Farm Aid Policy Article: USDA Issues New Regulations Protecting Contract Farmers

The USDA released regulations (PDF link) this week that will provide new, much-needed protections for contract poultry farmers.

Contract farming generally refers to a system in which a farmer raises or grows an agricultural product for a larger company. Contract poultry farmers invest their own money to build poultry barns to company specifications. Under contract, a company delivers the chicks to the grower who uses company feed and medicine to raise the chicks. The company retains ownership of the birds and dictates how the chicks are to be raised. The grown birds then go back to be processed by the poultry company for a previously agreed-upon price based on the birds’ weight.

A typical chicken house costs about $300,000 to build, and most companies encourage growers to build at least four houses, for an investment in excess of $1 million. Frequently, growers take out loans covering that entire expense, only to find themselves dropped by the company, often with little or no notice. While there exists the potential for fair contracts in this agricultural system, that has not been the case historically. Contract growers have typically been extremely vulnerable, the contracts tilted against the grower who is subject to the whims of the poultry company. These new regulations issued by the USDA’s Grain Inspection, Packers & Stockyards Administration will help change that system.

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