Tyson Foods' top performing breeder operations in Hempstead County can barely make ends meet in the face of inflationary pressures that have stripped the businesses of positive cash flow.

Linda and Tom Downs of Stamps operate two breeder houses for Springdale-based Tyson Foods Inc. The couple, in their 60s, would like to sell and retire, but say the business model under which they operated for more than a decade is broken.

The Downs' are not alone.

Economic hardships are causing tension between Tyson Foods and its contract growers, also known as poultry farmers. Some farmers, who still owe large debts on farms, are not able to make money on the poultry operation.

More than 100 broiler growers from the Berryville area and two dozen breeders near Hope have petitioned Tyson Foods for a pay raise. A few Berryville farmers have received calls from farmers near Batesville and Springdale with similar concerns over pay.

Farmers say the culprit is the ever rising costs of propane, diesel and electricity, combined with a pay schedule that omits a cost of living adjustment or doesn't keep up with the higher energy costs.

For its part, Tyson Foods officials say they value their growers and understand higher fuel and commodity costs. The company absorbed $120 million in excess grain expenses in the three months ending June 30.

"We value the work our growers do and are continually analyzing the costs of raising chicken because we want our growers to succeed," said company spokesman Gary Mickelson.

Joel and Michelle Wolf of Omaha grow broilers for Tyson Foods' Berryville/Green Forest complex.

The economics that worked a few years ago just don't work anymore, Michelle Wolf said.

"With more than $400,000 invested in our property, four conventional poultry houses and land, we are running a negative cash flow of $3,000 per month, and are on the verge of bankruptcy," she said.

Five years ago, Wolf left a full-time job paying $16 per hour because the farm income was sufficient. Now the family must rely on income generated from jobs off the farm.

Tyson Foods does not factor in a cost of living raise for its growers, in part because of the diverse geographical locations of the growers, said Patrick Pilkington, vice president of live production for Tyson Foods.

He said the company has in recent years paid some complexes a fuel stipend related to the jump in propane costs in 2005. However, not all growers received the help.

The farmers have noticed that Tyson Foods has profited in the last three quarters in part by raising poultry prices for its customers, both retail and food service. In July, the company reported higher net income on the strength of its chicken segment due to price increases of 18.8 percent in the quarter and 7.2 percent for first nine months.

But contract pay is not based on corporate earnings, Pilkington said.

Complex managers work with the growers and make pay increase recommendations they feel are necessary, Pilkington said. The company said it can change the payment schedule at any time during a contract period and said some complexes will see pay raises this year.

Tyson Foods said it relies on its regional managers to assess local situations and determine what type of pay increases are warranted.

The farmers say those assessments have been lacking -- in some cases for more than 10 years.

"We just want what is fair. We haven't seen a price increase to the bottom line in almost a decade," said Frankie Duckett of Waldo.

Duckett operates six breeder houses for the Hope complex. He and 25 breeder operators from the Hope complex spent more than 17 months compiling expense data and tax records from the last 10 years in an effort to explain their financial plight to Tyson Foods' officials.

Duckett said he took the data to the Hope complex manager hoping to get a raise for the breeder operators. The breeders asked for 42 cents per dozen of eggs, 10 percent below the rate paid to Tyson Foods' competitor Pilgrim's Pride, he said.

After months of negotiation Duckett said the company agreed to pay 39.5 cents per dozen, a 3 cent raise.

"Breeder producers at our Hope complex are being offered a new contract that provides for a three and a half cent per dozen increase in the base pay as well as bonuses based on the performance of their respective operation," Tyson Foods spokesman Gary Mickelson said in an e-mail.

The company said it believes the contract is fair and will help the breeders generate more money.

"Many of the producers have already accepted the contract and we're willing to meet with others to help them understand how it can work for them," Mickelson said.

Duckett said the company reconfigured the potential bonus pay and added three weeks to the growing cycle.

"In their new method of calculating bonus pay, the goal has been raised and restructured in a way that makes it very difficult to get the bonus," Duckett said.

Downs and Duckett said breeders in their complex have never received a fuel stipend or help to offset rising utility costs..

Wolf said the company did pay broilers growers in the Berryville/Green Forest complex two extra fuel supplements in recent years -- $2,000 in 2005, and $1,000 in 2006.

Wolf said the stipend of $1,000 did very little to cover the $10,000 propane bill from one flock last year.

"We just finished paying off that bill from last winter," she said.

The Wolfs' contract doesn't expire for three years, but they are among the group that asked the company in April for a pay raise of a 1.5 cents per pound.

The Berryville group said the raise request was based on the amount of money it would take to put the growers at the income level they were earning in 2005.

The group said the company has not responded to their request for a raise in pay.

Tyson Foods told The Morning News that growers in the Berryville complex would receive a raise, but no details were offered.

The farmers don't consider themselves activists, but said the contract grower system no longer works.

"You know something is wrong when banks won't finance a new farm because it can't generate positive cash flow. And that is the story among growers and breeders," Dana Downs said.

Bill and Dana Downs, son and daughter-in-law to Linda and Tom, wanted to add a second breeder house to their farm in 1999. It would have cost $265,000, a big increase from the $185,000 the couple spent on the first house built in 1995.

"When I ran all the numbers there was no way for us to make enough money to justify the added work to an already 7-day-a-week job," Dana Downs said.

Margins relating to poultry growing have been steadily diminishing for several years -- more drastically in the last two years -- due to the increased cost of building and running the operation, said Bill Roberson, with Farm Credit of Western Arkansas.

He said growers are experiencing a tight squeeze between higher repayment costs for their investment and soaring utility costs.

"The engineering design of new houses today requires more energy to operate in addition to the rising costs of both electricity and propane," Roberson said.

The life of a poultry house is 25 to 30 years and investment loans on new houses are amortized over 15 years to give the farmers adequate opportunity to build equity, which Roberson said was important because every few years poultry companies require housing upgrades which add to the investment and repayment costs.