Rule Limits Vertical Integrated Chicken Farm Loans

The U.S. Small Business Administration (SBA) is looking at implementing a rule making it harder for vertically integrated chicken farms to get government loans.

A vertically integrated farm in the broiler industry is when the company owns the hatchery, feed mill, and processing plant. Flocks are delivered to contract growers, who own their own housing, utilities, and labor; but are supplied aspects like feed and veterinary services.

A majority of the nearly $25 billion chicken industry is vertically integrated, but some use government loans, which are still owned by the farmer.

Last March, the SBA Office of Inspector General released a report because of Congressional concern that large businesses were subsidized by its lending program.

The report says loans made to growers did not meet regulatory SBA requirements. From 2012 to 2016, it guaranteed nearly $1.8 billion in loans, niy because of close affiliation with integrators, those dollars may be ineligible. The SBA says its goal is to grow businesses and create jobs.

Iowa Senator Chuck Grassley, along with Democrat Senator Jon Tester from Montana, sent a letter of support to Administrator Linda McMahon for working on the rule to make it more difficult for integrated farms to get SBA loans.

Its report says loan specialists did not have enough knowledge of the poultry industry when making decisions and it believes the relationship between integrator and farmers is affiliative.

Grassley says because large poultry businesses control farmer and business decisions, taxpayers should not be on the hook, "If these companies want farmers to sign contracts to raise birds for them. They should offer fair contracts that private banks will offer financing for without the help of the taxpayers."

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