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Chicken is America’s favorite protein, topping beef and pork for the past 30 years.  In 2016 alone, the USDA reported that American farmers raised over 8.8 billion chickens valued at $26 billion for domestic consumption and export.

Public demand has resulted in significant changes the poultry growing industry.  Where there was once 1.6 million independent farm across the country, a rapid shift to a “vertical integration” model has resulted only 25,000 contract farms raising the vast majority of our nation’s poultry. 

The very nature of the industry is what bring us here today.  Growers need capital to buy farms, build chicken coops, and buy feed to run their operations.  

Over the past four years, the 7(a) program has experienced significant growth in poultry lending.  As noted by the IG report, SBA has guaranteed over 1,500 poultry loans totaling $1.8 billion from 2012 through 2016.

On the surface this seems like we are helping small farms get access to the credit, but the nature of their relationships with integrators call this notion into question.  

Every report I’ve read and discussion I’ve had with stakeholders indicates there is a nascent traditional lending market for poultry growers, and as stated in PEW reports, is almost wholly dependent on government subsidies at all stages.  This includes the government guaranteed lending from USDA and SBA used by growers to buy farms, construct chicken houses, and fund operations.  This raises serious red flags.

As we will hear from Mr. Ware, the level of control exercised over the growers was significant.  From how to design and build their chicken coops to feeding and watering schedules, integrators have their hands in almost every aspect of a grower’s business.

Let’s be clear about what is going on here.  Large integrators own the chickens, sell the feed to the farmers, dictate the specifications of how to build the grow houses, all while pushing the cost and risk of financing and owning these very capital intensive structures onto the farmers.

While we all support the SBA programs for delivering credit to small business that can’t get it elsewhere, it is troubling if the program is being used to displace the growth of a traditional lending market and put taxpayer money at risk.

I look forward to hearing more from the IG about the details of their report and findings.  I am also very interested in hearing from SBA on why they relied on a 1993 regional agency decision based on one contract to determine affiliation – or lack thereof - in these contracts for so long.  Further, I’m interested in how the regulatory changes from 2016 are applied to poultry loan applications, and what SBA plans to do to address the affiliation concerns raised by the IG going forward.