Poultry execs: Suit producing ‘chilling effect’

BY ROBERT J. SMITH

Posted on Monday, February 20, 2006

Oklahoma Attorney General Drew Edmondson’s lawsuit against poultry companies with operations in Arkansas is having a “chilling effect” on the industry’s expansion within his state, an industry representative said last week.

Morril Harriman, executive vice president of The Poultry Federation, said the federal lawsuit filed in June is discouraging Oklahomans from starting new poultry farms and dissuading farmers from taking out bank loans to expand their operations.

There are 98 fewer poultry houses in Oklahoma now than there were a year ago.

“I don’t know the exact cause [for fewer houses ], but certainly with the litigation pending, that’s going to have a chilling effect on the expansion of the industry,” said Harriman, whose organization represents poultry companies in Oklahoma, Arkansas and Missouri. “A potential poultry producer is going to have to consider possible ramifications of the litigation itself.

“ You’ve certainly seen a slowing of growth.”

Others suggest there are reasons beyond the lawsuit to explain why there are fewer poultry houses in Oklahoma. The reasons include the poultry industry’s preference for larger houses to replace smaller ones and older poultry farmers who’ve refused to take on new debt to pay for improvements requested or required by the poultry companies.

Charlie Price, a spokesman for Edmondson’s office, said the attorney general doesn’t believe the federal lawsuit has harmed poultry farming in eastern Oklahoma. “From the numbers, I don’t believe they could be construed to say our lawsuit is having that type of impact,” Price said.

FEWER, LARGER HOUSES In June, Edmondson sued eight companies in U. S. District Court at Tulsa. They are Cargill Inc. of Minneapolis; Cobb-Vantress Inc. and Simmons Foods, both of Siloam Springs; George’s Inc. of Springdale; Peterson Farms Inc. of Decatur; Tyson Foods Inc. of Springdale; Willow Brook Foods of Springfield, Mo.; and Cal-Maine Foods Inc. of Jackson, Miss.

The lawsuit is over poultry litter that’s used in the Illinois River watershed, a 1, 700-square-mile area that includes portions of Northwest Arkansas and eastern Oklahoma. Farmers use poultry litter, the combination of rice hulls or wood chips and bird manure, to fertilize pastures.

Statistics kept by the Oklahoma Department of Agriculture, Food and Forestry show the number of poultry houses increased from 2000 to 2005 by 7. 1 percent.

In 2005, there were 2, 962 houses in 20 eastern Oklahoma counties. This year’s records show 2, 864 houses, a decrease of 3. 3 percent.

Price, however, said little of that has to do with the lawsuit. In Delaware County, he pointed out, there are 633 houses — the most in the past six years.

The increase came despite lawsuits affecting poultry farmers in the county. Those include the lawsuit filed in 2001 by Tulsa Metropolitan Utility Authority against six poultry companies and the city of Decatur. That lawsuit was settled in 2003.

There are many more poultry houses in Arkansas — 2, 885 last year. It’s uncertain whether that’s an increase over previous years, said Patrick Fisk, a program manager for the Arkansas Natural Resources Commission. The state didn’t start keeping statistics until 2004, and Fisk said that year’s report was flawed because many farmers didn’t know they were required to report houses.

“Other than through acquisition, we have not been expanding our poultry production in Northwest Arkansas and eastern Oklahoma,” Tyson spokesman Gary Mickelson said in a written statement. “Most of the new houses that have been built in recent years have been replacement facilities.

“ We have no plans to expand production in the region primarily because of urban growth. The pending litigation and its potential impact is also a factor.”

Farmers who build houses often rely on bigger versions because they are more efficient. Farmers who would have built 400-foot-long houses a few years ago are increasingly relying on 500-foot-long versions to hold more chickens.

Those houses are 43 feet wide, and cost $ 180, 000 to $ 200, 000 each. The higher cost has made it more difficult for young farmers to get in the business, said Phil Estes, farm loan program chief for the Oklahoma Farm Service Agency, a part of the U. S. Department of Agriculture that guarantees bank loans for farmers.

“I think everybody is sure cautious out there,” Estes said. “Even us. We try to be careful. On the environmental side, we are sure nervous. We don’t want somebody to change the rules on us.”

LAWSUIT IMPACT Farmers who raise chickens and turkeys don’t know the longterm impact of the lawsuit. They can’t predict how it will change how they farm, but many predict they will be required to operate differently. They don’t know whether they’ll be allowed to spread that litter in the same way they always have or if they’ll be more limited in what they can do.

Those outside the Illinois River watershed, on which the federal lawsuit is centered, are aware of the lawsuit and wondering how long it will be before lawsuits affect them.

Edmondson acknowledged in interviews that lawsuits based on poultry litter’s impact on other watersheds are possible depending on the outcome of the Illinois River lawsuit.

“That’s the big scare,” said Cyndi Mackey, who’s family raises chickens near Spiro, Okla., for OK Foods. “As a grower, you are honestly afraid of what’s going to happen. It’s going to do harm to us as a grower.”

Janet Wilkerson, a vice president for Decatur-based Peterson Farms, said she’s noted a decrease in the number of new poultry houses under construction in eastern Oklahoma from only a few years ago.

“We’re being very cautious, and that’s good business,” Wilkerson said.

Jim Reese, state executive director of the Oklahoma Farm Service Agency, said the purchases of existing farms remains the bulk of his agency’s work. The agency guaranteed $ 44. 8 million in loans to farmers last year in eastern Oklahoma and is on pace to have a similar loan guarantees this year, Reese said. Ninety percent of that money was for poultry farms, Reese said.

There are fewer new farms, Reese said.

Just four new poultry houses are under construction on the eastern edge of Oklahoma that have loans guaranteed by the federal agency, he said. In 2003, there would have been 15 to 20 houses under construction at any one time that were financed with loans guaranteed by the program, Reese said.

Barry Burns, a vice president at Simmons First Bank in Siloam Springs, said he’s seen a drop in new poultry house construction lately, but he doesn’t connect it to the lawsuit.

“Poultry companies go through periods of expansion to meet certain markets, and they reach that expansion and they don’t need new housing until they acquire new markets for poultry,” Burns said. “It is true that the lawsuits and environmental issues going on in the poultry industry may have some affect on producers’ interest in building new facilities.

“ Every lender has become a little more careful due to environmental issues. Everybody wants a clean environment, so lenders are taking a harder look at financing poultry loans.”