Tyson lifts per-pound pay for poultry
Posted on Wednesday, October 3, 2007
Tyson Foods Inc. has begun to raise per-pound payments for a group of contract chicken farmers who supply processing plants in Green Forest and Berryville, company officials said.
Growers in that area confirmed that Tyson began distributing new contracts in late August, a process that continues as flocks are finished, sold and replaced. However, they are concerned that Tyson’s push for larger birds will negate any gains in income made through the per-pound increases.
In an e-mail Thursday, Tyson officials said the “significant” increase in per-pound contract payments had been under consideration months prior to August, when local media picked up the story about the farmers ’ complaints. The new agreement has no bearing on other groups of poultry growers across the country, which are all analyzed separately.
“After evaluating our business model for this production area, we have decided to make changes in bird weights and grower pay that we believe will be mutually beneficial to the grower and the company,” spokesman Gary Mickelson wrote in an e-mail.
The new deal increases payments by four-tenths of a cent per pound, according to a contract obtained by the Arkansas Democrat-Gazette.
The new base pay — excluding any adjustments for performance — is 5. 15 cents per pound. That’s up from 4. 75 cents per pound that growers received before the increase in pay, about an 8. 4 percent increase in per-pound payments.
While the poultry farmers are pleased about the increase in perpound payments, it was more than a penny per pound less than what they requested from the Springdale meat producer in April.
Growers said Tyson is planning an 8-pound bird, which would be about a pound and a half heavier than the birds now raised in the complex. Tyson said it is not changing bird weights across all of its poultry complexes, but it adjusts bird weights annually in response to market demand.
Some of the Berryville / Green Forest growers worry that lower chick placements per house — since the larger birds will require more space and more time — and fewer flocks over time could cancel out the pay increase.
Tyson places about 20, 000 birds per house for a 6-pound grow-out, the farmers said.
Up to 16, 800 birds will be placed for the 8-pound grow-out, the farmers said they have been told. The additional weight per bird will increase the output of each house by 11, 000 pounds each flock, assuming 95 percent of the birds live.
Bud Phillips, a Tyson grower seven miles north of Green Forest in Carroll County, is unsure what the new deal means to his business, since the new grow-out period is about 10 to 13 days longer per flock. That means there will be fewer flocks over time and farmers will incur higher utility costs, particularly in the last two weeks when the birds are largest.
“Tyson is telling me that my utilities will go up about 20 percent, which on my farm comes to $ 7, 000 a year,” Phillips said in a recent telephone interview.
Mickelson said the decision to increase the per-pound pay for the Berryville / Green Forest growers was costly for the company.
“This is a major investment by Tyson Foods. While people involved in our business often talk in terms of cents per pound, pay increases such as this one typically involve millions of dollars in additional cost to the company,” Mickelson wrote.
Tyson, the second-largest poultry producer in the country, has 6, 200 contract growers around the nation. After several unprofitable quarters in fiscal 2006, Tyson cut back on chicken production to force prices up, and the segment has been profitable this year.
Chicken revenue rose 7. 6 percent to reach $ 2. 07 billion for the quarter that ended June 30, largely due to a 19 percent price increase.
After seeing Tyson’s financial turnaround in the first quarter, the Berryville / Green Forest growers put together some financial data to show how rising fuel costs were hurting their income.
They took the data to Tyson in April and requested a pennyand-a-half increase in pay per pound. After waiting more than two months for a response, the growers contacted the Democrat-Gazette in late July to tell their stories.
Mickelson emphasized that Tyson began considering raising the per-pound payment to the Berryville / Green Forest growers before the media reported on the farmers’ requests in August. Complexities involved with changing bird size contributed to the delay, he said.
According to the new contract, farmers willing to upgrade their houses to premium pay contracts, which require cool cell systems and better water supplies, can add another half-cent per pound. Also, the farmers can receive two energy allowance payments of 0. 55 cents per pound between November and March, when propane and natural gas are used to heat the houses. Contract poultry farmers nationwide are feeling the cash crunch, industry analysts say. In late September, a group of farmers growing chickens for Pittsburg, Texas-based Pilgrim’s Pride, the country’s largest poultry producer, pushed that company for a higher raise.
To contact this reporter: dirvin@arkansasonline. com
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