Poultry Farmers V. Tyson Foods

OMAHA (DTN) -- A small group of Missouri and Arkansas poultry farmers are suing Tyson Foods for closing a broiler operation in Dexter, Missouri, that left the farmers with debts on their chicken-raising facilities but no contracts to continue raising chickens for Tyson.

Tyson shut down its hatchery and broiler operations in Dexter, starting in October 2023.

The suit filed in Stoddard County, Missouri, in late December is against Tyson Foods, its chicken and sales divisions and a pair of managers at the Dexter facility. The farmers who produced eggs for Tyson's hatchery in the area allege Tyson officials had known the company would close the facility but the farmers still made investments and incurred more debt without knowing about Tyson's plans.

The lawsuit alleges Tyson and its local managers did not disclose the possibility of closing the Dexter facility and also actively concealed plans to close the processing plant.

"Generations of farmers have raised chickens for Tyson," said Russell Oliver, an attorney for the farmers, in a statement to DTN. "Tyson strong-armed these farmers into taking on debt, and now the farmers are being strong-armed into taking terrible deals. This is wrong, and we will not stand for it. That is why we filed this lawsuit."

Tyson Foods did not respond to a request from DTN seeking comment.

The farmers claim Tyson Companies' decisions put the farmers further in debt and left their farms with "little to no value." The farmers allege Tyson's actions amounted to fraud.

Under Tyson's vertically integrated system, the farmers own and operate farms that take care of the brood hens producing fertile eggs under contract with Tyson that would eventually become broiler chickens. The eggs would then go to a hatchery and the chicks would go to broiler operations owned by other farmers.

The farmers note in their lawsuit that Tyson would contract with growers in and around 45 miles of the processing plant and there is no other broiler processer within that 45-mile radius, meaning "growers in that area can only grow for the Tyson Companies."

The farmers say that Tyson controlled the genetics of the chickens, the amount, timing and type of pullets being delivered, the schedule of feed and distribution of medical supplies to chickens, as well as the temperature, ventilation, lighting and other environmental aspects of the chicken houses. "Tyson Companies control every aspect of how their chickens are treated and raised, although they do not care for the birds themselves," the lawsuit states.

The farmers maintain they were not allowed to change the feed, use alternative bedding or adjust the schedules for lighting the barns or the temperatures. Any of those actions would lead to termination of their contracts. Tyson directed the farmers where to purchase supplies and services for their operations.

Along with all of that, Tyson "exerted enormous financial control" because the farmers had significant investments in their operations that could only be used for Tyson. The farmers maintain their contracts induced them into making expensive investments in their operations to maintain their contracts with Tyson. That led to significant amounts of debt when a single set of chicken houses on one farm could cost millions of dollars.

"The Tyson Companies forced farmers to operate under the pressure of great debt that could only be paid down by farmers continuing to operate for the Tyson Companies and bend to the Tyson Companies' demands," the lawsuit states.

In 2021, a Tyson annual report filed with the Securities and Exchange Commission and a related earnings call pointed to $1 billion in savings that Tyson looked to achieve through a new production program over 2022 and 2023. The farmers state in their lawsuit that Tyson Companies did not inform them that closing the Dexter plant was part of that savings plan. Instead, the farmers allege, Tyson officials and local plant managers "continued to represent that the Dexter Complex would remain in operation for years to come."

The local Tyson officials named in the lawsuit allegedly demanded growers continue to make costly upgrades to their operations even when they knew Tyson planned to close the Dexter facility.

One Missouri farmer who is a plaintiff in the case stated Tyson required him to spend $200,000 on new nesting boxes just a few months before the Dexter plant closing was announced. If the farmer didn't agree to do that, he risked losing his contracts with Tyson.

The farmers stated in their complaint they would have stopped investing money, time and labor into trying to meet Tyson's demands if they had known earlier about the plant closure.

One Clay County, Arkansas, farmer had only been contracting with Tyson since January 2022. He has four barns on two egg production farms and spent $2.6 million to build the chicken houses in late 2021. Under his contract, the farmer was already facing years to recoup his investments before Tyson chose to close the Dexter operation.

The lawsuit was filed in Missouri state court seeking damages for fraudulent misrepresentation and negligent representation civil conspiracy, as well as unjust enrichment and tortious interference with contracts.

Oliver said the farmers have millions of dollars in debt because of the Tyson closure. He said his clients had been offered a contract to sell eggs to egg processor Cal-Maine for roughly half of the contract price farmers were getting from Tyson for a dozen eggs. Cal-Maine also requires the farmers to release Tyson from any liability before Cal-Maine would sign a contract with them.

"You really have to ask: Why would Cal-Maine insist on farmers releasing claims against Tyson?" Oliver stated.

In the past, similar lawsuits against poultry processors and meatpackers would be filed in federal court, but those cases would often fail because the farmers failed to demonstrate "harm to competition" under the Packers and Stockyards Act. On Dec. 18, USDA sent a proposed rule to the White House Office of Management and Budget seeking to amend the rules for unfair practices, undue preferences and harm to competition.

The lawsuit also comes as USDA is implementing a new final rule on transparency in broiler contracts. The rule, which goes into effect Feb. 12, 2024, would require poultry processors to provide producers with more disclosure on contracts and pricing for broiler producers. Members of the Senate and Congressional Chicken Caucuses in December sent letters to USDA calling for a 180-day extension of the rule, arguing it will force poultry companies to amend nearly every contract they have with producers over the next few months.

Chris Clayton can be reached at Chris.Clayton@dtn.com

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