Ensure that contract farming encompasses a price guarantee.

Egg prices have risen a year after US President Joe Biden established a $1 billion program for improving meat and poultry processing capacity in an effort to promote competition and slash retail prices. The US Consumer Price Index predicts a 60% increase in egg costs in 2022, while wholesale prices would rise by 300 percent. This increase in egg prices coincides with a significant decrease in the rates that chicken vendors are paid.

President Biden said, “As profits soar, grocery store prices go up, but the prices the farmers receive go down drastically.” The markets have been tilted as a result of four cattle corporations owning 85% of the livestock sector, establishing a cartel, and monopolising the pricing. As a result, commercial egg prices in January were nearly twice as high as they experienced in the same period in 2017.

However, considering that 96% of US poultry farmers work under contracts and the high expectations that economists consistently anticipate for contract farming, I fail to see why poultry producers should be receiving a terrible deal. Contract farming should benefit both the producer and the customer since it gives poultry producers more negotiating power and helps cut out many layers of intermediaries. However, as President Biden admitted, the primary cause of the growing food inflation was the enormous profits being extracted by the cattle businesses, which had, on the other hand, negatively impacted both farmers and consumers.

For example, in a quarter, the gross earnings of Cal-Maine Foods, which holds 20 percent of the US retail egg market, increased by 600 percent. Despite a massive 11% increase in sales and a rise in retail egg prices, the company’s earnings in the quarter ending in November 2022 climbed to $198 million; however, the gains did not go to the producer in the same proportion. “Making more money out of every egg” is how CNN described it.

It is not as though US poultry producers’ incomes have been declining recently. The National Chicken Council claims that during the 1990s, the amount chicken producers earn by weight has decreased when inflation is taken into account. Not just for broilers, but also for egg producers, income has been steadily declining. According to a previous assessment by Farm Action 2022, an organisation that opposes monopolistic control over agriculture and food, 71% of chicken farmers—for whom raising poultry is a stand-alone business—were either at or below the poverty level.

The weaker link always has a tendency to be abused when there is a concentration of power in a small number of contracting businesses. Contract farmers are a captive lot as Tyson Foods, Pilgrim’s Pride, Sanderson Farms, and Mountain Farm control more than half of the US egg market. It is true that the businesses who write the contracts give the chicks, feed, medications, veterinary care, and technical guidance; but, the poultry farmers are required to supply the land and housing, which is a costly endeavour, as well as the ongoing upkeep of the birds, for which they are paid.

The corporations have recently introduced a “tournament system” in which the most productive farmers with the healthiest chickens receive awards. However, the shocking thing is that the money provided to the winners is taken away from the portion of farmers who happen to be laggards.

Contracts provide farmers a market and guaranteed income, but farmers have frequently complained about unfair tactics, poor pricing, and being coerced into one-sided agreements. So much so that a few contract farmers sued in 2015 to stop the predatory, unjust prices and the ensuing spiralling debt. Interestingly, a $35 million out-of-court settlement was reached by Tyson Foods and Perdue Farms, two of the primary parties. This demonstrates how much more widespread the problem is and why stricter laws are needed. In the meanwhile, South Carolina contract farmers have launched another class-action complaint.

Furthermore, “The contract farming system relies on taking advantage of farmers,” as noted in Animal Outlook (September 2022). It is only a fantasy in such a situation to think that a person with the rank of SDM, as was suggested in the three Central legislation that have been dropped in India, can defend contract farmers’ rights from the monopolistic power of agribusiness behemoths.

As a research on ‘Broiler Farming in Punjab’ by Guru Angad Dev Veterinary and Animal Sciences University, Ludhiana, revealed that farmers complain of increasing corporate control and unfair practices. Large corporations may manipulate the markets because of their large institutional financing and volume advantages. Therefore, contract farmers have received negative net returns. 

One of its suggestions is to let the harmed party to file a lawsuit in a civil court. The US Agency for International Development conducted an intriguing research titled “Integrated Contract Broiler Farming: An Evaluation Case Study in India,” which unequivocally demonstrates that independent and non-contract farmers generate more earnings than contract farmers.

Put simply, farmers receive no compensation more as a result of contract poultry farming. The contract form of broiler farming only offers a “lower but assured return,” as both studies indicate. This is exactly what US contract farmers are saying similarly.

This is an equally terrible circumstance in the case of layers. In an effort to get a better price, poultry farmers in Tamil Nadu recently staged a demonstration outside the National Egg Coordination Committee’s office. According to the Telangana State Poultry Federation, the low price at which eggs are realised costs farmers over Rs 7,000 crore annually. Like with spices, they insist on putting up a board to control prices.

For this reason, we strongly believe that any agricultural contract, whatever of length, should be built around a system that ensures a price at least as high as the minimum support price, or MSP. Under contract farming, a price guarantee will guarantee a financially adequate existence.