Fast Food Nation: What The All-American Meal is Doing to the World (19 page)

MANY RANCHERS NOW FEAR
that the beef industry is deliberately being restructured along the lines of the poultry industry. They do not want to wind up like chicken growers — who in recent years have become virtually powerless, trapped by debt and by onerous contracts written by the large processors. The poultry industry was also transformed by a wave of mergers in the 1980s. Eight chicken processors now control about two-thirds of the American market. These processors have shifted almost all of their production to the rural South, where the weather tends to be mild, the workforce is poor, unions are weak, and farmers are desperate to find some way of staying on their land. Alabama, Arkansas, Georgia, and Mississippi now produce more than half the chicken raised in the United States. Although many factors helped revolutionize the poultry industry and increase the power of the large processors, one innovation played an especially important role. The Chicken McNugget turned a bird that once had to be carved at a table into something that could easily be eaten behind the wheel of a car. It turned a bulk agricultural commodity into a manufactured, value-added product. And it encouraged a system of production that has turned many chicken farmers into little more than serfs.

“I have an idea,” Fred Turner, the chairman of McDonald’s, told one of his suppliers in 1979. “I want a chicken finger-food without bones, about the size of your thumb. Can you do it?” The supplier, an executive at Keystone Foods, ordered a group of technicians to get to work in the lab, where they were soon joined by food scientists from Mc-Donald’s. Poultry consumption in the United States was growing, a trend with alarming implications for a fast food chain that only sold hamburgers. The nation’s chicken meat had traditionally been provided by hens that were too old to lay eggs; after World War II a new poultry industry based in Delaware and Virginia lowered the cost of raising chicken, while medical research touted the health benefits of eating it. Fred Turner wanted McDonald’s to sell a chicken dish that wouldn’t clash with the chain’s sensibility. After six months of intensive research, the Keystone lab developed new technology for the manufacture
of McNuggets — small pieces of reconstituted chicken, composed mainly of white meat, that were held together by stabilizers, breaded, fried, frozen, then reheated. The initial test-marketing of McNuggets was so successful that McDonald’s enlisted another company, Tyson Foods, to guarantee an adequate supply. Based in Arkansas, Tyson was one of the nation’s leading chicken processors, and it soon developed a new breed of chicken to facilitate the production of McNuggets. Dubbed “Mr. McDonald,” the new breed had unusually large breasts.

Chicken McNuggets were introduced nationwide in 1983. Within one month of their launch, the McDonald’s Corporation had become the second-largest purchaser of chicken in the United States, surpassed only by KFC. McNuggets tasted good, they were easy to chew, and they appeared to be healthier than other items on the menu at McDonald’s. After all, they were made out of chicken. But their health benefits were illusory. A chemical analysis of McNuggets by a researcher at Harvard Medical School found that their “fatty acid profile” more closely resembled beef than poultry. They were cooked in beef tallow, like McDonald’s fries. The chain soon switched to vegetable oil, adding “beef extract” to McNuggets during the manufacturing process in order to retain their familiar taste. Today Chicken McNuggets are wildly popular among young children — and contain twice as much fat per ounce as a hamburger.

The McNugget helped change not only the American diet but also its system for raising and processing poultry. “The impact of McNuggets was so huge that it changed the industry,” the president of ConAgra Poultry, the nation’s third-largest chicken processor, later acknowledged. Twenty years ago, most chicken was sold whole; today about 90 percent of the chicken sold in the United States has been cut into pieces, cutlets, or nuggets. In 1992 American consumption of chicken for the first time surpassed the consumption of beef. Gaining the McNugget contract helped turn Tyson Foods into the world’s largest chicken processor. Tyson now manufactures about half of the nation’s McNuggets and sells chicken to ninety of the one hundred largest restaurant chains. It is a vertically integrated company that breeds, slaughters, and processes chicken. It does not, however, raise the birds. It leaves the capital expenditures and the financial risks of that task to thousands of “independent contractors.”

A Tyson chicken grower never owns the birds in his or her poultry
houses. Like most of the other leading processors, Tyson supplies its growers with one-day-old chicks. Between the day they are born and the day they are killed, the birds spend their entire lives on the grower’s property. But they belong to Tyson. The company supplies the feed, veterinary services, and technical support. It determines feeding schedules, demands equipment upgrades, and employs “flock supervisors” to make sure that corporate directives are being followed. It hires the trucks that drop off the baby chicks and return seven weeks later to pick up full-grown chickens ready for slaughter. At the processing plant, Tyson employees count and weigh the birds. A grower’s income is determined by a formula based upon that count, that weight, and the amount of feed used.

The chicken grower provides the land, the labor, the poultry houses, and the fuel. Most growers must borrow money to build the houses, which cost about $150,000 each and hold about 25,000 birds. A 1995 survey by Louisiana Tech University found that the typical grower had been raising chicken for fifteen years, owned three poultry houses, remained deeply in debt, and earned perhaps $12,000 a year. About half of the nation’s chicken growers leave the business after just three years, either selling out or losing everything. The back roads of rural Arkansas are now littered with abandoned poultry houses.

Most chicken growers cannot obtain a bank loan without already having a signed contract from a major processor. “We get the check first,” a loan officer told the
Arkansas Democrat-Gazette
. A chicken grower who is unhappy with his or her processor has little power to do anything about it. Poultry contracts are short-term. Growers who complain may soon find themselves with empty poultry houses and debts that still need to be paid. Twenty-five years ago, when the United States had dozens of poultry firms, a grower stood a much better chance of finding a new processor and of striking a better deal. Today growers who are labeled “difficult” often have no choice but to find a new line of work. A processor can terminate a contract with a grower whenever it likes. It owns the birds. Short of that punishment, a processor can prolong the interval between the departure of one flock and the arrival of another. Every day that poultry houses sit empty, the grower loses money.

The large processors won’t publicly disclose the terms of their contracts. In the past, such contracts have not only required that growers surrender all rights to file a lawsuit against the company, but have also forbidden them from joining any association that might link
growers in a strong bargaining unit. The processors do not like the idea of chicken growers joining forces to protect their interests. “Our relationship with our growers is a one-on-one contractual relationship…,” a Tyson executive told a reporter in 1998. “We want to see that it remains that way.”

THE FOUR LARGE
meatpacking firms claim that an oversupply of beef, not any corporate behavior, is responsible for the low prices that American ranchers are paid for their cattle. A number of studies by the U.S. Department of Agriculture (USDA) have reached the same conclusion. Annual beef consumption in the United States peaked in 1976, at about ninety-four pounds per person. Today the typical American eats about sixty-eight pounds of beef every year. Although the nation’s population has grown since the 1970s, it has not grown fast enough to compensate for the decline in beef consumption. Ranchers trying to stabilize their incomes fell victim to their own fallacy of composition. They followed the advice of agribusiness firms and gave their cattle growth hormones. As a result, cattle are much bigger today; fewer cattle are sold; and most American beef cannot be exported to the European Union, where the use of bovine growth hormones has been banned.

The meatpacking companies claim that captive supplies and formula pricing systems are means of achieving greater efficiency, not of controlling cattle prices. Their slaughterhouses require a large and steady volume of cattle to operate profitably; captive supplies are one reliable way of sustaining that volume. The large meatpacking companies say that they’ve become a convenient scapegoat for ranchers, when the real problem is low poultry prices. A pound of chicken costs about half as much as a pound of beef. The long-term deals now being offered to cattlemen are portrayed as innovations that will save, not destroy, the beef industry. Responding in 1998 to a USDA investigation of captive supplies in Kansas, IBP defended such “alternative methods for selling fed cattle.” The company argued that these practices were “similar to changes that have already occurred… for selling other agricultural commodities,” such as poultry.

Many independent ranchers are convinced that captive supplies are used primarily to control the market, not to achieve greater slaughterhouse
efficiency. They do not oppose large-scale transactions or long-term contracts; they oppose cattle prices that are kept secret. Most of all, they do not trust the meatpacking giants. The belief that agribusiness executives secretly talk on the phone with their competitors, set prices, and divide up the worldwide market for commodities — a belief widely held among independent ranchers and farmers — may seem like a paranoid fantasy. But that is precisely what executives at Archer Daniels Midland, “supermarket to the world,” did for years.

Three of Archer Daniels Midland’s top officials, including Michael Andreas, its vice chairman, were sent to federal prison in 1999 for conspiring with foreign rivals to control the international market for lysine (an important feed additive). The Justice Department’s investigation of this massive price-fixing scheme focused on the period between August of 1992 and December of 1995. Within that roughly three-and-a-half-year stretch, Archer Daniels Midland and its coconspirators may have overcharged farmers by as much as $180 million. During the same period, Archer Daniels Midland executives also met with their overseas rivals to set the worldwide price for citric acid (a common food additive). At a meeting with Japanese executives that was secretly recorded, the president of Archer Daniels Midland preached the virtues of collaboration. “We have a saying at this company,” he said. “Our competitors are our friends, and our customers are our enemies.” Archer Daniels Midland remains the world’s largest producer of lysine, as well as the world’s largest processor of soybeans and corn. It is also one of the largest shareholders of IBP.

A 1996 USDA investigation of concentration in the beef industry found that many ranchers were afraid to testify against the large meatpacking companies, fearing retaliation and “economic ruin.” That year Mike Callicrate, a cattleman from St. Francis, Kansas, decided to speak out against corporate behavior he thought was not just improper but criminal. “I was driving down the road one day,” Callicrate told me, “and I kept thinking, when is someone going to do something about this? And I suddenly realized that maybe nobody’s going to do it, and I had to give it a try.” He claims that after his testimony before the USDA committee, the large meatpackers promptly stopped bidding on his cattle. “I couldn’t sell my cattle,” he said. “They’d drive right past my feed yard and buy cattle from a guy two hundred miles further away.” His business has recovered somewhat; ConAgra and Excel now bid on his cattle. The experience has turned him into an activist. He refuses to “make the transition to slavery quietly.”
He has spoken at congressional hearings and has joined a dozen other cattlemen in a class-action lawsuit against IBP. The lawsuit claims that IBP has for many years violated the Packers and Stockyards Act through a wide variety of anticompetitive tactics. According to Callicrate, the suit will demonstrate that the company’s purported efficiency in production is really “an efficiency in stealing.” IBP denies the charges. “It makes no sense for us to do anything to hurt cattle producers,” a top IBP executive told a reporter, “when we depend upon them to supply our plants.”

THE COLORADO CATTLEMEN
’
S ASSOCIATION
filed an amicus brief in Mike Callicrate’s lawsuit against IBP, demanding a competitive marketplace for cattle and a halt to any illegal buying practices being used by the large meatpacking firms. Ranchers in Colorado today, however, face threats to their livelihood that are unrelated to fluctuations in cattle prices. During the past twenty years, Colorado has lost roughly 1.5 million acres of ranchland to development. Population growth and the booming market for vacation homes have greatly driven up land costs. Some ranchland that sold for less than $200 an acre in the 1960s now sells for hundreds of times that amount. The new land prices make it impossible for ordinary ranchers to expand their operations. Each head of cattle needs about thirty acres of pasture for grazing, and until cattle start producing solid gold nuggets instead of sirloin, it’s hard to sustain beef production on such expensive land. Ranching families in Colorado tend to be land-rich and cash-poor. Inheritance taxes can claim more than half of a cattle ranch’s land value. Even if a family manages to operate its ranch profitably, handing it down to the next generation may require selling off large chunks of land, thereby diminishing its productive capacity.

Along with the ranches, Colorado is quickly losing its ranching culture. Among the students at Harrison High you see a variety of fashion statements: gangsta wannabes, skaters, stoners, goths, and punks. What you don’t see — in the shadow of Pikes Peak, in the heart of the Rocky Mountain West — is anyone dressed even remotely like a cowboy. Nobody’s wearing shirts with snaps or Justin boots. In 1959, eight of the nation’s top ten TV shows were Westerns. The networks ran thirty-five Westerns in prime time every week, and places like Colorado,
where real cowboys lived, were the stuff of youthful daydreams. That America now seems as dead and distant as the England of King Arthur. I saw hundreds of high school students in Colorado Springs, and only one of them wore a cowboy hat. His name was Philly Favorite, he played guitar in a band called the Deadites, and his cowboy hat was made out of fake zebra fur.

The median age of Colorado’s ranchers and farmers is about fifty-five, and roughly half of the state’s open land will change hands during the next two decades — a potential boon for real estate developers. A number of Colorado land trusts are now working to help ranchers obtain conservation easements. In return for donating future development rights to one of these trusts, a rancher receives an immediate tax break and the prospect of lower inheritance taxes. The land remains private property, but by law can never be turned into golf courses, shopping malls, or subdivisions. In 1995 the Colorado Cattlemen’s Association formed the first land trust in the United States that is devoted solely to the preservation of ranchland. It has thus far protected almost 40,000 acres, a significant achievement. But ranchland in Colorado is now vanishing at the rate of about 90,000 acres a year.

Conservation easements are usually of greatest benefit to wealthy gentleman ranchers who earn large incomes from other sources. The doctors, lawyers, and stockbrokers now running cattle on some of Colorado’s most beautiful land can own big ranches, preserve open space with easements, and enjoy the big tax deductions. Ranchers whose annual income comes entirely from selling cattle usually don’t earn enough to benefit from that sort of tax break. And the value of their land, along with the pressure to sell it, often increases when a wealthy neighbor obtains a conservation easement, since the views in the area are more likely to remain unspoiled.

The Colorado ranchers who now face the greatest economic difficulty are the ones who run a few hundred head of cattle, who work their own land, who don’t have any outside income, and who don’t stand to gain anything from a big tax write-off. They have to compete with gentleman ranchers whose operations don’t have to earn a profit and with part-time ranchers whose operations are kept afloat by second jobs. Indeed, the ranchers most likely to be in financial trouble today are the ones who live the life and embody the values supposedly at the heart of the American West. They are independent and self-sufficient, cherish their freedom, believe in hard work — and as a result are now paying the price.