October 4, 2007

 

Tyson to grow bigger chickens, raises pay in Arkansas

 

 

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, in north-west Arkansas while asking for bigger chickens. 

 

Tyson, the second largest chicken producer in the US, is based in Springdale, Arkansas, dubbed the "chicken capital of the World".

 

Growers in the Green Forest and Berryville area confirmed that Tyson began distributing new contracts in late August.

 

However, they are concerned that Tyson's push for larger birds would negate any gains in income made through the increase, according to Arkansas Democrat Gazette.

 

The new deal increases payments by four-tenths of a cent per pound, an 8.4 percent increase.

 

Still, it was less than the penny and-a-half increase farmers requested from the company in April.

 

The new base pay for the growers in Green Forest and Berryville is 5. 15 cents per pound, up from 4.75 cents per pound.

 

Tyson officials told the paper that the "significant" increase in per-pound contract payments had been under consideration months prior to August, when the Arkansas Democrat Gazette carried the story about the farmers' complaints of rising energy costs.

 

Tyson said the new agreement would only apply to the Green Forest and Berryville growers and not others in the country.

 

The company made changes in bird weights and grower pay in the belief that it would be mutually beneficial to the grower and the company, spokesman Gary Mickelson wrote in an e-mail.

 

Growers said Tyson is planning an 8-pound bird, which would be about a pound and a half heavier than the birds now raised. Tyson said it is not changing bird weights across all of its poultry complexes, but adjusts bird weights annually in response to market demand.

 

Growers worry that lower chick placements per house due to the bigger birds would lead to fewer flocks, which would cancel out the pay increase. The new grow-out period would also take about 10 to 13 days longer per flock, costing farmers more in feed and utility costs.

 

Tyson places about 20, 000 birds per house for a 6-pound grow-out while up to 16, 800 birds for the 8-pound grow-out.

 

Despite the lower numbers, 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.

 

Calling it a major investment by Tyson Foods, Mickelson said the decision to increase the per-pound pay would be costly for the company as it would involve millions in additional costs.

 

Tyson, the second-largest poultry producer in the country, has 6, 200 contract growers.

 

After several unprofitable quarters in fiscal 2006, Tyson cut back on chicken production and announced US$111 million in profits for its fiscal third quarter in July, thanks to a 19 percent price increase.

 

Berryville / Green Forest growers already saw improved performance in Tyson in the first quarter and in April, showed the company data which indicated how rising energy costs are hurting their incomes.

 

Two months later, the growers contacted the Democrat-Gazette in late July after hearing no response from Tyson.

 

Mickelson said Tyson began considering the increase before the media report in August. Complexities involved with changing bird size contributed to the delay, he said.

 

Tyson is also granting higher pay to farmers willing to upgrade their chicken houses, which would require cool cell systems and better water supplies. The farmers can also receive two energy allowance payments of 0. 55 cents per pound between November and March to offset heating costs.

 

Growers for Pilgrim's Pride, the country's largest chicken producer, have also begun to ask for higher prices.