Rss poultry2012

First the Chicken: The Origins of First the Chicken: The Origins of Flexible Accumulation in AgrifoodFlexible Accumulation in Agrifood

Douglas H. Constance*, Jason Konefal*, Douglas H. Constance*, Jason Konefal*,

William D. Heffernan** and Anthony Rainey*William D. Heffernan** and Anthony Rainey*

*Sam Houston State University *Sam Houston State University

**University of Missouri - Columbia**University of Missouri - Columbia

Presentation for the annual meeting of the Presentation for the annual meeting of the

Rural Sociological Association: SAFRIG Mini-Conference Rural Sociological Association: SAFRIG Mini-Conference

July 28, 2012July 28, 2012

The PremiseThe Premise

If you want to understand agrifood If you want to understand agrifood globalization, you should study the poultry globalization, you should study the poultry industry. industry.

The poultry industry is the original model The poultry industry is the original model of neoliberal structuring and flexible of neoliberal structuring and flexible accumulation in agriculture. accumulation in agriculture.

The FrameworkThe Framework

Commodity Systems AnalysisCommodity Systems Analysis (Friedland 1984) (Friedland 1984)

Agrifood RegimesAgrifood Regimes (Friedmann and McMichael 1989) (Friedmann and McMichael 1989)

Agrifood RegimesAgrifood Regimes

Agrifood Regimes: Friedmann and McMichael (1989)Agrifood Regimes: Friedmann and McMichael (1989) 1880s to 1920s – Settler/Colonial (Empire - Britain)1880s to 1920s – Settler/Colonial (Empire - Britain) 1940s to 1970s – Agricultural Surplus (State - US)1940s to 1970s – Agricultural Surplus (State - US)

The 3The 3rdrd. Agrifood Regime (Market as hegemon). Agrifood Regime (Market as hegemon) Corporate Corporate (McMichael 2005)(McMichael 2005) Corporate-Environmental Corporate-Environmental (Friedmann 2005)(Friedmann 2005) Financialized Financialized (Burch/Lawrence 2009)(Burch/Lawrence 2009) Neoliberal Food Neoliberal Food (Pechlaner /Otero 2010)(Pechlaner /Otero 2010) Nutritionalization Nutritionalization (Dixon 2009)(Dixon 2009) Food from Somewhere Food from Somewhere (Campbell 2009)(Campbell 2009)

Agrifood RegimesAgrifood Regimes

Corporate Food Regime Corporate Food Regime (McMichael 2005)(McMichael 2005)Based on neoliberal restructuring (Harvey 2005)Based on neoliberal restructuring (Harvey 2005)Consolidation/concentration of agrifood sectorsConsolidation/concentration of agrifood sectorsAccumulation by dispossession Accumulation by dispossession Consumer food crisesConsumer food crises

Agrifood RegimesAgrifood RegimesGlobalization Project Globalization Project (McMichael 1996)(McMichael 1996)

Contested Project – (Bonanno and Constance 2008)Contested Project – (Bonanno and Constance 2008)

Corporate response to success of social-Corporate response to success of social-democratic movements of Fordismdemocratic movements of Fordism

Capital Flight – avoid regulations in NorthCapital Flight – avoid regulations in North Decentralization of Production – multi-site sourcingDecentralization of Production – multi-site sourcing Informalization of Labor - anti-union, minorities, casualizationInformalization of Labor - anti-union, minorities, casualization Global Sourcing – global commodity chains Global Sourcing – global commodity chains

The LiteratureThe Literature

Living on Contract Living on Contract (Little and Watts 1994)(Little and Watts 1994)

Flexible form of organizing commodity chainsFlexible form of organizing commodity chainsProvides control without liability and Provides control without liability and

responsibility responsibility

Poultry Agro-Industrial Districts in US Poultry Agro-Industrial Districts in US South South (Boyd and Watts 1997)(Boyd and Watts 1997)

Early model of flexible accumulation Early model of flexible accumulation

History of Poultry IndustryHistory of Poultry Industry

1930s - Northeast US: Independent system 1930s - Northeast US: Independent system servicing urban markets. servicing urban markets.

1940s – Northeast production for the war1940s – Northeast production for the war

1940s- 50s – Southeast US dominates 1940s- 50s – Southeast US dominates productionproduction

Industry Moves South: 1940sIndustry Moves South: 1940s

Abundance of small marginal farmersAbundance of small marginal farmersFarmers suffering from cotton crop failures Farmers suffering from cotton crop failures

History of sharecroppingHistory of sharecroppingPlanters, merchants and feed dealers Planters, merchants and feed dealers

extending informal creditextending informal credit

Availability of surplus labor for processingAvailability of surplus labor for processingWomen and minorities (non-union)Women and minorities (non-union)

Vertical Integration: 1950s/1960s Vertical Integration: 1950s/1960s

Rationalization of the commodity chain Rationalization of the commodity chain

Genetics, hatcheries, feedmills, contract Genetics, hatcheries, feedmills, contract production, processing and transportationproduction, processing and transportation

Ralston Purina, Cargill, and Tyson emerge Ralston Purina, Cargill, and Tyson emerge as dominant companies as dominant companies

Independent production “non-existent”Independent production “non-existent”

Agro-Industrial DistrictsAgro-Industrial Districts

NW ArkansasNW ArkansasNorth GeorgiaNorth GeorgiaNorth AlabamaNorth AlabamaNE Texas/NW LouisianaNE Texas/NW LouisianaSouth Central North CarolinaSouth Central North Carolina

US Broiler Production Map

The Southern Model (Constance 2008)

The modern broiler system “possessed a distinctive southern accent from its inception” (Boyd and Watts 1997:184)

Southern ModelSouthern Model

Distinct labor processDistinct labor process

Processing – informal labor relationsProduction – sharecropping/contracts

Southern Model: ContractsSouthern Model: Contracts

1940s – 1960s: informal contracts changed 1940s – 1960s: informal contracts changed to formal contracts to formal contracts

Change from “a simple credit arrangement Change from “a simple credit arrangement to a tightly interlnked credit, input, and labor to a tightly interlnked credit, input, and labor contract” contract” (Boyd and Watts 1997) (Boyd and Watts 1997)

Poultry Contracts Poultry Contracts

Company provides chicks, feed, mgmt. Company provides chicks, feed, mgmt.

Grower provides land, labor, power, and Grower provides land, labor, power, and capital for growout barns. (asset specificity)capital for growout barns. (asset specificity)

Long term debt and short term contractsLong term debt and short term contracts

Quality of contract for grower erodes with Quality of contract for grower erodes with horizontal integration horizontal integration (Heffernan 2000).(Heffernan 2000).


Contract system allows the integrator to Contract system allows the integrator to take advantage of the chief assets of the take advantage of the chief assets of the family farm – cheap, ‘docile’, and flexible family farm – cheap, ‘docile’, and flexible labor – without the burdens of equity or the labor – without the burdens of equity or the costs of wage labor. costs of wage labor. (Boyd and Watts 1997) (Boyd and Watts 1997)


Social relations of production: independent Social relations of production: independent commodity producers are subordinated to commodity producers are subordinated to “management” through a distinctive labor “management” through a distinctive labor process. process. (Boyd and Watts 1997)(Boyd and Watts 1997)


Grower Dependent and VulnerableGrower Dependent and Vulnerable

““contracts are batch to batch” … “fear of contracts are batch to batch” … “fear of being cut off” (being cut off” (Heffernan 1984) Heffernan 1984)

““propertied laborer” (propertied laborer” (Davis 1980Davis 1980)) ““serfs on the land” serfs on the land” (Breimyer 1965)(Breimyer 1965)

““only slaves left in the country” (only slaves left in the country” (Wellford Wellford 1990)1990)

Poultry Contracts: ConclusionsPoultry Contracts: Conclusions

Production contracts are “detours” around Production contracts are “detours” around “obstacles” to capitalist penetration of “obstacles” to capitalist penetration of agriculture – agriculture – (Mooney 1982) (Mooney 1982)

Provides control without ownership/liabilityProvides control without ownership/liabilityForm of labor discipline. Form of labor discipline.

System being adopted around the world System being adopted around the world Development agencies (IMF/WB/FAO)Development agencies (IMF/WB/FAO)Expanding into other agrifood sectorsExpanding into other agrifood sectors

Southern Model

The vertical integration system developed in the US South around agro-industrial districts is THE MODEL for the low cost production systems that are the social basis of competitiveness in a now global industry. (Boyd and Watts 1997)

Horizontal Integration: 1960s/2000s Horizontal Integration: 1960s/2000s

Commodity cyclesCommodity cycles

Mergers and acquisitionsMergers and acquisitions

Sector consolidation/concentrationSector consolidation/concentration

CR4 – 1963: 14%CR4 – 1963: 14% CR4 – 2009: 57% CR4 – 2009: 57%

Tyson Foods, Inc.: An ExampleTyson Foods, Inc.: An Example

1930s – John Tyson 1930s – John Tyson 1947–Tyson Feed & Hatchery, Inc. 1947–Tyson Feed & Hatchery, Inc. 1958 – buys first processing plant.1958 – buys first processing plant. 1963 – Tyson Foods, Inc.1963 – Tyson Foods, Inc. 1978 - buys Wilson Foods 1978 - buys Wilson Foods 1984 - buys Valmac Industries 1984 - buys Valmac Industries 1986 – buys Lane Processing1986 – buys Lane Processing 1989 – buys Holly Farms1989 – buys Holly Farms

Tyson Foods Tyson Foods

1998 – buys Hudson Farms, now largest 1998 – buys Hudson Farms, now largest broiler firm in US and worldbroiler firm in US and world

2001 - buys IBP, largest beef and pork 2001 - buys IBP, largest beef and pork processor in the US and worldprocessor in the US and world

The Problem: VI + HI = MO The Problem: VI + HI = MO

VI + HI = MOVI + HI = MO (Constance et al. 2012)(Constance et al. 2012)

Monopsony OpportunismMonopsony OpportunismPredatory BehaviorPredatory BehaviorForm of labor discipline Form of labor discipline

(Vukina and Leegmonchai 2006)(Vukina and Leegmonchai 2006)

Legitimation Crisis: Legitimation Crisis: Social Movement ResistanceSocial Movement Resistance

Poultry growers want USDA/USDOJ to Poultry growers want USDA/USDOJ to protect them from market power of the protect them from market power of the poultry companies. poultry companies.

National Contract Poultry Growers National Contract Poultry Growers AssociationAssociation

GIPSA Hearings (Grain Inspection GIPSA Hearings (Grain Inspection Packers Stockyard Adm. Packers Stockyard Adm.

USDOJ/USDA Public Workshops Exploring USDOJ/USDA Public Workshops Exploring Competition in Agriculture (2010)Competition in Agriculture (2010)

Five workshops: general/seeds; poultry; Five workshops: general/seeds; poultry; dairy; livestock; margins. dairy; livestock; margins.

Analysis of grower testimonyAnalysis of grower testimonyCompanies are Regional MonopsoniesCompanies are Regional Monopsonies

Suppress grower organizationSuppress grower organizationHold Up - Technology UpgradesHold Up - Technology Upgrades

Long term debt, short term contracts Long term debt, short term contracts Maintain debt (asset specificity) Maintain debt (asset specificity)

Tournament Ranking SystemTournament Ranking SystemLack of transparencyLack of transparencyChicks/feed/weight Chicks/feed/weight

Grower TestimonyGrower Testimony

Contract “renewals”Contract “renewals”From long to short termFrom long to short termSign contract or lose the farmSign contract or lose the farmAsset specificity leads to extortionAsset specificity leads to extortion

Fear of RetaliationFear of RetaliationBlacklist/poor chicks/bad feed/delaysBlacklist/poor chicks/bad feed/delays

Debt BondageDebt BondageAsset rich but cash poorAsset rich but cash poor

DebtDebt

““Once the grower bites the hook and goes Once the grower bites the hook and goes deep into debt they start a cycle of debt deep into debt they start a cycle of debt burden from which it is very difficult to burden from which it is very difficult to escape.” escape.”

ContractsContracts

““Before the end of the initial 10-year term Before the end of the initial 10-year term the company changed that contract to a 1-the company changed that contract to a 1-year term. I realized that the company year term. I realized that the company could change contracts easily by could change contracts easily by threatening to stop placing birds if I threatening to stop placing birds if I refused to sign.” refused to sign.”

ContractsContracts

““It’s only a contract until they bring you the It’s only a contract until they bring you the next one, you know. It might say 15 years, next one, you know. It might say 15 years, but two months from now they might but two months from now they might decide to change that contract. So they decide to change that contract. So they bring you a new one and you sign it, or bring you a new one and you sign it, or you don’t grow chicks, you know.” you don’t grow chicks, you know.”

ContractsContracts

““Contracts can be changed or terminated Contracts can be changed or terminated at any time for any reason and as growers at any time for any reason and as growers we have no recourse. And we’re forced to we have no recourse. And we’re forced to sign a contract whether we like it or not on sign a contract whether we like it or not on a take it or leave it basis because, you a take it or leave it basis because, you know, we can either sign it or face know, we can either sign it or face bankruptcy.” bankruptcy.”

Upgrading – HoldupUpgrading – Holdup

““And one of the things that always came And one of the things that always came up was upgrades and how the companies, up was upgrades and how the companies, the integrators would keep growers in debt the integrators would keep growers in debt with upgrades.” with upgrades.”

The Tournament The Tournament ““I think it’s unfair because of the lack of I think it’s unfair because of the lack of

transparency gives the company the ability transparency gives the company the ability to terminate or penalize growers based on to terminate or penalize growers based on false claims of poor performance that, in false claims of poor performance that, in fact, is out of the grower’s control?”fact, is out of the grower’s control?”

Tournament Tournament ““Anybody in this room knows that there is Anybody in this room knows that there is

no such thing as a level playing field, the no such thing as a level playing field, the inputs. There’s just too many variables: inputs. There’s just too many variables: quality of chicks; quality of feed; the feed quality of chicks; quality of feed; the feed deliveries. The stuff that’s outside of our deliveries. The stuff that’s outside of our control is almost endless.”control is almost endless.”

Information AsymmetryInformation Asymmetry

““Feed is formulated and mixed, loaded Feed is formulated and mixed, loaded and weighed by the company and then and weighed by the company and then delivered to the farm. Feed must be delivered to the farm. Feed must be accepted by the grower on the company’s accepted by the grower on the company’s say so. And there’s no guarantee that the say so. And there’s no guarantee that the feed is of the highest quality or quantity.” feed is of the highest quality or quantity.”

MonopsonyMonopsony

““In 1963 the top four firms controlled 14% In 1963 the top four firms controlled 14% of the chickens slaughtered. Today it’s of the chickens slaughtered. Today it’s roughly 57%. And now it’s not uncommon roughly 57%. And now it’s not uncommon for a grower to have to do business with for a grower to have to do business with only one company in their area.” only one company in their area.”

Economic ConcentrationEconomic Concentration

““So you’ve got consolidation on the retail So you’ve got consolidation on the retail side and you’ve got vertical integration on side and you’ve got vertical integration on the production side. And that can lead to a the production side. And that can lead to a lot of imbalance in the system.” lot of imbalance in the system.”

The Problem: VI + HI = MO The Problem: VI + HI = MO

Regional MonopsoniesRegional Monopsonies

Asset Specificity – debt dependencyAsset Specificity – debt dependencyHold Up – debt bondageHold Up – debt bondageThe Tournament The Tournament

Predatory Opportunism Predatory Opportunism Form of labor discipline Form of labor discipline

Araghi (2003)Araghi (2003)

““Slavish conditions of employment… Slavish conditions of employment… without visible enslavement.”without visible enslavement.”

Tyson International: Tyson International: Diffuse the Innovation Diffuse the Innovation

2003 – beef operations in China, Ireland 2003 – beef operations in China, Ireland and Russiaand Russia

2003 – broiler operations in Argentina, 2003 – broiler operations in Argentina, Brazil, China, Denmark, Indonesia, Japan, Brazil, China, Denmark, Indonesia, Japan, Korea, Malaysia, Mexico, Panama, Korea, Malaysia, Mexico, Panama, Philippines, Spain, UK, VenezuelaPhilippines, Spain, UK, Venezuela

Tyson International: Mexico Tyson International: Mexico

1987 joint venture with Trasgo de Mexico 1987 joint venture with Trasgo de Mexico and C. Itoh of Japan - CITRAand C. Itoh of Japan - CITRA

1994 Trasgo de Mexico - Tyson de Mexico1994 Trasgo de Mexico - Tyson de Mexico

2003 buys Nochistongo2003 buys Nochistongo

2003 largest “value added” producer 2003 largest “value added” producer

Tyson International: Mexico Tyson International: Mexico

Prototype : Mexico - after 20 years 3Prototype : Mexico - after 20 years 3rdrd. largest . largest overall and 1overall and 1stst. in value-added sales . in value-added sales

Return on Investment (ROI) in Mexico 30% Return on Investment (ROI) in Mexico 30% higher than UShigher than US

Followed its American customers South – Followed its American customers South – WalMart, McDonald’s, KFC, Burger KingWalMart, McDonald’s, KFC, Burger King

Regional Integration: Regional Integration: The Mexican Poultry IndustryThe Mexican Poultry Industry

#1 – Industrias Bachoco ($2B)#1 – Industrias Bachoco ($2B) #2 – JBS/Pilgrim’s Pride ($32B)#2 – JBS/Pilgrim’s Pride ($32B) #3 – Tyson/Tyson de Mexico ($28B)#3 – Tyson/Tyson de Mexico ($28B)

CR3 – 52% CR3 – 52% Increasing adoption of contract system. Increasing adoption of contract system.

JBS - Brazil JBS - Brazil

2005 – Buys Swift/Armour 2005 – Buys Swift/Armour Argentina (beef)Argentina (beef)

2007 – Buys Swift US 2007 – Buys Swift US and Australia (beef)and Australia (beef)

2008 – Buys Smithfield 2008 – Buys Smithfield Beef and Tasman Beef Beef and Tasman Beef

2009 – Buys Pilgrim’s 2009 – Buys Pilgrim’s Pride, Inc. (poultry) Pride, Inc. (poultry)

Mexico: Neoliberal RestructuringMexico: Neoliberal Restructuring 1984: Peso Crisis1984: Peso Crisis

IMF – Structural Adjustment LoansIMF – Structural Adjustment Loans

1995: NAFTA1995: NAFTAFDI; corn dumping FDI; corn dumping

Shifts from ejidos to private contractorsShifts from ejidos to private contractors

2007: Tortilla Crisis (Sin Maiz, No Hay Paiz)2007: Tortilla Crisis (Sin Maiz, No Hay Paiz)

Tyson: Diffuse the InnovationTyson: Diffuse the Innovation

2008 – buys Macedo, Avita, and 2008 – buys Macedo, Avita, and Frangobras of Brazil (poultry)Frangobras of Brazil (poultry)

2008 – joint venture with Godrej Foods of 2008 – joint venture with Godrej Foods of India (poultry)India (poultry)

2008 – joint venture with Hinchang Foods 2008 – joint venture with Hinchang Foods and Jinghai Poultry in China (poultry)and Jinghai Poultry in China (poultry)

2007 – joint venture with Cactus Feeders 2007 – joint venture with Cactus Feeders and Cresud in Argentina (beef) and Cresud in Argentina (beef)

Tyson - ConclusionsTyson - Conclusions

Corporate Philosophy: Corporate Philosophy: Segment, Concentrate, and DominateSegment, Concentrate, and Dominate

““We anticipate consumer demand, segment We anticipate consumer demand, segment a market, concentrate production and a market, concentrate production and marketing, and, subsequently, dominate marketing, and, subsequently, dominate that segment.” that segment.”

Neoliberalism and the Neoliberalism and the Southern ModelSouthern Model

Poultry industry is the preferred model of agrifood Poultry industry is the preferred model of agrifood globalization globalization Model of flexible accumulation Model of flexible accumulation Control without liability/responsibilityControl without liability/responsibilityCasualization of labor in production and processing – Casualization of labor in production and processing –

labor disciplinelabor disciplineModel of the “World Farm”Model of the “World Farm”

(see Burch 2005 on CP in Thailand)(see Burch 2005 on CP in Thailand)

ConclusionsConclusions

VI + HI = MOVI + HI = MO

MO = monopsony opportunism in productionMO = monopsony opportunism in productionBased on “debt bondage”Based on “debt bondage”

Growing monopsony power in retailing.Growing monopsony power in retailing. WalMart , food service, fast food driving the WalMart , food service, fast food driving the

commodity chains within the commodity system. commodity chains within the commodity system.

ConclusionsConclusions

If you want to see the preferred MODEL of If you want to see the preferred MODEL of global agrifood relations of production, global agrifood relations of production, study the poultry industry. study the poultry industry.

The MODEL is based on flexible labor and The MODEL is based on flexible labor and capital relations. capital relations.

The MODEL is form of sharecropping and The MODEL is form of sharecropping and a remnant of colonialism and slavery. a remnant of colonialism and slavery.