Monica Potts' article 'The Serfs of Arkansas', which appeared both in the Northwest Arkansas Farmer and the Arkansas Democrat Gazette, failed to report essential information that puts the plight of Hmong poultry farmers and their relationship with Tyson into full context.
Four years ago, as a Senior Consultant for the Washington DC based Institute for Social and Economic Development (ISED), and working under a task order from the US Office of Refugee Resettlement, I met several times with individual and groups of Hmong poultry farmers to find out why so many of them where in financial distress and verging on bankruptcy.
While I cannot speak knowledgeably about the fairness or utility of the contractual relationships between farmers and Tyson, I can say that these Hmong operated farms were destined to fail from the onset or, to be fairly marginal business investments over any period of time, short or long term.
At the time of our study there were approximately 300 Hmong families who had purchased poultry operations in NW Arkansas, SW Missouri, SE Kansas, and NE Oklahoma. Part of our work focused on completing cash flow statements for these operations. Of the 50 that I completed or reviewed, not a single operation had a positive cash flow or the potential for a positive cash flow.
The underlying problem was that the Hmong had purchased farms that were overvalued and with equipment and buildings that were nearly or fully depreciated. The critical information missing from the Pott's article was that appraisals of farms were too high at the time of purchase, and that area banks made loans even though it should have been fairly apparent to the banks that the Hmong purchasers were entering into fairly risky ventures that had limited potential to ever be profitable.
Why would banks make loans for potentially high risk business ventures? Probably because, in most cases, the loans were guaranteed by USDA's Farm Service Agency (FSA), which substantially reduced the risk for lenders.
ISED reported what looked like a failure of due-diligence on the part of Hmong buyers and lenders--and by local FSA offices--to high level USDA FSA officials in meetings in Washington. Those officials ultimately decided that, within the range of foreclosures on FSA loans nationally, the plight of the Hmong here in the Ozarks was merely a statistical blip. No follow-up was initiated or planned.
In very general terms, what appears to have happened is that Realtors found a crowd of eager buyers for farming operations the buyers were not adequately prepared to operate, and passed the buyers along to banks--accompanied by inflated appraisals--who made "safe for the bank" loans because they were guaranteed by USDA FSA. The only losers were the Hmong.
Again, while I cannot characterize how equitable the business relationships between Tyson and the Hmong farmers are, I can say that many of the farmers had similar if not identical contracts with other poultry processors such as Simmons, Peterson, George, etc. Financial outcomes for Hmong farmers was predictably poor regardless of the processing company they worked with.
What the Hmong have ultimately discovered is that making a living raising poultry under contract is a tough business. Like many people, they were initially dazzled by gross revenues and assumed that high grosses led to high net revenues (profits). The sad truth is that, unless an operation is done on a very large scale, or is an operation carrying no debt due to inheritance, contractors are simply capitalizing processor production in return for a relatively low hourly wage.
As an aside, the Hmong began arriving in the United States from Laos following the US exit from Vietnam. The Hmong, valiant allies with the US against communism, became refugees and were settled in the United States to avoid extinction at the hands of our North Vietnamese enemies as punishment for their service to the United States.