The ancient creation dilemma is based on determining which came first, the chicken or the egg? But in 2018 agri-business government lending, the current dilemma is more accurately based on which comes first, the independent poultry grower or the corporate poultry integrator?
The answer is complex and that complexity is based in great measure on how important the industry is to Mississippi’s economy. Are the growers truly independent or agents of the companies? That political and business debate has raged for years and is still volatile.
Becoming a contract grower for a poultry company is expensive. Building a broiler house to get into the business of raising chickens is at best about a $300,000 to $350,000 proposition. Small Business Administration loans have become an integral financing options.
But an SBA Office of the Inspector General (OIG) report earlier this year threatened that financing option and thereby the viability of the state’s poultry industry. The proposed rule stirred Mississippi GOP Sens. Roger Wicker and Cindy Hyde-Smith to directly challenge the Trump Administration’s SBA leadership in a Nov. 19, 2018 letter.
According to the agricultural newsletter Feedstuffs, the Mississippi senators in their letter “were sharply critical of a March 6, 2018, SBA Office of the Inspector General (OIG) report, titled “Evaluation of SBA 7(a) Loans Made to Poultry Farmers,” which inaccurately found that large producers, or integrators, maintain control over independent operators and should, therefore, be considered “affiliates” of the larger companies that buy their chickens.
“As affiliates, small farmers, who are actually independent registered businesses, would be deemed too big to participate in the SBA loan program. The proposed rule is based on the flawed OIG report.”
So why would Wicker and Hyde-Smith challenge the SBA report?
The Mississippi State University Extension Service reported earlier this month that for the 24th consecutive year, poultry remains Mississippi’s leading agricultural commodity with production values estimated at over $3 billion – including $2.7 billion in broiler production and $304 million in egg production. The chickens that produce table eggs account for $8 million in value.
A 2016 economic impact report commissioned conducted by John Dunham & Associates found that in Mississippi alone, the poultry industry generated as much as $18.36 billion in total economic activity that created or supported an estimated 72,153 total direct or indirect jobs paying an average of $54,143 in wages and benefits.
Mississippi is the fifth largest poultry producing state in the nation at over 738 million birds on what the Mississippi Poultry Association lists as about 1,900 poultry farms in the state. Of the world’s top 10 poultry companies, three – Tyson Foods, Koch Foods, and Sanderson Farms – operate in Mississippi. The state trails only Georgia, Alabama, Arkansas and North Carolina.
The 2016 NCC report cited Mississippi poultry industry generated $914 million in federal taxes and $481 million in state and local taxes.
In their letter to SBA administrator Linda McMahon, Wicker and Hyde-Smith urged that a proposed rule to the SBA 7(a) Loan Program be changed to more accurately reflect the relationship between small contract growers and large producers, commonly referred to as integrators. Wicker and Hyde-Smith told McMahon that the SBA is a vital source of financing for many Mississippi poultry farmers.
“These independent poultry farmers are solely responsible for obtaining financing, supervising, managing day-to-day business and paying taxes. In no way are they partners, agents or employees of the integrator. The SBA 7(a) loan program provides essential access to financing for small family farmers,” the senators wrote.
“Access to capital is essential to the continued success of poultry production in Mississippi, and we respectfully request that you revise the SBA proposed rule so growers are not arbitrarily excluded from the SBA 7(a) loan program,” they said.
The SBA was receiving public comment on the proposed changes through Dec. 18. Expect the issue to continue to gain the attention of Mississippi’s congressional delegation during the 116th Congress.
Sid Salter is a syndicated columnist. Contact him at sidsalter@sidsalter.com
Wednesday, December 26, 2018
Sid Salter: SBA Loan Review Shines Bright Light on Industry's Role in Mississippi's Economy
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10 comments:
Its true, the vertical integrators have screwed the contract growers for years. Sad to say but once the banks loan the money to the growers they are hung in the fence and cannot hope to repay the loan if they challenge the VI’s. By the way, these poultry companies use illegal aliens as employees and always have. Laurel is a sanctuary city whether they admit it or not.
This seems like a government guaranteed scheme that is part ponzi and part payday loan ripoff!
It is modern day slavery like much of our economy in Mississippi.
Challenge the VI too directly and you won't get chickens from them any more, been done before. Some growers were ruined a few years ago for speaking up. If you work very hard for many years and have some luck you can make good money at chickens, but the start-up costs are extremely high thus the price of failure is also.
There are so many in Laurel there is a pretty extensive Hispanic section at the Walmart there. Not just the poultry industry working them though.
We don't have an economy 6:00. Most of this state lives off some form of transfer payments from Washington DC. Or until the other states cut us off given our rookie team of legislators there.
The politicos have a great time playing the "Farmer" tunes. Most of the "farmers" are or could be on the government tit. Next to Medicaid, they have the greatest subsidies going. Hyde-Smith, Bryant, Tater, Wicker, will all keep the band playing that Cochran, Barbour, and others started. I see no way Mississippi can ever rise, as long as the politicos keep the citizens barefoot and pregnant.
Well if it wasn't like this chicken might cost an extra 59 cents a pound! That would be an extra 58 cents for big chicken and a penny for Hector and Jesus who clean them chicken houses.
Hard to see this getting any worse when the Chinese buy all this up like they did with the big pig operations. Well the pollution might get worse- you see how they live over there! Good thing it can all go downstream. Feed them fish and shrimps and oysters!
I like the part where if you leave Tyson you are banned from getting a contract with another chicken company.
Is this an anti-trust violation?
This seems similar to the IRS rule that an independent contractor must become a W-2 employee if he only contracts with one company. Maybe it would be a good idea for our legislature to remove some of the barriers that prevent chicken producers and other farmers from selling directly to the public so they'd have another option for their products.
VIs, Fed-Ex Ground and various other corporations have found a way to divvy up an organization so that those at the top get the gold while those doing the work get the shaft. It's modern day share cropping at its worst here in Mississippi.
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