By Frank Morris
Imagine an idyllic painting of a farm, a big red barn down a windy road on green fields hemmed in by forested hills, a couple of horses trotting around.
That’s where Shawn Hinkle and his dad Ken Hinkle farm – for now.
Four red chicken houses, each stretching precisely 500 feet long, stand lined up like barracks on a military base. The elder Hinkle built this farm up with years of very early mornings, long hours tending livestock and a deputy sheriff’s salary.
My whole life is right here,” said Ken Hinkle looking out over the chicken houses. “This is life! This is blood running through that vein.”
But the Hinkles’ farm is bleeding out. Their enormous chicken houses are empty, save a few stray feathers, dusty machinery and sharp-smelling mulch.
“The single worst decision that I ever made was building those chicken houses,” laments Shawn Hinkle. “Because it’s put everything behind me and in front of me in jeopardy. And that’s a weight that will crush any man.”
The Deal
A decade ago, Shawn Hinkle signed a contract with Tyson Foods to supply fertile eggs to Tyson’s hatchery in Dexter, Missouri.
Tyson promised game-changing income, on a simple proposition: Hinkle was responsible for the land, labor, buildings, and machinery, while Tyson would provide tens of thousands of hens and roosters to Hinkle’s farm, ample feed and it would pick up the eggs and truck them back to Dexter.
Hinkle borrowed more than $2.5 million to build the chicken houses and equip them with Tyson-specified generators, fans and egg-gathering equipment. He committed to feeding all the birds twice a day, seven days a week, at times dictated by Tyson Foods, hiring staff and enlisting family to collect and hand pack tens of thousands of eggs a week.
“There’s been many a time where we’d spend 14, 16, 18 hours a day making sure things were going as best as they possibly can,” said Hinkle.
Over time, Hinkle said Tyson began to skimp on the number and quality of birds it delivered to his farm and the quality of the feed began to slip. Problems like these cut into his earnings, but he said there was nothing he could do about it.
“It was always our fault. Always. And that's just the relationship that you have,” said Hinkle. “You do the best you can with what you've been given. And a lot of the times what you've been given is not up to par.”
Tyson pioneered the system of “vertical integration” in the chicken business. It’s been a runaway success in terms of production efficiency and has been widely adopted across the industry, transforming the nation’s poultry farming. U.S. chicken meat production has climbed by almost 600% in half a century, with a lot fewer farmers involved. But, Kansas City lawyer Brandon Boulware says the vertical integration is a hardship for the farmers involved.
“These farmers essentially become sharecroppers on their own land,” Boulware said. “Tyson controls every aspect of the grow process. And there’s only one company that’s going to pay him for the chickens, and that’s Tyson.”
That was especially true in southeast Missouri. Tyson’s Dexter, Missouri, complex was the only chicken processing plant in the region, and Tyson was the only company farmers like Hinkle had to do business with.
And then, suddenly, last August, Tyson closed the Dexter plant.
“Monday morning at 7 o’clock, we get a phone call from our tech. And the tech says we’re shutting everything down,” recalled Hinkle. “Ok, what do we do now?”
The dilemma
Hinkle didn’t have any good options. Tyson sold the Dexter complex to Cal-Maine Foods, a company that produces table eggs. Tyson didn’t grant an interview for this story but did provide a written statement, which said the sale was part of an efficiency push.
"Closing plants is always a difficult decision,” the statement said. “In the case of the Dexter facility, the size and age of the plant made it inefficient to operate and prohibitively costly to improve.”
That explanation makes sense to Jada Thompson, an agricultural economist at the University of Arkansas. Old plants like the one Tyson had in Dexter are far more expensive to operate than new, larger, and much more automated facilities, she said. New plants need far fewer employees and they can also attract millions of dollars in tax incentives from local governments.
The margins in the chicken business are razor thin, Thompson said, and in order for companies like Tyson to stay profitable, they must continually sharpen efficiencies.
“This is just a matter of competition in the marketplace,” Thompson said.
Farmers such as Hinkle were vulnerable all along, according to Thompson, because Tyson was the only chicken company in the region.
It’s not feasible to transport live chickens for more than an hour or so between the hatchery and the farm and the processing plant. Most chicken farming is done within range of at least two processors, so that if any one plant closes the farmers supplying it may be able to go to work for one of the other processing companies in the area.
Thompson said bankers are increasingly hesitant to loan money to chicken farmers that aren’t in range of at least two processors or haven’t locked in lengthy contracts with processing companies.
“I think that there's an industry shift that's happening. And I think specifically because a lot of these plants have been closing, I think lenders are asking now for longer-term contracts, said Thompson.
Meanwhile, Tyson said it has worked to support employees and growers following the closure. The company that bought the operation in Dexter sells table eggs — something Tyson points to as a positive.
“Fortunately, we were able to reach an agreement to sell the Dexter facility to another food company, Cal-Maine,” Tyson’s statement said. “This sale supports the Dexter community by providing new employment opportunities for former Tyson team members and new growing opportunities for local farmers who previously worked with us.''
So Hinkle could, in theory, negotiate a contract with Cal-Maine.
Yet remodeling his chicken houses to meet Cal-Maine’s specifications, which HInkle said are very different than Tyson’s, would drive him deeper into debt.
Click here to see more...