What Is Contract Farming?

According to the United States Department of Agriculture, contract farming accounts for 99.5% of all chickens raised for food in the United States. This means nearly every chicken in the country is raised by a farmer under contract. 

What is contract farming? To put it simply, a farmer (also referred to as a “grower”) enters into a contract with an integrator, or meat processor. More often than not, the integrator is a major corporation, like Tyson, Pilgrim’s Pride, or Perdue. Big Meat corporations are in control. 

These relationships shift the lion’s share of financial risk and responsibility onto farmers. Farmers claim they are promised financial success but soon discover that the contract system keeps them in a cycle of debt. 

Contract farming creates a debt spiral

Farmers entering into contracts with a new integrator must build barns or facilities to the company’s exact specifications. Many farmers take out loans to the tune of hundreds of thousands of dollars—sometimes over a million dollars—to finance construction. Once farmers get close to paying off that loan, they’re often asked to make expensive changes and upgrades.

“They’re always coming back to you when you get your houses close to being paid for to make these additions or renovations. There’s always this new thing, ‘it’s gonna save the industry and you have to have it, but we’re not going to make you get it but we’re not gonna bring you any more birds until you do it.’ It’s kind of making it mandatory without actually saying ‘mandatory.’” 

—Craig Watts to Modern Farmer

This is how farmers come to feel like “indentured servants.” The debt keeps them trapped in the system. They must continue taking on debt to stay afloat. Many feel as though they can’t escape. 

The Tournament System: Unfair Pay in Contract Farming

The pay structure for contract growers presents its own problems. Farmers under contract enter a “tournament” group with other farmers delivering birds to a slaughterhouse in a given period. The integrator calculates an average base fee for all contractors in the group by dividing, for each grower, the cost of chicks, feed, and veterinary services provided by the total live weight of the birds delivered. Growers with lower-than-average costs earn a premium over the base fee and thus a higher per-pound rate, while those with higher-than-average costs receive deductions and a lower per-pound rate. Though this may sound like a strong incentive for farmers to perform well, contract farmers do not own the feed, the medications, or even the birds themselves. Ultimately, they have little control over how their flocks are raised. 

Because farmers do not control the health of the chicks they’re provided, the quality of the feed, the medications they get, or the timing of transport to slaughter, the system is more of a lottery than a competition.

Companies have also been accused of retaliating against growers for complaining. Paula Boles, a Transfarmation^™ farmer and former Tyson contract grower, told Modern Farmer that challenging company representatives would result in becoming stuck at the bottom of the tournament group. “If you complain too much, they just start sending you bad flocks of chickens,” she said.

In 2022, the median household income from poultry farming was −$4,069.

How did we get here?

It wasn’t always this way! In 1950, 95% of chicken farms were independent. Only five years later, that number dropped to a lowly 10%. Today, the top four companies (Tyson, Pilgrim’s Pride, Perdue, and Sanderson) control nearly 60% of the market, and local markets are even more concentrated.

In a healthy and fair agricultural economy, farmers can be independent and sell to a variety of buyers. But major corporations have dominated the market and curtailed such freedom. Contract farmers are completely beholden to their integrators.

The contract system works exactly as it was meant to. It fails farmers and workers in order to boost profits for shareholders and executives. We need a food system that’s equitable and sustainable.