Washington demands an explanation for SBA’s exploitative loan practices in poultry industry

An Office of the Inspector General report shared in the Senate Small Business Committee revealed concerns over the use of Small Business Administration loans in the poultry business. Getty images
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Washington, DC, March 15, 2018 – Yesterday, during consideration of S. 2283 by the Senate Small Business Committee, Senator Cory Booker (D-NJ) offered and the Committee passed an amendment responding to a recent report by the Small Business Administration’s (SBA) Office of the Inspector General (OIG), which found that SBA had been subsidizing an abusive, highly-concentrated contract poultry industry.

“American poultry producers have for some time complained about unfair practices and abusive contracts in their industry, particularly when it comes to dealing with large corporate packers and integrators,” said Paul Wolfe, Senior Policy Specialist at the National Sustainable Agriculture Coalition (NSAC). “The OIG report provides these producers with much-deserved and long-overdue validation. We are grateful for Senator Booker’s commitment to transparency and fairness, and fully support his amendment requiring SBA’s Director of the Office of Credit Risk Management to report to Congress on whether and how the Office of Capital Access has addressed the charges of the OIG.”

According to the OIG’s report: “The large chicken companies (integrators) in our sample exercised such comprehensive control over the growers that the SBA Office of Inspector General believes the concerns appear affiliative under SBA regulations[…] This control overcame practically all of a grower’s ability to operate their business independent of integrator mandates.”

The report concluded that $1.8 billion in recent SBA loans were against regulations, given the power structure within the contract poultry industry. Additionally, the OIG revealed that the huge increase in SBA loans to Concentrated Animal Feeding Operations has been linked to just two banks and that the buildings funded by the loans are worth just a fraction of the their cost without a contract in place.

“We hope that Senator Booker’s amendment is the first of many steps towards SBA cleaning up its act when it comes to farm lending,” said Wolfe. “The Administration has made achieving fairness and fidelity in the contract poultry and livestock industry increasingly challenging after rescinding the Farmer Fair Practices Rules, but we are committed to continuing the fight for reform and to working to restore producers and taxpayers’ faith in the system.”

–National Sustainable Ag Coalition