The contract era of farming
Today I am going to come back to the “60 Minutes” piece that ran a couple of weeks ago attacking pig farmers. There is one negative stigma that continues to grow in and out of the farming community: contract production.
The overall negative slant that Leslie Stahl put on the piece was that “these animals aren’t even owned by farmers.” I am fully aware that many friends within agriculture have concerns about the “chickenization of beef cattle” but let’s really dig into contracts. Isn’t a contract simply reaching an agreement about what you will be paid for services rendered? If you can ensure a profit for the next 10 years, who thinks that is a bad idea?
The contract grower scenario started in the chicken business. Today, contract growers exist in every commodity at some level. Recently, I was fortunate to speak at a Tyson turkey contract grower meeting and I met folks that have been caring for turkeys under contract for 30-plus years. They told me it has been a wonderful addition to their farming operation. They also told me it is tougher than it used to be to get a good contract. I don’t see that as a deterrent but rather a reason to be a better negotiator. When both sides win, both sides win!
I am aware there are companies in all phases of livestock looking to sign farmers into more contract growing arrangements. In my home state of Nebraska, I contend that it is the land of opportunity for farmers who want to feed chickens or pigs. Is pride of ownership getting in the way of some folks partnering with a company so they can maintain profitability in their operation and still be a stockman?
Nobody works at a job and then stops at the end of the pay period to ask their employer what his or her services were worth. Contract production is a risk management tool that makes sense for the structure of strength in American agriculture. You are transferring the market risk to someone else while still doing what you enjoy the most: providing daily care of critters as a good stockman.
It is interesting to note that if you mention contract production, people automatically think about the biggest meat companies like Tyson but that is certainly not where it ends. In fact, we are in our second year of producing Certified Piedmontese cattle for Lone Creek Cattle Company and it has been a great opportunity to produce a specialty product for a premium market. I also get calls on a regular basis asking us to produce Berkshire pigs for different entities of all sizes from all around the country.
The “Nebraksa Farmer” magazine recently published a piece about the eight things to look for when entering a contract for chickens and I think their No. 1 is worth sharing here.
Roger McEowen, a Kansas Farm Bureau professor of agricultural law and taxation at Washburn University School of Law, offered some advice to farmers who might be thinking of expanding their operation to raise chickens for Tyson.
1. Don’t let yourself be pressured into signing something you haven’t read. “There is somewhat less concern today than there was a decade ago,” McEowen says. “That’s because there have been a number of contract disputes that have made it through the court system, and Tyson and other poultry companies have become a little more cautious about what kind of clauses they put in those contracts. They used to just go out to a farm and bring along the paperwork and just slap it down on the hood of a pickup truck and say, ‘If you don’t sign, I’ll go offer the contract to your neighbor.’ A lot of people signed and regretted it later.”
I don’t think there is one style of production that fits everyone. I do know that while some constantly squeal about how they don’t get paid fairly for what they produce others are quiet and content that it is working. I don’t think a contract is right for everyone, but I also wholeheartedly believe that we should applaud those who are making it work.
At the end of the day, the most important thing we need to address is what opportunities do we need to secure to keep more families in livestock production? How do we inspire young families to be a part of the rural landscape? How do we minimize the risk so people are excited about caring for livestock on a daily basis, especially with the challenges Mother Nature has thrown at us lately?
Maybe the answer for most will be to seek a contract that creates a risk management scenario so their lender can give them a green light for the future. Contracts are not for everyone and all contracts are made to be negotiated; if the offer isn’t good for you, then wait or negotiate something that is right for your family. Most importantly, we need to find a way, on our individual operations and in our ag communities, to keep raising kids with all the benefits of life on the farm.
Editor’s note: Trent Loos is a sixth generation United States farmer, host of the daily radio show, Loos Tales, and founder of Faces of Agriculture, a non-profit organization putting the human element back into the production of food. Get more information at www.LoosTales.com, or email Trent at [email protected].
