For Immediate Release
SBA’s Office of the Inspector General Reports Government-Guaranteed Loans Promote Exploitative Practices in the Chicken Industry
Pittsboro, NC, March 9, 2018 –Three days ago, Small Business Administration’s (SBA) Office of the Inspector General (OIG) released a report validating the longstanding outcry of poultry farmers. The report determined that SBA 7(a) loans, the primary lending program for helping startup and existing small businesses, made to poultry farmers did not meet eligibility requirements. This report supports farmer claims that government guaranteed loans unfairly subsidize exploitative practices in the chicken industry.
“We are grateful that the OIG has documented what growers have experienced for a long time,” said Mike Weaver, a West Virginia poultry grower and President of the Contract Poultry Growers’ Association of the Virginias.
SBA’s OIG based their evaluation on evidence gleaned from a sample of guaranteed poultry loans, which confirms what farmers have been saying for years. Under the industry’s contract model, integrators have an extraordinary level of control over farmers’ operation, tying farmers’ hands, and preventing them from truly independently managing their farm businesses. “Farmers are told that this is an independent business, but in reality you are controlled by the integrator,” said Craig Watts, former North Carolina poultry grower. “This report validates what we have been saying for many years.”
The report states that “integrator control exercised through a series of contractual restrictions, management agreements, oversight inspections, and market controls… overcame practically all of a grower’s ability to operate their business independent of integrator mandates.”
This report is a breakthrough for contract poultry farmers fighting for their rights in an uncompetitive industry characterized by corporate control. “Taking away the SBA guarantee will keep companies from being able to bring new growers into the meat grinder, while throwing out and mistreating existing growers,” said Eric Hedrick, a West Virginia poultry grower.
Farmers have long called attention to how government guaranteed loans subsidize the dramatic increase of new growers entering this exploitative system. When SBA guarantees a loan, it means the agency relies on taxpayer money to repay the bank up to 85% of the value of the loan if the farmer defaults. This type of guarantee allows banks to make high-risk loans. Guarantees are helpful to assist farmers needing credit for new business ventures. However, government guarantees threaten the security of existing poultry farms by flooding the industry with new poultry houses and enabling the termination of existing farmers.
RAFI-USA supports limiting new SBA guaranteed poultry house loans. We want to ensure farmers with current SBA-guaranteed loans receive servicing, support, and are not forced into default. Farmers should not pay the price for poor underwriting, inadequate oversight, and limited understanding of the poultry industry.
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