emmetsburg than almost anywhere else. Iowa hog farmers have a critical cost advantage over farmers around the globe. Just saving a few pennies on each bushel of feed can mean millions of dollars in profits for a major pork producer. That’s why Iowa has historically been the epicenter of pork production in the United States, and will likely always be. In 2011 there were more pigs in Iowa than there were humans in Manhattan. It is estimated that at any given time, 10 percent of these 19 million pigs are on the highway, meaning 190,000 swine are rolling across the state’s blacktop on their way to a slaughterhouse or a farm.

  By the time he was in his early twenties, in 1982, Wirtz had expanded his hog herd, deciding to stay on the farm and raise his animals rather than attend college. He married a local girl name Trela, whom he knew through church, and started a family on the same plot of land where he was raised with his two brothers.

  As an adult, Wirtz had a manic temperament that made him perfectly suited to the seven-day workweek that hog farming required. He was up and fully dressed before sunrise most days, tending to his herd. By late at night his brain still raced with thoughts of how to improve his business by ordering the best genetic lines of sows or finding a new market in which to sell his hogs.

  But Wirtz’s skill and experience could carry him only so far. Any farmer will tell you that, at the end of the day, he lives or dies based on the markets. If there is not a profitable market in which farmers can sell their goods, all the hard work in the world can’t save them. And as Wirtz worked six days a week or more in Iowa, the market for hogs was starting to shift fundamentally. And the transformation was being driven by farmers hundreds of miles away, in places like Holdenville, Oklahoma, where Tyson Foods was offering them the chance of a lifetime.

  * * *

  In the early 1990s, Bob Allen saw an advertisement in the local newspaper. A chicken company called Tyson Foods was looking for farmers around Allen’s home of Holdenville. But the company didn’t want the farmers to raise birds. It was looking for them to build hog barns.

  Allen was intrigued. At the time, he leased some rocky pastureland around Holdenville where he raised about a hundred cattle. It was hard work, mending the fence lines and baling the hay necessary to feed his herd. The opportunity to build a hog farm for Tyson Foods meant he could consolidate his business onto one property, making it easier to manage. Like most farmers, Allen thought about his farm in terms of his children. He had four boys, and he wanted to leave them a business that would support them and keep them on their family’s land. Plenty of farmers seemed to have the same idea.

  Allen went to a crowded meeting in downtown Holdenville to hear what Tyson Foods had to offer him. Allen isn’t anyone’s idea of a pushover. It was hard to eke a living out of the grassy hill country around Holdenville, but hard men like Allen made it work. He had grown up accustomed to the seven-day workweek, and his only time away from farm work was his stint in the U.S. Army, when he fought in Vietnam. So he listened to the Tyson man’s pitch with a skeptical ear. Allen wasn’t looking to get rich quick or even make an easy living. He just wanted an operation he knew would pay hi
s modest bills. He was pleased with what he heard from Tyson. The company said it would line up loans for anyone interested in building a hog house. It would offer farmers a series of three consecutive three-year contracts, which would last almost the entire life of the ten-year loan they would take on to build the farm. The work would be constant, but Allen was used to that. What worried him was whether the project would provide a viable enough cash flow to cover the amount of debt he would take on. Allen had heard about chicken farmers in neighboring states like Arkansas who had gotten too deep in debt when building their farms and were forced into bankruptcy when their contract payments came in lower than they expected. But those farmers operated on contracts that lasted only one year, or in some cases from month to month. With Tyson promising to provide a farm income for ten years, Allen felt more comfortable borrowing the $500,000 it would take to build two farrowing farms.

  He talked the business proposition over with his neighbors and his wife. He thought about what it would mean for his boys. And in 1993 he took the plunge. He had a perfect piece of ground south of Holdenville that had been in his family for three generations where he planned to build his hog farm. With Tyson’s support, he expected the land could stay in his family for at least another generation.

  When he broke ground on his farm, he helped Tyson lay the foundation for its new industrial herds, which would eventually be shipped far beyond the hills of Oklahoma. Years later, the piglets would even be sent as far as 680 miles away, to farms outside little Iowa towns like Emmetsburg, West Bend, and Whittemore.

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