• HIGHLIGHTS
• Environmental measures -- good or bad for business?
• Perdue's role in fixing the Chesapeake's agricultural pollution?
• Regulate agriculture as we do industry?
• If Perdue owns the chickens, feed, why not the manure?

What was the key -- either organizational or technical -- ingredient that made possible the kind of scale of farming that is now typical in this region? ...

I think capitalism in general stimulates efficiency, and efficiency often is size, and so I think things had to become bigger in order to keep costs lower so you could maintain your price structure. A farmer can't live on 100 acres today. The cost to pay to amortize the fuel, the cost of the tractors and everything else, they have to have 1,000 acres to make money now. So everything, it seems like, in capitalism drives for bigger and bigger and more efficiency. Oftentimes the result is three companies in a mature industry, like the auto industry. It started with a lot of small players, but over time, consolidation results in larger and fewer companies, and it's no different in the poultry industry. It's just that we're not as mature as the auto industry. But we're certainly headed in that direction. ...

There used to be 200 companies on the [Eastern] Shore [of Maryland] involved in the poultry industry, but they were all independent. So you had an independent hatchery, an independent processing plant. The story of the poultry industry and of Perdue is vertical integration. ... [Y]ou can control the quality from the egg all the way to the finished product that went to New York City. And that's the reason vertical integration is important, is quality.

... What's the tension between remaining profitable, being able to deliver millions, maybe more, chickens and yet at the same time trying to do something for the environment or trying to stick within the environmental laws?

I don't think there's tension at all. I think it's part of our culture. I think it's part of our philosophy that stems around quality. I think quality is not just the quality of the products. It's the way you run your business, the way you treat your people. It's the way you deal with your animals from an animal welfare standpoint. It's the way you deal with the environment, community outreach. It's all those things. It's not a conflict in our company at all, in my mind.

... Are environmental measures for you as a company a competitive disadvantage that is a cost, or are they a competitive advantage?

I think it probably starts off as a competitive disadvantage if you're doing things and somebody else isn't. But I think over time, this is all coming, and I think everybody is going to have to do the same thing eventually. It's just that with a brand name, we certainly have to make sure that we're doing it right. And it's kind of a win-win. ... It's a better way to do it, so our consumers are expecting it today.

Expecting what?

That we will be more responsible. In the old days, you produced products, and you paid a paycheck to your employees, and that's all that was expected. Today ... I think they have more expectations out of the companies that are in their communities that they're not only going to do that, but they're also going to be responsible for the environment in the area that they're operating in, that you'll be a participant in the communities that you're doing business in, those kind of things. So there's more of an expectation, I think, today of corporate responsibility, you might call it. ...

[Perdue's Vice President of Environmental Sustainability] Steve Schwalb told us that the program that he's been working on -- we've been talking to him about working with the farmers to make sure their nutrient management is the most favorable possible to the environment -- was something you personally wanted to do. Why?

I think agriculture in general is slow to change. Farmers are somewhat set in where they are, and they'll change, but they really have to be given a compelling reason to change. And a lot of times that comes through regulation and enforcement and that sort of thing. I think convincing them that there's a better way, which is working together to get to the same end but doing it in a cooperative way, is better for everybody. And so our job is to try to sell the folks who raise our chickens [on that idea], to think about changing the way we do business and where we need to be five years from now and 10 years from now. It's a sales job to do that.

So to a certain extent, then, [these] programs are an alternative to more regulation, I guess.

More regulation and enforcement, which nobody likes. I mean, nobody likes somebody coming onto your farm without any warning and those kinds of things. ... So [we're] trying to figure out a better way to do that, so we accomplish the same result but without having to go through some sort of enforcement action. ...

... Were [supermarket chains] as customers urging you, pushing you, encouraging you?

I think some of them are; the progressive ones are. They're asking questions. They want us to give them information about what we're doing about sustainability, for example. They're asking for an annual sustainability report from us. ...

So when you look at this program you call Clean Bays, dealing with the growers, where does that come from, where is it now, where is it going, and how important is it going to be?

Well, it's been in a pilot mode because EPA is trying to learn also how it can work.

Whether they can work with a large company like yours.

Yeah, and if they can accomplish those results. And of course it's a pilot for us, because we've never done it before. And it's certainly a pilot for the farmer, because he hasn't done that before, so we're all learning in this thing. I think the good news is that we feel good that there's a lot that can be done. All three parties are thinking that this is very workable, so we want to expand the program.

... Looking at going beyond your 20 pilot farms, do you think it's going to be a bit of a different experience? ...

I think as we go to different states it may, because this is the Chesapeake Bay watershed; there's many years of sensitivity to the issue here. Now, if you go to Kentucky, it may not be as sensitive an issue ... so therefore the selling job and the "Why do I need to do this?" will probably take a bit more work.

What about the actual performance? I was thinking more about going to farms that may be not as well endowed as the 20 large ones that you started with. Their finances may be a little bit tighter, and they may not have automatically built the manure sheds and the compost piles, and they may not have as much spare capital for the trees, for the buffer lines and so forth. ...

I think you'd be surprised at how little some of these things cost. ...

... How responsible does Perdue Inc., or you as its CEO, feel for taking steps to correct some of the things that have been reported by scientists and the Chesapeake Bay Program and the EPA about agricultural pollution in the bay?

First of all, we develop everything we do around people, products and profitability, and we do it in that order: People come first, products and profitability. ... We're not going to think short-term about making a buck for this quarter, and we do that in a lot of things that we do. ... Secondly, I think you know my background in marine biology and fisheries. I do have a little bit of a sensitivity about the water environment that we're in. I fish in the Chesapeake Bay. I've grown up on the bay all my life, so I probably have also a bit more sensitivity just because of being in this watershed my whole life. I think you can't ignore it, certainly. That's probably where my motivation comes from -- those two aspects: putting a focus on people, products before profitability; and secondly, my background probably is part of that.

... How do you feel about the role that agriculture and particularly the chicken industry on the Eastern Shore has played in the decline of watermen; in the decline of oysters, in the decline of various other species and the rise of dead zones in the bay? Does this trouble you?

That's certainly a controversial point and [one] where a lot of people have their own philosophies. Personally, my background in aquaculture and working with oysters. The oyster population is critically important to the Chesapeake Bay. It is the filter in the bay, and back even 50 years ago, 75 years ago, the water in the bay was turned over every three days through the filtration of oysters and clams alone. Today that's over a year it takes the volume of water in the bay to be filtered. So we have a bay out here that has no filter. Just like a car -- you can't run a car without an oil filter; it won't last. So until we get something back in the bay that filters the water, we can do everything we want on the nutrients and we're not going to win, because nutrients are also related to the population increase, and chickens' [population] has actually gone down significantly over the last 10 years on the Eastern Shore.

Gone down in terms of --

In numbers. ... [Annually we've gone from] 600 million down to 500 [million], so we've lost 100 million chickens on the Shore being raised. We've lost 1,000 farm families, from 3,000 to 2,000 farm families raising chickens. So that is declining.

What's increasing is the [human] population. We have a brand-new development here in Salisbury. They developed their own wastewater plant separate from the Salisbury wastewater plant. It's a state-of-the-art [plant]. It's called enhanced nitrogen, which means three parts nitrogen, but that's still three parts of nitrogen going in 24 hours a day times the number of gallons that wasn't there before they built that plant. So that's added nutrients to the environment. ...

... The people we've talked to, whether they're scientists, whether they're EPA or USGS [U.S. Geological Survey] or various other agencies, will say to us agriculture is still the leading contributor of pollution to the Chesapeake Bay, whatever improvements have been made. Do you take issue with that?

Remember, when you say "agriculture," agriculture in this bay comes from many, many watersheds. Most of the time it comes from rivers. The rivers on the Eastern Shore contribute 8 percent of the river water that goes into the Chesapeake Bay. The rest of it comes from primarily the Potomac, the James in Virginia, and mostly the Susquehanna, coming out of New York state and Pennsylvania. So when you talk about agriculture, you've got to think about agriculture in all these other states.

And Maryland can only impact Maryland. They can't go to Pennsylvania and tell them how to run their programs. ... So we can contribute to the 8 percent of the river water that's entering the Chesapeake Bay, but that's not going to solve the 92 percent that's coming from other sources other than the bay. And remember, the most nutrient-rich rivers, the top three, are on the western shore of Maryland, in Anne Arundel County and Baltimore County, coming into the Chesapeake Bay. Our highest nutrient-rich river, the Nanticoke, I'm not even sure it's in the top 10. So yeah, we're going to do our part, but I think if you're going to fix the problem, you've got to go to other states to help with the agricultural problem, let alone the municipal wastewater problem.

... Whether it's 8 percent or 18 percent, in terms of the Eastern Shore, can you say confidently over the last decade you have evidence of an improvement, that there's less nitrogen and phosphorus going into the bay ... ?

I don't measure it. And I don't have access to the records, so I can't really say it is or isn't. All I can see is the improvement in things like nutrient management plans, requiring nutrient management plans, manure sheds. All these things certainly have got to be a step in the right direction.

We used to incinerate dead chickens. Now chickens are all composted, and there's no runoff from that composting. It's a dry process, totally decomposes any birds that are there, and then that can be used as fertilizer on the land. So I think there's a lot of things that have happened. I think the wastewater facilities have been improved. The municipal wastewater facilities have been improved dramatically. As a reporter, ... you have to look at everything that's being done, both agriculture and municipalities that are probably helping with this. ...

... In terms of your growers ... do you have any knowledge about how many people are actually in compliance ... ?

The pilot is about just that, I think, trying to see what our role is, would be, in compliance in that. And of course the tough thing is somebody who is not in compliance, then what do you do? And of course, EPA is also involved with that. I'm not aware of anyone who has violated compliance, but I'm not sure. ...

You have had your battles with political leaders in various states, including the state of Maryland, on issues of regulation, isn't that right?

With respect to the farmer. The farmers had a problem, and of course when the farmer has a problem, we have a problem, because we're dependent on each other. Absolutely.

... My recollection is that the [former Gov. Parris] Glendening administration had a plan to do what they called co-permitting to make the growers and the chicken processors jointly responsible. Why isn't that a reasonable approach?

Well, a judge, number one, decided it wasn't reasonable, so you'd have to ask the judge about why he decided that it was. He threw it out.

The story I understand with that was that the administrative procedures leading up to the drafting of the regulations was faulty, and the judge's decision never got to the substance of whether or not the regulations were right or wrong. They were just badly written.

One of the things that I always look at is what good is going to come from something. Nutrient management plans, you can see where there's some good that's going to come from this. In this situation, where you have a farmer who somehow is connected to a company NPDES permit [National Pollutant Discharge Elimination System, an EPA wastewater permit] in the plant, I never could understand what good it's going to do for the environment. And number two, this is just the state of Maryland, remember, so what if we have a grower in Delaware who's sending birds to a plant in Maryland? How do you figure that out? Or if we have a Maryland grower who's sending their birds to one of our plants in Delaware, are they subject to it or not subject to it, because the NPDES permit is in Delaware, not in Maryland?

But I think they weren't talking about NPDES permits, were they?

The co-permit had to be tied to a permit, and the only permit that existed is the NPDES permit in the plant. If that plant had, say, 200 growers, 200 farmers supplying chickens to that plant, that was how they were going to get the co-permit for that farmer, because you'd co-permit it with a NPDES permit at the plant. And so that was the strategy; let's put it that way.

I'm just saying it was probably a failed strategy, because it's so complicated in a state where you had Maryland, Delaware and Virginia all with lines that are so close to each other. It just was untenable. ...

... Doesn't it make sense for you, the processor and the grower jointly to be responsible for the manure and its runoff since you're involved in a close partnership?

I think that's what this pilot [program] is doing. That's what we're trying to accomplish with this pilot is to jointly make sure that everything is being complied with, all the rules and regulations are being complied with.

And you would be opposed to or would you accept regulations that simply codified that in law?

You'd have to see what the regulation exactly said. I can't just say outright, "Oh, yeah, that would be great." I don't know. I'd have to see what the regulation was.

But it could be acceptable?

Well, it could be acceptable, sure, if it accomplished something. Let's face it: If you're going to do something, make sure it's going to mean something to the environment, and [it's] not just something to create more bureaucracy but accomplishes nothing.

[Advocates of regulation will point to the success of using permits to control pollution from industrial sources like DuPont, Boeing, U.S. Steel.] ... [I]f industry is regulated that way, why shouldn't Big Agriculture be regulated that way?

The big difference is point source and nonpoint source, and that is the contentious issue. With a point source, where you have a pipe, it's very easy to regulate what's coming out of that pipe. With a nonpoint source situation like you have on a farm, it's more difficult to measure exactly what's in the effluent, where it is. You've been to a farm. There [are] no pipes or river systems or streams related to a chicken house, so all you can deal with is the dry product itself, the dry litter, the effluent coming out of the house. ...

But there are lots of those farms that have drainage ditches that come right out of them, and they go right into streams, and the streams run into the rivers.

But it's very difficult to measure. If you can get the ag scientist and all to get to the point where you can start measuring something, I think that would be good, but remember, those creeks and streams, I mean, those ditches are coming off a field.

I'm not talking about coming off a field. I'm talking about chicken houses.

Well, there's not that much going on there. The litter in the house is protected by a roof. The water doesn't go in and go out. That's not the effluent. Really, the concern, truthfully, is the field. The interest is the field and what's in the field and what's coming off the field into the ditches.

... You're not the only person we've talked to in Wicomico County or in this area here that says there have really been changes in agricultural practices, whether it's chicken growing or whether it's field farming. ... I've talked to farmers who said 10 years ago they were putting on [three times as much fertilizer]. ... But the one thing that puzzles me is if there's been the kind of improvement that it appears there's been, then why would the Maryland Department of Natural Resources find that nitrogen and phosphorous pollution in the Pocomoke River flowing through the heart of chicken country -- not in a major urban development area -- is about the same as it was a decade ago?

Where's it coming from?

It's coming from the region right around the Pocomoke River.

Well, the Pocomoke River goes through the Pocomoke swamp [Great Cypress Swamp], and even when [settler] John Smith sailed up in his boat, the Chesapeake Bay was a nutrient-rich [body of water]. It's called an estuary, and estuaries are nutrient-rich, eutrophicated environments. Because the nutrients are high, that's why there's so much food; that's why there are so many oysters. The nutrients often come from the swamps, from decay of all the detritus and all that sort of thing.

When you say agriculture is the number one [source] and etc., that's coming from a model. In other words, they've developed a model to say that. Now, what goes into the model is key, and that's where there's questions.

So you question whether or not, in fact, agriculture is number one.

It doesn't make any difference. We need to do everything we can do to make sure we're doing right for the environment in the areas we can control, which is the chicken houses and the manure sheds and the compost piles. It doesn't make any difference what the real cause is. I think you could spend your whole life trying to argue what that is, and it's not going to help the environment.

Let's do what we can do and make sure that municipalities are doing what they can do. Let's make sure that septic systems are kept up to date. Let's make sure people don't put too much lawn fertilizer on their lawns. There's a lot of different areas that can add nutrients to it.

That means everybody's got to take responsibility.

Everybody's got to take responsibility, and that's why you hear, speaking of the Department of Natural Resources, there are a lot of ads on the radio today about how much fertilizer are you putting on your lawn, and it's a good question. ...

But if the background natural sources of the nitrogen and phosphorus were there and have been there since John Smith's time, then it would seem to me that change in human behavior would at least fluctuate the figures at the margin, and what these folks are saying is it hasn't. And I don't get it.

What's different is when John Smith was here, he kept running into islands of oysters, and that's why I get back to the oysters. There is no filter here. ...

... You've got these two communities living side by side -- the farming community and the oystermen or the watermen community on Chesapeake Bay. One has thrived, and the other has really suffered a disaster economically. Do you feel a responsibility there?

I think the watermen that you're referring to have been here a long, long time, and I think they're an integral part of the culture of the bay. ... The problem with the watermen is they don't put back. ... I would like to see the watermen move toward aquaculture, move toward farming, where they're not just taking out, they're doing something to put in first and then take out, which is what aquaculture is -- farming the bay, just like a farmer on the land farms the land.

There are people who say, in effect, polluters are stealing our common natural resources, whether water, whether air, wetlands, you name it. Do you share that view?

Who are you saying are polluters?

Any polluter. In effect what they're saying is: Anybody who's in a business -- whether it's your business or whether it's the steel plant over in Baltimore Harbor or whether it's DuPont up in Delaware, whoever it is -- anybody who's running a business, who's polluting the waterways or polluting the airways, is in effect dumping a cost of business on the public, because they're getting rid of their waste, whatever it is, and it's a pollutant, therefore they're in effect stealing the public assets.

I think polluters is terrible, absolutely.

Is it criminal?

If we have a wastewater facility in one of our operations and we're not in compliance and doing it on purpose, absolutely that's a criminal act. I think it's what the NPDES permit is all about. I think that's what the stipulations in the code are about, sure.

So you'd go along with that.

It depends on what you're calling a -- I'm talking about a point source permit. If you're violating that permit and violating it on purpose, then absolutely it's the wrong thing. You're taking away from everybody.

But you were talking about in the bay area here particularly with, you said farming, is something that is essentially unregulated; it's harder to get your hands on.

It is harder to get your hands on. It's a nonpoint source situation.

Do we need better laws and regulations to try to get our hands on that? Is that the way to go?

Actually, with the laws and regulations on nutrient management plans and that sort of thing, I think they're in place. I think the first thing to do is make sure everything is being done in compliance with what's there now. Passing more regulations, more laws is not always the way to get a better result. ...

Help me understand one thing that's also got me baffled. ... How do you wind up owning the chickens, owning the feed and not owning, in the sense of legal responsibility, the manure?

The manure is considered a resource, actually. You know, when we went to Kentucky, they're used to buying chemical fertilizer to fertilize their hay. They think they've died and gone to heaven now because they've got a fertilizer that's organic also, which chemical [fertilizer] is not, so to them it's a big benefit. ... It's an issue that the producers want the litter; they want the chicken litter. It's not a matter of who owns or doesn't own it; it's a matter of what use is being made from it. The reason we built the AgriRecycle is that there's some producers now who may not have a place to go with the litter, so we were providing a facility where that could be taken if they didn't have a field situation and a nutrient management situation where they could use the litter. But the vast majority still do use the poultry litter if their nutrient management plan accepts that. In other words, the phosphorous level is such that they can use the poultry litter.

... I think essentially what you're saying is you want to deal with that issue of the excess manure voluntarily, not on a regulation or legal basis, is that right?

I don't understand what that means, "on a regulation basis."

... You obviously are familiar with the regulations or the laws that people have proposed ... suggesting that large poultry processors like yourselves should be jointly responsible with the growers. That's all I'm talking about. That's a legal or regulatory approach. Your approach has been to go through AgriRecycling. ... I'm simply asking, so your approach is to deal with this on a voluntary basis rather than on a regulatory basis?

I don't understand the voluntary versus the regulatory. I really don't. I mean, what we're doing with EPA is a cooperative effort with the producer, cooperatively trying to accomplish what EPA wants and making sure that everything is in compliance with, I guess, regulations. ...

... People talk about the power and the influence of agriculture nationwide to resist regulation in ways that industry hasn't done. Is it all just a point source question, or is there something about the notion of the family farmer and the notion of the independence of a grower or somebody [who] grows crops? It's a different kind of social economic entity than a company or a manufacturing plant?

I think you're right. I think that it's all those things. I think it's the independence of the farmer. It's more difficult to change, where the industrial site has to change. It's the point source versus the nonpoint source, as you said. All those things are probably part of the difficulty in making change happen in agriculture. But agriculture will change. They'll do what it takes. I think they just have to be given a compelling reason why it's important to do that. ...

We're trying to help them understand what the regulators want, what the EPA, whoever it is, wants, and there's a way to get there without it being such an, in their mind, onerous process.

And is it expensive ... to take the steps that are necessary, to build the manure sheds, to put up the buffers, to put in the compost and so forth. ...

No. I don't think it's terribly expensive as long as the state helps, for example, on the manure sheds. They cost-share. I think it's important that that happens, that the states do their part. If they're interested in that, I think they will.

... Critics say that agriculture, specifically the chicken industry, is the primary source of pollution in the bay and that if large integrators like Purdue were to be responsible for the waste, it might be better cleaned up. [What's your] point of view on that criticism or argument? ...

The farmer puts the litter on his land, and that's a nutrient management plan, and we're not involved in that, you know? If he puts chemical on his land, he's responsible for what he does with his chemical fertilizer. ...