On January 28, Tyson Foods Inc. (TSN – $14.22) announced that it would raise poultry prices substantially as a result of higher feed costs.
Half the cost of getting a chicken to market revolves around feed, typically corn and soybean meal. Tyson claimed that a $500 million increase in these costs put a $24-million dent in Tyson’s fourth quarter 2007 profits. Continuing, unpredictable spikes in grain prices also prompted Tyson to pull its guidance predictions for 2008. While investment counselors flounder, environmentally responsible consumers enjoy a moment of schadenfreude. Factory farming of chickens is disgusting, dirty, and ultimately inhumane, both to animals and workers. Poultry farms produce as much as 200 million tons of manure yearly, including 235 pounds a day of ammonia from feces, which is released into the air in and around the farm. Further releases into watersheds magnify the inherently unsanitary nature of these operations. In 2002, the Political Economy Research Institute rated Tyson the 8th worst polluter on the Toxic 100 index, based on figures supplied by the EPA.
Most factory farms are located in regional poverty areas in the South. In 2004, leading poultry production states included Georgia, Alabama, and Arkansas. These concentrated animal-feeding operations, or CAFOs, don’t end up in posh neighborhoods. Instead, they occupy rural areas, where local residents desperately need the wages. According to the United Food and Commercial Workers, 71 percent of growers and their employees earn below poverty-level wages. They are forced to buy their own safety equipment, usually at inflated prices from the company store, and in some instances the cost is illegally deducted from their pay. From 1998 to 2004, Tyson, through its contractors, refused to pay workers for the time it took them to don this mandatory safety gear before beginning their shifts. More than 800 workers filed six separate lawsuits against Tyson and won. It was a pittance compared to their continuing losses.
Working conditions at factory farms are equally appalling. Poultry plant workers have twice as many injuries and illnesses as any other manufacturing sector. Workers repeat the same cutting and twisting motions thousands of times a day, making repetitive stress injuries endemic. The working environment is filled with high-speed saws and knives; lacerations and amputations are common. Work areas are often overcrowded, and workers jostle each other trying to complete the quota of 90 birds per hour, standing or walking on floors slick with blood and offal. Almost half of all poultry workers are Latino and/or female, and many do not have sufficient language skills, immigration status, or familiarity with the law to report their injuries in a timely manner in order to claim just compensation.
Factory-farming itself is inherently unfair. Tyson awards contracts, and the contractor must sustain the cost of building, repairs, improvements (even company-mandated ones), wages, and poultry losses due to disease or weather. In exchange, Tyson provides the chicks, feed, veterinary services, medication and technical advice, and sets the price it will pay for each bird. If a contractor, or grower, doesn’t like the terms, or falls into disfavor by demanding more support or better pricing, Tyson simply cancels the contract, leaving the grower holding the financial bag.
In 2006, the Environmental Protection Agency (EPA) concluded that concentrated animal feeding operations (CAFOs) were the primary source of river pollution in 29 states. A significant part of the problem is poultry farming, where litter used to cover the facilities, or fields, gets into waterways. This was the case in Oklahoma, where releases from a Tyson facility polluted Lake Tenkiller, which Tahlequah residents use for drinking water. Oklahoma Attorney General Drew Edmondson filed suit against Tyson, hoping to use the Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA (otherwise known as the Superfund Act), to mitigate the effects, but so far the EPA – which administers the Superfund – has been reluctant to set legal precedent by using CERCLA against factory farms, since manure is not classified as a CERCLA hazardous substance.
In 2005, Tyson – using its well-established Chicken defense – again insisted that its subcontractors were responsible for cleanup (Tyson had used this defense in several prior lawsuits). Edmondson and the Sierra Club disagreed. The court, using Tyson Foods v. Stevens as a precedent, agreed with Edmondson, ruling that – since Tyson’s control of poultry growers was so pervasive – Tyson was ultimately responsible. As of September, 2007, 25 senators (including Christopher Bond, R-MO) have signed S. 807, which would amend CERCLA to cover poultry farms by including manure as a hazardous substance. Opponents of S. 807 argue that factory farms are already regulated under other environmental laws. In fact, the EPA has failed to substantially control factory-farm pollution under any of its statutes, including the Clean Air Act. A 2001 EPA estimate showed that, of 13,000 factory farms, only 2,520 had received Clean Air permits.
A final adjudication and award of monetary damages, however, remains in limbo, and Tyson continues to pollute waterways and drinking water supplies with ammonia, arsenic, zinc and copper, creating high phosphorus levels which can lead to excessive algae growth, fish kills, and dangerous levels of known carcinogens.
From a broader perspective, meat itself is a luxury. Most of the world subsists on vegetable crops and grains like corn, whose price has skyrocketed due to increased ethanol production. In fact, most grain crops not devoted to ethanol go to raise meat, leading the world’s poor closer to starvation daily. According to a Jan. 29, 2008 article in the New York Times, Americans eat about eight ounces of meat a day – roughly twice the global average – and 30 percent of the earth’s arable land is either directly or indirectly involved in producing this precious commodity, resulting in one-fifth of the world’s greenhouse gases.
In 2005, John H. Tyson, Tyson’s CEO, made over $5.54 million in total compensation including stock option grants, with an additional $11.67 million in unexercised stock options from previous years. In October of 2002, Business Week cited Tyson’s board because 10 of its 15 board members had ties to the company (seven of them pervasively so). That same year, the CEO received a $2.1 million bonus for the successful acquisition of meatpacker IBP, even though Tyson Foods’ net income dropped 42 percent.
Shareholders and consumers alike suffer from Tyson’s mismanagement. Interestingly enough, Tyson also managed to use its infamous Chicken Defense when indicted by the Department of Justice in 2001 for a conspiracy to hire illegals in its Shelbyville, Tennessee plant. Tyson called the hiring managers "rogues" and denied any wrongdoing. Similar suits continue to crop up. When one associates with chickens, the ordure does occasionally hit the fan.
Disclosure: I don’t own Tyson Foods stock.