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April 1996, Volume 2, Number 2

Farmers, Meat Packers, and Rural Communities

The meatpacking industry increasingly relies on immigrant workers,
and these workers are transforming the midwestern rural communities
in which many of meatpacking plants are located. Storm Lake, Iowa,
for example, is a city of 8,800 that is about 10 percent minority,
largely because of an influx of southeast Asians drawn to the
non-union IBP hog processing plant.

About 24 percent of the children in K-12 classes are minorities,
and the school system says that it must spend money on English as a
Second Language and bilingual teachers. IBP counters that it has a
$36 million annual payroll in the area.

The US Attorney in April 1996 prosecuted 47 unauthorized aliens
for entering or remaining in the country illegally who working at a
chicken processing plant in Charles Lake, Iowa. All 47 were sentenced
to five years' probation and ordered not to illegally return to the
United State--if they are apprehended and prosecuted again, each
could be sentenced to up to six months imprisonment for violating
probation, and could face a felony charge for a second offense,
illegal entry, for which the sentence could be up to two years in

Spencer, Iowa, a city north of Storm Lake, refused to grant a
zoning variance to another meat-packing company after citizens
protested at public hearings that they did not want their town to
become another Storm Lake.

A similar story of immigrants moving into a rural community to
take meatpacking jobs that pay $7 to $8 per hour is unfolding in
Lexington, Nebraska, where the local IBP plant has a $56 million
annual payroll. According to local observers, most of the immigrants
first share a mobile home, then move to rental apartments, then
rental homes, and finally purchased homes.

The crime rate in Lexington has doubled over the past 10 years,
putting Lexington among the five northeast cities with the highest
crime rates--much of the crime involves drunk driving without
licenses and/or insurance. Every city official has taken a 16-week
Spanish Survival Course.

In early April, a federal judge ordered IBP to pay $7 million to
23,500 workers at 11 plants in six states for requiring the workers
to put on and take off protective clothing, and to sharpen their
knives--about 14 minutes each day--without pay. The Department of
Labor ordered IBP to pay the workers in 1988, and the company went to
court to oppose the DOL assessment. IBP was fined $2.6 million by
OSHA for record-keeping violations in 1987, and paid almost $1
million in 1989.

In most parts of agriculture, farmers tend to be numerous, small,
and dispersed, while packers and processors tend to be few in number,
large, and concentrated. As a result, there is often tension between
producers and packers who believe that the processors are "taking
advantage" of them by offering them such low prices that they cannot
raise wages for hired farm workers.

The beef industry provides a classic example of the conflict.
There are about 900,000 ranches that raise calves from birth until
they weigh about 800 pounds six to 10 months later. Then the 1,200
largest feedlots "finish" 60 percent of US cattle by feeding them
corn so that they add about 400 more pounds.

The three largest meatpackers--IBP, ConAgra's Monfort subsidiary,
and Cargill's Excel subsidiary -- slaughter and package 80 percent of
the feedlot beef cattle. Increasingly, meatpackers have signed
formula contracts with feedlots, so that feedlots outside of
"partnership agreements" fear they are getting ever lower prices.

So-called captive suppliers who get more or less a guaranteed
return are used, according to other feedlots, to drive down prices,
while the meat packers argue that special arrangements are made with
selected feedlots to improve meat quality. Some cattlemen are calling
for antitrust action to limit the power of the meatpackers or to
establish a cattlemen marketing approach.

A Department of Agriculture study of whether the meatpackers use
their market power to drive down cattle prices was not definitive.
The study, conducted by economists at Virginia Polytechnic Institute,
found no evidence of market manipulation, but did not reach firm
conclusions because the economic models were flawed.

The US has a balance of trade in meat--the US exported 1.5 million
metric tons of meat in 1995, two-thirds beef, worth $4 billion. Over
90 percent of US meat exports go to Japan, Canada, Mexico, and Korea.

About 20 percent of the 200,000 US workers employed in poultry
processing are union members.

Many of the poultry employees are single mothers and recent
immigrants who often leave poultry jobs; high turnover, plus the fact
that most poultry processing plants are in the south, where many
states have so-called "right to work" laws stipulating that workers
do not have to join the union to work in unionized plants--have so
far prevented unions from making inroads in the growing industry.
According to Tyson Foods, 11 of its 80 plants have unions. About half
of the workers at the have joined the union at the eleven plants.
However, the Laborers' International Union of North America (LIUNA)
won a union election in July 1995 at Sanderson Farms in Mississippi,
and LIUNA negotiated a first contract in October 1995 (Rural MN,
October 1995).

The number of broilers processed is about seven billion annually.

"IBP is ordered to pay more than $7 million in overtime wages,"
Wall Street Journal, April 3, 1996. Kenneth Freed, " Melting Pot of
Perceptions," Omaha World Herald, February 18, 1996. Steven A.
Holmes, " Iowa town mirrors national struggle with immigration
issues," New York Times, February 17, 1996. Ronald Smothers, "Unions
head south to woo Poultry workers," New York Times, January 30, 1996.
Michael Tarsala, "2 States' Meat Industries Tangle," Arizona
Republic, December 15, 1995. "Study of Meatpackers' Power
Inconclusive," Los Angeles Times, December 5, 1995. Ann Toner,
"Cattleman Decries Control Wielded by Meatpackers," Omaha World
Herald, November 28, 1995. Barnaby Feder, "The Stew over Beef," New
York Times, October 17, 1995.

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