The moratorium on family feuding between Mississippi’s chicken processors (the Big Guys) and chicken growers (the Little Guys) expired at the end of Gov. Kirk Fordice’s second term. Bills were introduced in both houses of the Legislature this session to create a government intermediary to assure fairness in dealings between the two groups.
At the time of writing this column last week, the final hearings were underway and the issue will likely be decided — one way or the other —before you read this column. Regardless of the outcome, the controversy is likely to continue.
Poultry is the largest industry in the state. Mississippi-grown and -processed poultry products are shipped all over the world. The economic importance of the poultry industry to Mississippi is huge. The industry has suffered a setback over the last few years due to the Russian economic debacle and restrictions on trade with China. Notwithstanding the current problems, the future is bright for the industry.
The poultry industry operates something like this scenario: A small number of processors contract with individual farmers to grow chickens. The processor supplies the chickens, feed and medical supplements while the grower (farmer) provides the facility and supervision. At the end of the growing period, the processor picks up the grown birds and pays the farmer. Then the cycle begins all over again.
The cost of starting a chicken farm is significant — roughly $500,000. Farmers usually borrow the start-up money and up to half of their income goes toward debt repayment. They depend entirely on the processor to keep them afloat.
Why should the government get involved in contract negotiations between private businesses? Some believe that the multi-million dollar processors have an unfair advantage over the farmers. This group holds that farmers are at a disadvantage when negotiating contract terms since they are financially unable to risk falling into disfavor with the processors.
An opposing point of view holds that it is in the processor’s best interest to treat his suppliers, the farmers, fairly in order to assure a steady stream of chickens to process. It would be a foolish manufacturer indeed who negotiates so harshly with his suppliers that they all go out of business and leave him with nothing to manufacture.
There is an element of truth in both opinions. I don’t think the processors would intentionally put their suppliers out of business. However, I do suspect that the contracts are designed to provide the farmer a minimal subsistence and little more. Historically, big business has been pretty tight-fisted and hard-hearted when dealing with employees and smaller businesses.
Would government intervention improve the situation? I don’t think so. I believe that government is the problem more often than it is the solution. Bureaucrats don’t have broad business experience to deal even-handedly with both parties and would merely muddy the water if they were given authority over contract negotiations.
A better solution might be for the farmers to join together and voice their collective concerns to the processors. Along these lines, the growers have formed an association to address common problems and speak with a united voice. I think this approach is better than bureaucratic intervention from Jackson.
THOUGHT FOR THE MOMENT
According to Cicero, the ancient Roman statesman and philosopher, the six mistakes of man are:
(1) the delusion that personal gain is made by crushing others;
(2) the tendency to worry about things that cannot be changed or corrected;
(3) insisting a thing is impossible because we cannot accomplish it;
(4) refusing to set aside trivial preferences;
(5) neglecting development and refinement of the mind, and not acquiring the habit of reading and studying; and
(6) attempting to compel others to believe and live as we do.
Joe D. Jones, CPA, is publisher of the Mississippi Business Journal. His e-mail address is email@example.com.