Honestly, because it's Costco and they have built up some good name capital, i think this might be a good deal for these farmers. Unless you're in the agriculture industry, or in the food industry, you might not know that a lot of chicken (especially things like wings) is coming from Brazil. That's not necessarily a bad thing, but if Costco can get some American farmers on board, and get them making money, and get them producing a good product, they could probably get some really good business out of it. I'm always suspicious, but this sounds pretty win-win.
10 years ago: Tyson and Purdue lock their farmers down into exclusivity agreements and then make the farmers carry all the risk. The reason Costco is getting other farmers into the act, I reckon, is they have decided they can get a better price if they cut Tyson and Purdue out of the equation. Farm loans are also mind-blowing. My wife's cousin has 400 head of cattle, a dairy barn, no land and $10m in debt. She will never pay it off, they just refinance it and refinance it and refinance it and push it out with subsidies. That's the way our market agriculture economy works - the government pays to keep you in business and you profit on whatever you make over the top. Crop insurance is the craziest: the government issues the payout but individual brokers sell the coverage. It's 100% risk free for the broker but they make a commission based on assuming zero risk. So buy fucking insurance. If Tyson says they'll pay what they want to pay for your chickens this year, no guarantees for next year, also we're raising the interest rate on your loan, also if you talk to the press you lose your franchise, while Costco says they'll sign a 15-year contract, GO WITH COSTCO. It's almost as if Costco has lobbyists: supply, grow-out requirements, transportation, slaughter, processing, and wholesale distribution and may control brood egg production and hatching. The integrators consequently have remarkable control of their products and vast market power relative to growers. There are many fewer growers in the layer and gamebird sectors than in the meat sectors. Under the terms of the contract for this project and the enabling legislation for this study, the proposed insurance product would provide coverage for growers by paying an indemnity for a single cause of loss: the bankruptcy of the integrator. Insurance for business interruption is available for many businesses, including sectors of the poultry industry. The Contractor has identified insurance in the private sectors covering business interruption losses of a grower resulting from integrator bankruptcy. A determination would need to be made about whether this insurance is “generally available.” When Costco wanted to sell booze in Washington State, they spent $22m kicking the state out of the liquor business. If Costco wants to blow up Tyson we should give them dynamite."A disaster flock I call them," says OCM President Mike Weaver, who raises poultry on contract in West Virginia. "They contract a disease that stunts their growth. And that's going to happen to (the farmers) eventually. The feed and the chicks, they don't have control over, but their pay is going to be based on those."
For instance, if the project struggles financially, Costco can cancel the contract.
Much of the poultry meat industry is vertically integrated. Integrators typically control feed
Refrigeration and shipping really affects a lot. I know a few years back, and probably still now, Africa had a huge problem with their local chicken farmers being undersold by frozen chicken shipped in from Europe. I can imagine, economically and politically, it was probably quite the mess.Unless you're in the agriculture industry, or in the food industry, you might not know that a lot of chicken (especially things like wings) is coming from Brazil.
You skate it on forever. You're never paying it back, you pay down the interest, and then when you're ready to pack it in you declare bankruptcy. Or, if you're one of the lucky ones you assign the loan to your kids or whoever takes over the farm and they continue the process. The United States has weaponized agriculture. It was one of the primary ways we won the Cold War. Part of that is making sure farmers can always produce a surplus to send somewhere else (soft power). This is one of the many reasons agricultural loans are called "loans" but are actually more like grants.
Good thing indentured servitude is a thing of the past, right? Books have been and will be written about agricultural reform. The policies as they exist right now are batshit insane.Yeah, but skating on the loan means you're either stuck being a farmer for life, or you have to publicly admit that you suck at being a farmer.
I'm not saying it's the worst sort of policy, and it works, but maybe it'd be better if the loans really were grants instead of just de facto grants.
From what I understand, it's not too uncommon for farms to take out big loans to set up new projects and that through government subsidies, sales, etc. they can make that money back without that much risk. It also tends to be a good idea for farmers to diversify when they can. You never know when one product quickly falls out of favor and another one takes off. That said, there's tons of experience on raising pretty much everything out there, so I can't imagine it would be too big of a stretch for them to find the help they need to raise chickens when they need it.