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July 2004, Volume 10, Number 3

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Migrants, Meat and Poultry

Laotian immigrants are reportedly buying small poultry farms in the southeastern US, including 75 who bought farms in northwest Arkansas in 2003. A 40-acre farm with three chicken houses typically sold for $350,000 in spring 2004, and required a 20 percent down payment to get a USDA guarantee for 90 percent of the loan.

Poultry processors such as Tyson Foods consider the farmers who raise chickens for them to be independent contractors. Tyson owns the chickens, and the farmers own the chicken houses and provide the labor to raise them, under the guidance of field technicians from the company that will process the chickens. In 2001, Oklahoma's Attorney General issued an opinion that defined contract farmers as "employees" of the poultry processing companies they work with because the companies have control over the operations.

Mississippi has about 25 poultry plants, each hiring 500 to 1,400 workers at wages that begin at $6 an hour. Bill Beardall of the Equal Justice Center in Austin announced that a $200,000 grant would support the opening of a center to serve as a bridge between immigrant and US poultry workers in Mississippi.

The federal poverty line is $18,850 for a family of four in 2004, and over half of the families in the Mississippi Delta have incomes below the poverty line, highlighting the fact that 20 percent of children in rural areas live in poor families, compared to 16 percent of children in metro areas. Reviews of the entrenched poverty in the Delta point to cotton mechanization that eliminated jobs a half century ago, the lack of development to create alternative sources of employment, and the emigration of young people, which makes the area less attractive to investors.

Concentration. The US food processing and retailing sector is consolidating rapidly. Food processing was relatively unconcentrated until the 1980s, when fewer and larger firms became dominant in meat processing, often re-opening closed plants with subsidies from state and local governments and hiring non-union immigrant workers to staff dis-assembly lines.

For example, the number of cattle slaughtering plants fell from 600 in 1980 to 170 in 2000, and for hogs from 500 to 180 during the same period. The US Justice Department, which uses the Herfindahl-Hirschmann Index (summing the square of each firm's market share) to measure concentration in markets, puts beef processing at 1,936 and pork processing at 1,036- numbers above 1,800 are considered highly concentrated, and those above 1,000 moderately concentrated.

Consolidation in meat processing, the largest manufacturing sector in rural America, is extending to farmers. The first industry in which processors relied on "contract farmers" was broilers and, since the 1970s, almost 100 percent of chickens have been grown in a vertical integration process in which processors supply feed and chicks, while farmers own the buildings and supply labor to raise the chickens. Less than five percent of hogs were raised under contract in 1980, but over 80 percent were in 2000, which helped to reduce the number of US hog farms from over 500,000 to 85,000 in 20 years.

The cattle industry is least concentrated and vertically integrated, in part because it has two segments- mostly small feeder cattle operations that raise calves, and generally larger feedlots that "finish" the cattle. Half of the feedlots have more than 32,000 cattle, and contract farming is spreading rapidly in the feedlot sector.

Concentration in production has been associated with rising per capita consumption of poultry, stable per capita pork consumption, and falling beef consumption. Most studies show economies of scale in farming and processing, suggesting that falling costs due to concentration contribute to rising per capita consumption. Overall, consumers spend less than 10 percent of their disposable income on food, and an increasing share of food spending is for restaurant meals and food consumed at home but largely prepared outside the home.

A major issue in the past decade has been the environmental consequences of large livestock operations. Eastern North Carolina has most of that state's 10 million pigs, second only to Iowa, in part because of relatively lax environmental regulations for hog farms, which house hogs in barns that each hold 900 to 1,200 animals. Waste is flushed into lagoons, where anaerobic bacteria break down pollutants biologically before it is sprayed on to fields.

In September 1999, Hurricane Floyd demonstrated that many lagoons were unable to keep hog waste out of rivers, and an effort was made to find alternatives to lagoons and spray fields. However, the alternatives are more expensive. If farmers are required to adopt them, the growth of the industry and thus the immigration of Mexicans to work in processing plants could be slowed.

Rural Policy. Most forecasts for rural America project a world of rich and poor counties, and urge the government to do more to protect "the world's store house of food and other natural resources." During the 1990s, half of the rural counties in the US lost people and jobs. These "losers" usually lacked retail centers or were primarily dependent on farming.

The counties that grew had economies based on attracting retirees and trade. Most economists recommend development policies that are people rather than place specific, but such policies often increase the mobility of residents, accelerating rural population losses.

Many analysts want to foster entrepreneurship in rural areas. In the US, firms with fewer than 500 employees are 99.7 percent of all firms, and they account for about half of private nonfarm output and employment. However, turnover among such firms is high: 550,000 new firms were created in 2002, and 584,000 closed.

A House bill raising corporate taxes by $100 billion over the next decade, and adding $140 billion in corporate tax breaks, included $9.6 billion for tobacco farmers to compensate them for ending a system of quotas and price supports that dates back to the Depression; the Senate provided $12 billion for tobacco farmers. Under the current tobacco quota system, farmers can produce specific amounts of tobacco for government-set prices, but these quotas have been reduced 50 percent since 1998.

According to the New York Times, rural America provided 23 percent of the votes in November 2000, and George Bush received 59 percent of rural votes. Republicans gain rural votes on cultural issues, including guns and abortion, while Democrats have emphasized the loss of manufacturing jobs and the continued troubles in the farm economy. Senator John Kerry (D-MA) believes that his running mate, Senator John Edwards (D-NC), will be especially effective in winning rural votes for the Democratic ticket among rural residents facing economic uncertainty.

In 1999, USDA settled a lawsuit filed by African American farmers who alleged that local USDA committees discriminated against black farmers in providing loans and other aid. Under the settlement Black farmers could file for compensation along two tracks. Track A promised an automatic payment of $50,000 if a claim was approved while Track B required a hearing before possibility greater compensation could be paid.

Some 94,000 farmers sought restitution, and 60 percent of the 22,100 farmers whose claims were reviewed under Track A were approved, as were 18 of 173 claims filed under Track B. However, 72,000 claims were rejected for being filed too late. There were almost a million Black farmers in the 1920s, and 30,000 today.