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- [00:00]
Joe Weisenthal
What do you see on the horizon?
- [00:03]
Tracy Alloway
Uncertainty or opportunity?
- [00:05]
Joe Weisenthal
Whatever you see at pgm, we can.
- [00:08]
Tracy Alloway
Help you rise to the challenges of.
- [00:10]
Joe Weisenthal
Today when active investing and disciplined risk.
- [00:12]
Tracy Alloway
Management are needed most. Drawing on deep expertise across the world's public and private markets in pursuit of.
- [00:20]
Joe Weisenthal
Long term returns, our investments shape tomorrow today. Pursue your tomorrow with pgim, a leading global asset manager.
- [00:30]
Carmen Rodriguez
The forces shaping markets and the economy are often hiding behind a blur of numbers. So that's why we created the Big Take from Bloomberg Podcasts to give you the context you need to make sense of it all. Every day in just 15 minutes, we dive into one global business story that matters. You'll hear from Bloomberg journalists like Matt Levine. A lot of this meme stock stuff is, I think, embarrassing to the SEC. Follow the Big Take podcast on the iHeartRadio app, Apple Podcasts or wherever you listen.
- [01:03]
Joe Weisenthal
Bloomberg Audio Studios Podcasts, Radio news.
- [01:16]
Craig Watts
But besides being a good egg layer.
- [01:18]
Carmen Rodriguez
The chicken of tomorrow will be an.
- [01:20]
Craig Watts
Improved meat producer here's an example of the progress that's been made already. Notice how breeding has increased the AM of meat on the breast. Look at that drumstick. This bird was fattened in the same length of time and on the same amount of feed as the other one. Make your own guess as to which is the more profitable to raise.
- [01:47]
Carmen Rodriguez
For much of America's history, chickens looked different to the way they do today. They were thin, elegant, even slim and upright. The average bird weighed about 2 1/2 pounds in the 1920s, and chickens were raised differently too. On small farms and homesteads. The birds and their eggs provided a valuable source of extra protein and the occasional Sunday roast for millions of Americans.
- [02:15]
Tracy Alloway
But today, chickens are front loaded feathered freaks. After years of commercial breeding, the weight of your run of the mill roaster has more than doubled to a chunky five or six pounds. Way more than chickens of the past.
- [02:28]
Joe Weisenthal
Chickens, as our great grandparents would have understood them, looked very different from chickens today. They were scrawny, they were rangier, they could move around a barnyard and they could flap up into trees and avoid predators. And that's almost nothing like the chickens that we eat today. So if you went back to the time of I would, I guess our great grandparents, let's say at the beginning of the 20th century, people didn't eat chicken that often and that seems very bizarre to us now in the era when there are a million forms of chicken nuggets in the cold case at the supermarket and there's a chicken sandwich on every corner. But chicken used to be Kind of special.
- [03:22]
Carmen Rodriguez
Welcome to the second installment of Beat Capitalism, our Odd Lots special series in which we are examining the US Economy through the lens of chicken. If you haven't listened to our first episode where we talked about chicken prices and the consumer experience of eating chickens and eggs, you should definitely go back and do that.
- [03:41]
Tracy Alloway
In this episode, we're going to focus on the birds themselves and the people that grow them, because chicken actually has a lot to say about the structure of the labor market, too, and the relationship between big companies and their workers. And a lot has changed from the backyard birds of yesteryear.
- [04:04]
Carmen Rodriguez
To understand what's happened to chickens and the people who grow them, it helps to consider where they started from. Maren McKenna is a journalist and author who specializes in public health, and she wrote a book called, appropriately enough, Baked Chicken.
- [04:19]
Tracy Alloway
As we said, chickens used to be a lot smaller. Families might keep a few egg layers in their backyards, and once the birds reach the end of their laying life, they might be put in the proverbial pot. One key thing is that chicken meat for a long time was a treat, not a staple.
- [04:33]
Carmen Rodriguez
Now, as a rule, older chickens that have been running around a backyard don't usually taste as good. They're leaner, they're chewier, and there just aren't that many of them compared to today's industrial scale farming. But things started to change in the 1920s and 1930s. To satisfy increased demand for chicken meat, farmers started scaling up and raising their birds in big chicken houses. We'll talk more about those in just a little bit.
- [05:00]
Tracy Alloway
Then in the 1940s, after the Second World War, something big happened on the way to big chicken.
- [05:07]
Joe Weisenthal
To understand where the industrialization of chicken comes from, and after that, the industrialization of almost all the other proteins that we eat, you really have to go back to the middle, to the end of World War II. And a couple of things are happening at the same time. The first is that there's a war on, and there's a lot of soldiers and sailors deployed around the globe who need to be fed. So there's a great deal of pressure on meat producers to increase their production. Pressure that goes away when the war is over and when that guaranteed market from the military forces suddenly vanishes, leaving them pretty overextended. The second is that immediately after World War II, kind of extraordinarily, there are a number of extreme weather events in growing areas around the globe. There are typhoons and there are storms. And this is added to the destruction of growing areas that occurred during the War and the destruction of naval fleets and of fishing vessels. So there's both an overextension of meat product and also a sense of fragility of the food system.
- [06:21]
Tracy Alloway
It was against this backdrop that biologist Thomas Jukes entered the picture. With more and more chickens now being kept in big houses, the birds were no longer able to forage for bugs and grubs and grains on their own. They needed help to survive indoors. And that's where Jukes comes in.
- [06:35]
Joe Weisenthal
Jukes was attached to a team that had produced the first antibiotic of the tetracyclines that we still use today. It was called oreomycin. He also happened to have been given an assignment to address the dietary needs of chickens, because part of the issue of the meat industry feeling overextended after the end of World War II was that they felt they needed to cut costs. This is actually the point at which we start entering into the part of American agricultural history where livestock starts getting fed a lot of grain. But there was concern that grain didn't have a full nutritional profile. And so they were looking for inexpensive supplements. And in a very famous experiment, Jukes bought a whole bunch of baby chicks, divided them into groups, gave each group some kind of supplement that was available on the market at the time. Cod liver oil, synthesized vitamins, brewer's yeast. And to one group, he gave the ground up dried remains of the growing medium in which his company's drug had been made, oreomycin. And when he assessed the results of the experiment On Christmas Day 1948, he found that the chicks in his experiment who'd been given the oriomycin leftovers had gained more weight than any other set of animals in the experiment. And from that recognition, an entire industry of giving antibiotics to animals began. Jukes called that effect growth promotion, and they filed for a patent for the.
- [08:09]
Carmen Rodriguez
So the introduction of growth promoters helped the birds survive the great indoors and get bigger. But that wasn't the last of the chicken revolution.
- [08:17]
Joe Weisenthal
One was the chickens themselves changed physically, thanks largely to the U.S. department of Agriculture, which in the late 1940s and early 1950s sponsored a contest among chicken breeders called the Chicken of Tomorrow.
- [08:34]
Craig Watts
Help in developing the Chicken of Tomorrow. You can't take it for granted that every hen is earning her keep, even though laying an egg ought to be easy for any chick. That's what you think, big boy.
- [08:51]
Joe Weisenthal
Well, anyhow, the idea of the Chicken of Tomorrow contest was to make chickens meatier, to produce a bird that would have more breast, that would be big enough to feed a family which was kind of hard at that point for a four or five person family to eat one chicken and be satisfied and also to be very predictable in a number of ways, to be a single breed. And after a couple of years of competition, the Chicken of tomorrow contest produced the prototype for the most of the chickens that are raised today. Blocky, muscled, white feathered, docile, not interested in running around a barnyard and flapping up into a tree, content to sit in one place.
- [09:39]
Tracy Alloway
So antibiotics and breeding helped turn the chicken of tomorrow into the chicken of today.
- [09:43]
Carmen Rodriguez
Well, that's not quite all, actually. A lot of things were happening on the chicken innovation front around that time.
- [09:50]
Joe Weisenthal
The second thing that drove the difference between the chicken of yesterday and the chicken of tomorrow is that we changed our orientation to how we eat chicken from buying birds that were whole and had to be roasted or cut up into pieces and had to be pan fried or broiled into a source of protein that was disassembled at the manufacturing level into things like nuggets so that people could consume chicken without having to deal with the physical reality of a chicken.
- [10:24]
Carmen Rodriguez
It's hard to imagine a world without chicken nuggets now, but as Marin lays out, it wasn't until the 1960s that these became a thing. And it was a very deliberate decision. After all, if you want to sell more chicken, you have to get people to eat more chicken. And one way of doing that is giving them more options to consume it. And then, boom, the chicken nugget was born. And these little nuggets of chicken proved to be pure gold for some businesses like McDonald's. McDonald's, yes. And, Joe, you might be surprised to find out that McDonald's didn't actually invent the chicken nugget. Here's Maren again.
- [11:02]
Joe Weisenthal
So we all think of the chicken nugget as a creation of McDonald's, and certainly McDonald's would claim that the chicken nugget is their thing, introduced in the late 70s. By 1980, they were blowing the doors off in the McDonald's restaurants where they were sort of secretly introduced. But it's pretty widely understood in the poultry industry that McDonald's shouldn't get all the credit, because the prototype, the predecessor of the McDonald's chicken nugget, was actually invented by a kind of tinkerer scientist in a basement laboratory at Cornell University, a guy named Robert Baker, who was not primarily interested in chicken, but rather was interested in essentially how to avoid food waste. And he was very troubled by how much of the carcass of a chicken goes to waste. And he wanted to find ways to use as much of the carcass as possible, as much of the meat on the carcass as possible. And he came up in this basement laboratory with a bunch of graduate students with things that we now take for granted in supermarkets. Chicken bacon, chicken cold cuts, chicken sausages. But his signature contribution to the future of chicken was a thing that he called the chicken stick. Modeled to some degree on fish sticks, which had been introduced about 10 years earlier. The chicken stick was chopped, formed, pressed chicken meat, sucked off the bones, covered with a breaded coating, frozen and frozen in such a way that when you took it out of the freezer and fried it or baked it, the coating wouldn't disassemble from the rest of the meat. That was a kind of secret process that Baker invented, but it didn't stay a secret. It was released in an agricultural extension bulletin that Cornell published and sent all over the country. They didn't in any way attempt to keep any IP in this. And as a result, the idea of something that looked like a chicken nugget was out there in the world. And 17 years later, out came the McDonald's nugget.
- [13:17]
Carmen Rodriguez
Suddenly a lot more of a chicken could be used, and thanks to antibiotics and breeding, there was more chicken around to sell.
- [13:25]
Tracy Alloway
One way to think about it is that raising chickens went from being a really small scale agriculture process to more of an industrial thing. There's a reason it's called factory farming, after all. The idea is to produce as much meat as you can at the lowest possible cost, and then use it as efficiently as possible. And to do that, you need standardization, new technology in the form of growth promoters and scale.
- [13:46]
Joe Weisenthal
I really think we can say that it's because of antibiotic use that we have the modern industrial scale meat production that we have today. Without that early use of antibiotics as growth promoters, no one would have understood that you could actually produce animals almost like widgets, in a kind of Henry Ford model. And so once people moved to doing that, then it made sense for farms to get larger and for profit to increase. And for farms to get larger, you had to protect animals against being held in more crowded conditions than they traditionally would have been in smaller open farms.
- [14:28]
Carmen Rodriguez
The upside of all of this is that we get plentiful white meat, all the stuff that goes into delicious sandwiches and convenient chicken nuggets. The downside is a lot of that comes at the expense of the animals themselves. And as we're about to see, also the farmers who grow them.
- [14:52]
Joe Weisenthal
Bonds are back and so is all the credit. PJYM Fixed Income's monthly podcast series.
- [14:58]
Tracy Alloway
From the latest trends to long term perspectives, you'll get timely fixed income insights.
- [15:02]
Joe Weisenthal
From leading economists, research analysts and investment professionals. Whether you're new to bonds or a seasoned investor, tune in to all the credit wherever you get your podcasts. This podcast is intended solely for professional investor use. Past performance is not a guarantee of future results.
- [15:20]
Carmen Rodriguez
The forces shaping markets and the economy are often hiding behind a blur of numbers. So that's why we created the Big Take from Bloomberg podcast to give you the context you need to make sense of it all. Every day in just 15 minutes, we dive into one global business story that matters. You'll hear from Bloomberg journalists like Matt Levine. A lot of this meme stock stuff is, I think, embarrassing to the SEC. Follow the Big Take podcast on the iHeartRadio app, Apple Podcasts, or wherever you listen. There's another seminal moment in the transformation of America's chicken industry, one that has more to do with where they're grown and by whom.
- [16:00]
Tracy Alloway
In 1923, a Delaware housewife by the name of Cecile Long Steele, by the way, great name got a surprise in the mail. She had ordered 50 baby chicks, but the mailman came to her door with 500 chicks instead.
- [16:16]
Carmen Rodriguez
Instead of sending the hundreds of extra chicks back in the mail, Cecile decided to make do. She kept them in a cardboard box and set about building a shed to house them. Over the next five months or so, she raised the chicks to adulthood, fattening them up and eventually selling them to local hotels and restaurants as a delicious meal. Then she decided to do it all over again. Soon she was ordering a thousand chicks, then 10,000, and then she just kept going.
- [16:44]
Tracy Alloway
So what Cecile pioneered is the first broiler house, a big step in the history of poultry farming. Today, chickens are raised in huge barns that cost large amounts of money to build. And in order to keep these big barns filled with chickens, farmers have to participate in something called the tournament system.
- [16:59]
Carmen Rodriguez
In fact, everything about modern chicken is big. In the tournament system, farmers get baby chicks from large chicken breeders. They're called integrators, companies like Tyson, Purdue, or Pilgrim's Pride. And then they raise them using feed and growth promoters sent to them by those same companies. Eventually, the mature birds are handed back to the chicken company that sold them as babies, and they fulfill their chicken destiny of becoming sandwiches, nuggets, or other snacks.
- [17:28]
Craig Watts
Basically, what we do is we supply the buildings and the labor and all the stuff needed to actually raise birds for these big, what they call integrators or chicken companies like a Tyson or Purdue. Tyson or Purdue actually owns the chicks and they actually own the feed and vaccinations and that sort of thing.
- [17:46]
Carmen Rodriguez
Meet Craig Watts. He's a former contract poultry producer who raised chickens in North Carolina. As part of the tournament system, we.
- [17:54]
Craig Watts
Just basically get them on, for lack of better terms, consignment. They're just a few hours old when we get them, and we raise them up to market age. They give us some guidelines on doing that, and then they come pick them up, and then we get ready and start all over again.
- [18:11]
Tracy Alloway
It all sounds pretty simple and efficient. And the integrators themselves argue that they're basically taking on the messier, more difficult and more capital intensive parts of the chicken business, like hatching chicks, transporting them back and forth to farmers, and then processing them into chicken nuggets and so on.
- [18:26]
Carmen Rodriguez
So that's the tournament system, but Craig. Craig calls it something different.
- [18:31]
Craig Watts
Basically, what it boils down to is who can get the chicken to the plant the quickest, who can get that chicken the fattest, on the least amount of feed, least amount of feed, meaning least amount of cod lost. So, and that. And it sounds perfect. I mean, you figure things out, you grasp concepts, you tweak things, do what you have to do, and if you work smarter and you work harder than the next guy, you're going to get compensated a little more. Perfect, Right. The only problem is there's the flaw in this whole tournament system scenario. I call it Thunder Dome. It's 10 men enter and five men leave. Because every week, if you have 10 growers go out, you're going to have some that make at or above the base pay, which my base pay, I think was around 5 cents a pound at that time. And then you're going to have five or so out of the 10 that are at base or below, right? So they take the bonuses to the five growers that are above average is taken from the pay of the growers that are below average. So for the company, it's a zero sum game. They're only going to have a nickel invested in a pound. The pie, so to speak, is finite. The size of the pie is finite. The farmer is fighting for the slice.
- [19:43]
Tracy Alloway
So in the tournament system, you're basically graded on a curve. If you're a chicken farmer who does well relative to other growers in the area, you'll get more money from the pot. And the ones who do badly get less money from the same pot. So you want to be ranked higher relative to other growers.
- [19:57]
Carmen Rodriguez
When Craig decided to become a farmer, competing against his fellow chicken growers for pay wasn't quite what he had in mind. In fact, let's go back to how Craig got into the chicken business in the first place, back when he saw a big opportunity. When Purdue started building a processing plant just seven miles south of his home.
- [20:18]
Craig Watts
They were looking for farmers to contract with to build buildings to raise their birds. I saw advertisement in the paper. I called the representative, we had a meeting. He gave me a income and expense kind of pro forma sheet. It wouldn't get rich quick. I took it to my accountant. He cash flowed it there again, it was steady, but it wouldn't get rich. But it was enough. And the guy at Farm Credit was excited about the possibility of poultry moving into our area. He told me it was the best thing that might be the best thing that ever happened to farming in Robson County.
- [20:49]
Carmen Rodriguez
Things went okay at first. Craig spent his days monitoring his birds, making sure they weren't overheating or getting sick or eating too much or too little. Basically following the instructions and the chicken growing rules sent by Purdue.
- [21:03]
Craig Watts
Well, the first thing I would do, I would wake up and I would go and I would open all the houses up and I would just basically stick my head in and look. And then I would. And then we had a control room that I monitor things from and I would make sure that the controller was set properly. They call it a computer, but it's basically a glorified thermostat, basically where you can control all the temperature settings, fan settings, that kind of stuff from. From a central location. So I would, I would look at all that and make sure everything was right. You know, take a sniff test, you know, is the. Is the ammonia up? Is it good? You know, is. Is the house too humid? You know, and what do the birds look like? Are they spread out, comfortable? Are they active or are they just huddled up or are they panting? I mean, it was just. It was just a lot of observations. Initially, I would have to run the kids to school, but then when I'd come back, the next thing I would do, I'd actually physically walk through the houses and I would look for birds that had died or maybe were deformed or just maybe weren't performing as they should. And either I pick up the dead or we would have to call out and just, just a nice word for kill birds that weren't going to make it the entire six weeks, you know, for whatever reason.
- [22:10]
Tracy Alloway
But there was a limit to what Craig could do for his flock. After all, the integrators are the ones sending him the baby birds themselves. They own the chickens and they're the ones making decisions about what they eat, what medicines they get, what conditions they're kept in and how much room they have to grow up in.
- [22:24]
Craig Watts
The deal was each of my houses were 20,000 square feet. Well, they put 30,000 birds in every house. So when those chickens were, they had the same amount of space all the time. But when they got market age, I mean, it was wall to wall, end to end, just a sea of white chickens. So if you do the math, 30,000 chickens and 20,000 square feet is 0.67 square foot per bird. So there were, there's issues within the structure of the system that I had no control over that it's not cruel, but it's not about quality of life for, for an animal by any means. It's about homogenizing a widget and getting it to the plant. These chickens traits have been selected over the years to where that what they are. The Americans desire for white meat is what drove what we call the Franken chicken. The breast is very large, it's oversized compared to the rest of its body. They do have trouble standing and they're very docile. They're not a hardy breed. I mean they're bred to just barely stay alive long enough to get to the plant. So what they do is they take a bite of feed, they take a drink of water, they sit down. I call it three steps and flop. Boom, boom, boom, boom. Sit down. That's what they do all day.
- [23:38]
Tracy Alloway
In 2008, Craig reached a tipping point. Frustrated by a particularly feeble flock of floppy chickens.
- [23:43]
Carmen Rodriguez
Scented say that 10 times fast Joe.
- [23:45]
Tracy Alloway
Frustrated by a particularly feeble flock of floppy chickens, he filmed the conditions in his own chicken house and uploaded them to YouTube to send to his production manager at Purdue. Soon after, he partnered with a reporter and an animal rights activist to produce an expose on chicken farming.
- [24:03]
Carmen Rodriguez
Craig has no control over the health or genetics of the chicks that are delivered to him by Purdue. Bound by contract, Craig is not even allowed to give them sunshine or fresh air. Just 37 days later, they are a sea of panting birds. Panting indicates birds are overheated. These birds find it too painful to bear the weight of their unnaturally large breasts on their legs. Craig Watts ultimately proved to be something of a renegade.
- [24:37]
Tracy Alloway
For its part, a Purdue spokeswoman said it works with over 1800 poultry farmers and the retention rate with Those contracts is around 98%. In a statement to Odd Lots, they also said it's been nearly 10 years since Watts was a farmer for Purdue, and in that time it has established farmer Advisory Councils to gather important feedback and insights from them on how the company can improve.
- [24:59]
Carmen Rodriguez
But Craig's complaints about the imbalance of power in the poultry industry and the health of the birds are things that come up again and again in our conversations with chicken farmers. For instance, Karen Crutchfield, she goes by Suzy, was a contract grower for Tyson for many years, but she started out raising cows.
- [25:20]
Karen Crutchfield
We already had a cattle farm and so we wanted to kind of expand out and add something else, some more income coming in. The difference in farming cattle and farming chickens is farming cattle. You own all the inputs, you own the cattle, you own the feed, you decide what type of cattle you're going to buy, you decide what time they leave your farm, you decide the breeding periods. All of it is decided by you. And you are a truly independent cattle farmer. You're independent. You don't have nobody giving you orders or telling you what you need, what size, what kind of feed. With chickens, it's totally different. With chickens, you have no control over any of the inputs. They deliver the chickens at their time, they give them the feed that they want them to have, they pick them up on their time, they tell you what to do in controlling the inputs in the house, what temperature it needs to be, what size you need to let them out into full house. They control all of the inputs. You are only a serf, more or less. You just have to do what they tell you. And actually it's more like you're an employee of theirs.
- [26:35]
Carmen Rodriguez
So for Susie, following the instructions of the chicken integrator was a must, because if you don't, you risk losing out on that contract and you might not have any other companies to sell chickens to.
- [26:47]
Karen Crutchfield
For poultry growers, there is no option of going independent because there's nothing you can do with your barns except raise chickens for Tyson or whatever integrator as the occasion had to be. In my area, Tyson was the only company in the area that we could go to. So if your houses were shut down, they were just shut down, you had nowhere else to go or anything else you could do with your barns other than maybe put hay in them, that was the only other option you had. You could not grow chickens in them.
- [27:17]
Tracy Alloway
Again, the barns are really expensive and the farmers are often on their own when it comes to building them, even though the integrators may be the ones asking for improvements, which is exactly what happened to Suzy Tyson.
- [27:28]
Karen Crutchfield
Food started doing upgrades probably in the mid-90s. And each time they decided to do an upgrade, it kept costing more money. It was bigger upgrades than before. And so the last upgrade that they called for us to do was in 2010. They sent a letter out saying that we had to do all of these upgrades. One of the upgrades that they requested us to do at the time was add two extra row of lights. Just one massive upgrade and it was going to end up costing us over $300,000 to upgrade. And it would actually cost on the two older houses that we built in 87. It was going to cost us more than we had originally built the houses for them for. And so at that point we said, no, we're not going to do any more upgrades. The incentive for Tyson to ask for upgrades is keep the grower in debt. As long as the grower is in debt, they're going to do exactly what Tyson tells them. If they get out of debt, then they have more freedom to say, no, I don't want to do that and I'm not going to do that. And if they cut you off, then you've got everything paid for. But if you're a million dollars in debt and going to lose your home, you're more likely to do what they say.
- [28:55]
Tracy Alloway
A Tyson spokesperson did respond for comment. When we reached out, they said, and I quote, tyson Foods contracts with a network of thousands of independent growers across the country. And we value the contributions that these growers make to our business. We depend on growers and the contracts we have in place incentivize growers to raise high quality birds.
- [29:14]
Carmen Rodriguez
One contract grower who did lose it all is Michael Diaz. The Diaz's used their life savings to put down a deposit on 50 acres of land back in 2018 with a home and four chicken houses. It was supposed to be agricultural bliss.
- [29:32]
Michael Diaz
Farming was something that I had always dreamed of doing, but it wasn't something that I saw as being very feasible to do given the monetary constraints. I mean, you need a large piece of property, you need to make a lot of capital investments to get into any kind of farming. The magnitude of what we had bought didn't sink in. But there were other farmers in the area. They weren't poultry farmers, but some of them knew of some poultry farms. They were friends with some of these guys. And there was always this kind of this thought process that these guys that own these poultry farms that, you know, These barns are 50 by 500ft long, and some of them bigger than that. You know, you always felt like they were because they had a lot of capital investments. You thought they were. They must have had good cash flow. They must have been living good lives. They were in contract with some of these household brands that you see on every grocery store shelf that you tend to start trusting, right? You see these names, you know, I'll pick on. On others. You know, you see a name like Heinz ketchup, or you see a name like. Like Hormel or whatever. What I'm trying to allude to is you see these brands that have been in your face year after year from childhood to adulthood, a staple in our food system. So you tend to trust these brands are doing the right thing.
- [31:07]
Tracy Alloway
But Michael's integrator kept asking for more investments, and he struggled to keep up on this loan payment. Michael thinks he spent something like $100,000 on unexpected upgrades in just two years.
- [31:19]
Michael Diaz
I kept thinking that this is just going to sink me deeper and deeper and deeper and deeper into debt. This dream of me being able to pay this place off and eventually build something that's generational for my family is not going to exist. I said, I'm not doing it.
- [31:36]
Carmen Rodriguez
Michael Diaz ended up selling the farm, losing his life savings in the process. He later sued his integrator, arguing that chicken farmers in the tournament system should be classified as employees of integrators instead of independent contractors. That litigation is still pending.
- [31:53]
Tracy Alloway
Susie Crutchfield filed for bankruptcy and is still paying off her debt. Interestingly, Craig Watts didn't lose his chicken farming contract with Purdue after filming his barns. But the relationship obviously soured. Craig filed a whistleblower complaint. Purdue countersued. That's pending, too.
- [32:10]
Carmen Rodriguez
All three of them are now part of the socially responsible agriculture project, srap, where they work on a contract grower transition program, which aims to help poultry farmers navigate the Thunderdome and the pile of manure, both figurative and literal, that comes with it. Here's Michael Diaz again.
- [32:29]
Michael Diaz
The person that has all the risk, all the liability is the farmer. He's the one that's in debt for these barns. He's the one that's in debt for all the facilities, the upgrades, the equipment. He's the one that's in debt that he's got to figure out, what in the world do I do with all this manure that I have here? On this, on this, I've got to get rid of it. Half of them have nothing that they can do with it. Everything that is. That is a liability the farmer has. The integrator is the only one that's got anything that's able to build a profit.
- [33:11]
Joe Weisenthal
Bonds are back and so is all the credit. PGIM Fixed Incomes Monthly Policy Podcast Series.
- [33:17]
Tracy Alloway
From the latest trends to long term perspectives, you'll get timely fixed income insights.
- [33:22]
Joe Weisenthal
From leading economists, research analysts and investment professionals. Whether you're new to bonds or a seasoned investor, tune in to all the credit wherever you get your podcasts. This podcast is intended solely for professional investor use. Past performance is not a guarantee of future results.
- [33:40]
Carmen Rodriguez
The forces shaping markets and the economy are often hiding behind a blur of numbers. So that's why we created the Big Take from Bloomberg podcast to give you the context you need to make sense of it all. Every day in just 15 minutes, we dive into one global business story that matters. You'll hear from Bloomberg journalists like Matt Levine. A lot of this meme stock stuff is, I think, embarrassing to the SEC. Follow the Big Take podcast on the iHeartRadio app, Apple Podcasts, or wherever you listen. That is not the sound of chickens, clearly, but I promise it will be relevant in a second Contract growers in the poultry world carry most of the potential downside risks of chicken farming, while big chicken, the integrators, enjoy most of the upside. They hog the benefits and pass on the risks. And that model is becoming more common, as the state of pig farming in Iowa shows.
- [34:37]
Tracy Alloway
At any given time, there are some 28 million hogs being raised in Iowa, making it America's biggest pig farming state. Iowa now produces nearly a third of America's total hog supply.
- [34:47]
Carmen Rodriguez
And speaking of manure, Iowa's pig population and what it produces has become a big debate. People generally don't want to live next to big pig farms for obvious reasons. And huge lagoons of manure can get into the water supply. One analysis of USDA data shows that the manure produced by Iowa's pigs has grown by almost 80% between 2002 and 2020.
- [35:12]
Tracy Alloway
Austin Ferc is also a member of the SRAP. He's an agricultural and antitrust expert who grew up in Iowa and had a front row seat to the state's transformation into prime pig territory.
- [35:23]
Carmen Rodriguez
As Austin points out, Iowa's pork industry didn't always look like this. Modern pig producers took a lot of inspiration from, you guessed it, chickens.
- [35:35]
Tracy Alloway
What you saw happen in the 80s is a state senator deregulated the pork industry in North Carolina to allow the industrialization of pork production. Copying that model of chickenization where he owned the animal, he had other People in these metal sheds, he would give them his pigs, they would grow them out, and then he would sell them, butcher them, what have you. The business elite in Iowa saw what's happening in North Carolina and they saw the massive amount of production increases going on there. And they were like, we're not going to lose our number one status. We're going to engage in this race to the bottom. And actually there's a name for this trend, chickenization. We are going to chickenize the pork industry in Iowa. And if we have to kill the family farm, so be it, because it's all about selling more corn seed, the whole supply chain around it maintaining that dominance. Instead of having chicken behave like the other industries, it became a race to the bottom. Chickenization, Everything is being chickenized where you just apply this really abusive power structure to different modes of commodity production because it shifts the riskiest part to the worker and the corporate shareholders get the upside of it.
- [36:45]
Carmen Rodriguez
And that's arguably helped big chicken just get bigger. Chicken is now dominated by large commercial breeders and processors, with a handful of companies commanding 60% of the US chicken market.
- [36:57]
Tracy Alloway
The chicken industry is pretty concentrated. It's not even just the concentration of slaughtering the animal. It's the whole supply chain. The whole goal of the company is from the genetics of the thing that hatches to the chicken tenders you eat in the store. That whole thing has been highly vertically integrated.
- [37:13]
Carmen Rodriguez
So chickens have grown fatter, more horizontal. At the same time, the chicken industry as a whole has become more concentrated, more top down, more vertical, more powerful in terms of what they can extract from farmers and their birds. And that business model is spreading across agriculture and even beyond.
- [37:33]
Tracy Alloway
Right. You know, people think of companies like Uber as pioneering some novel business model, but the rise of independent contractors with more risk being foisted on people who resemble employees is a large and growing phenomenon.
- [37:45]
Carmen Rodriguez
Next up on Beat Capitalism, what can be done to tip the balance of power back towards consumers and workers? It's time to talk about unclucking the system.
- [37:59]
Tracy Alloway
Beat Capitalism is written by Tracy Alloway, Carmen Rodriguez and Joe Weisenthal.
- [38:04]
Carmen Rodriguez
This short series was produced and edited by Carmen with the help of Kale Brooks and Dashiell Bennett.
- [38:09]
Tracy Alloway
The fact checking of industry puns and other information was brought to you by.
- [38:12]
Carmen Rodriguez
Dash and Kale, the chickenization of our regular Odd Lots theme song. And the mixing is done by our sound engineer, Blake Maples.
- [38:20]
Tracy Alloway
Brendan Newnham is our executive producer and Sage Bauman is Bloomberg's head of podcasts.
- [38:25]
Carmen Rodriguez
Special thanks to Compassion in World farming.
- [38:28]
Tracy Alloway
And if you enjoyed this deep dive into the chicken industry, please consider leaving a positive review on your favorite podcast platform. Thanks for listening.
- [38:40]
Carmen Rodriguez
This episode has been updated to reflect a clarification. It wasn't until 202013 that Craig Watts sent a film of his barns to his production manager. In 2014, he partnered with a human rights activist and journalist to produce a documentary on chicken farming. The forces shaping markets and the economy are often hiding behind a blur of numbers. So that's why we created the Big Take from Bloomberg podcast to give you the context you need to make sense of it all. Every day in just 15 minutes, we dive into one global business story that matters. You'll hear from Bloomberg journalists like Matt Levine. A lot of this Meme stock stuff is, I think, embarrassing to the SEC. Follow the Big Take podcast on the iHeartRadio app, Apple Podcasts, or wherever you listen.