Business ethics in the broiler industry

• Published date: 01 June 2019
• DOI: http://doi.org/10.1111/basr.12170
• Date: 01 June 2019
• Author: S. Douglas Beets

Bus Soc Rev. 2019;124:239–260.

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Since the middle of the twentieth century, the poultry agriculture model in the United States has

evolved from dependence on a multitude of small, diversified farms to industry dominance by large,

vertically integrated, food production corporations with ownership, or control of giant industrial

growing facilities. Chicken is the most popular meat in the United States, and the chicken meat indus-

try is the most industrialized segment of livestock agriculture (Nosowitz, 2017; Pew Charitable Trusts,

DOI: 10.1111/basr.12170

ORIGINAL ARTICLE

Business ethics in the broiler industry

S. DouglasBeets

© 2019 W. Michael Hoffman Center for Business Ethics at Bentley University. Published by Wiley Periodicals, Inc., 350 Main Street, Malden,

MA 02148, USA, and 9600 Garsington Road, Oxford OX4 2DQ, UK.

School of Business,Wake Forest

University, Winston‐Salem, North Carolina

Correspondence

S. Douglas Beets, School of Business,

Wake Forest University, P.O. Box 7897,

Winston‐Salem, NC 27109.

Email: beets@wfu.edu

Abstract

The chicken meat, or broiler, business in the United States

is a vertically integrated industry in which integrator cor-

porations control all aspects of the business. Primarily

through a series of business acquisitions, an industry duop-

oly has evolved. The two dominant integrator corporations,

Pilgrim's Pride and Tyson Foods, are profitable, and their

officers and stockholders benefit from the corporations’ fi-

nancial success. The multitude of local growers who nurture

the chickens to maturity for the integrators, however, ben-

efit minimally from the financial success of the integrators,

as the growers face a myriad of financial, environmental,

community, and health problems. Many growers have dif-

ficulty in extracting themselves from an occupation that

requires their initial, personal expenditure, or debt of hun-

dreds of thousands of dollars. Additionally, many who live

in regions or states of broiler growing facilities suffer from

gases emitted by these facilities and correspondingly lower

property values. Several demographic, economic, educa-

tion, health, and quality of life metrics were analyzed for the

50 U.S. states to provide insights regarding the ethics of the

broiler industry and why some states produce significantly

more broilers than others.

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BEETS

2013). But while yielding relatively inexpensive chicken meat for consumers, industrial agricultural

facilities also generate costs to society that are high in terms of economic, environmental, and social

issues (Rossi & Garner, 2014). One of these issues is the volume of harmful gases emitted by a broiler

growing facility (GF) and the related decline in property values of those who live in the surrounding

region (Brown, 2017; Dalton, Caraway, Gibb, & Fulcher, 2011; Gilchrist et al., 2007; Gutierrez, 2016;

Hoolveld, Smit, Femke, Wouters, & Dijk, 2016; Lahav et al., 2008). An additional issue relates to the

economic commitment of contract growers who raise the poultry for the large integrator corporations;

nearly all chickens produced are grown under inequitable contract arrangements (Food & Water

Watch, 2015; Moodie, 2017; Taylor & Domina, 2010).

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HISTORY OF THE BROILER INDUSTRY

The intense and rapid consolidation of the chicken meat, or broiler, industry may be considered re-

markable. In the United States in 1950, there were more than 1.5million facilities that raised and sold

chickens, each facility processed about 350 chickens each year, and around 580million chickens were

sold. By contrast in 2007, there were 27,000 facilities that raised and sold chickens, each facility pro-

cessed about 325,000 chickens annually, and almost nine billion chickens were sold (Pew Charitable

Trusts, 2013). How and why did such a change in the industry occur?

Before about 1940, chicken farmers grew the number of chickens that they judged appropriate,

considering their land and the other crops and livestock they had. The chickens were sold in open

markets to the highest bidder, possibly local butchers. During World War II, U.S. consumers were

limited by rationing in their purchases of red meat products, but chicken was not rationed.

Correspondingly, American appetites for chicken increased substantially; in 1945, Americans were

eating triple the amount of chickens than they were eating five years earlier, and their taste for chicken

continued after the war (Khan, 2012).

Around 1950, a new system was developed, whereby chicken farmers would contract with busi-

nesses that sold the chickens and feed. When the chickens matured under the care of the farmer, the

businesses would buy the chickens back at the prevailing market rate. Within a few years, this contract

arrangement became dominant in the industry; in 1950, about 95% of chicken farmers were selling

their chickens in open markets, but by 1958, about 90% were raising their chickens under contract

arrangements. As open markets for selling chickens disappeared, the integrator corporations could

dictate contract terms as farmers had few viable options for selling their chickens (Khan, 2012).

In the 1960s and 1970s, some poultry companies instituted a form of vertical integration in the

industry, owning all components of the life cycle of a chicken including the farms where the chickens

were raised. Most of these corporations eventually concluded, however, that corporation ownership of

farms made this business model unprofitable (Chrisman, 2016; Lee, 2016a; Leonard, 2014).

The next major evolution in the broiler industry occurred in the early 1980s, when the Reagan

administration announced a reinterpretation of antitrust laws, leading to a plethora of mergers and

consolidations in many industries including the broiler industry (Khan, 2012). Within a few years of

mergers and consolidations, two dominant public corporations, Pilgrim's Pride and Tyson Foods, con-

trolled approximately half of the broiler market and largely dictated industry practices (Elconin, 2014;

Farm Aid, 2015; Food & Water Watch, 2015; Rural Advancement Foundation International (RAFI)

2016; Thornton, 2017). During this period, many large corporations began contracting corporation

lobbyists to influence lawmakers (Khan, 2012; Open Secrets, 2017).

As large poultry corporations grew larger through additional consolidations, several returned to the

vertical integration model, with a critical adjustment from the failed model of the 1960s and 1970s. In