June 18, 2010
On Thursday, June 18, NSAC issued a press release applauding a proposed regulation, issued by USDA’s Grain Inspection Packers and Stockyards Administration (GIPSA), to increase protections for farmers and ranchers in their dealings with packers and processors.
The proposed regulation will be published in the Federal Register on June 22 with a 60-day public comment period.
A USDA press release, along with an outline, a question and answer guide, and examples of unfair market practices addressed by the proposed rule are posted on the GIPSA website.
Over the past few decades, the number of livestock and poultry packing and processing firms has decreased dramatically. A few of the remaining firms have control over a large share of the market.
In addition packers and processors, especially in the poultry and swine sectors, can control not only packing and processing but also supply animals, feed, medication and other inputs for raising the animals. With increased market power and control in the hands of packers and processors, farmers and ranchers have found themselves on an uneven playing field when it comes to marketing livestock and poultry.
At a press conference to announce the release of the proposed rule, USDA Secretary Tom Vilsack stated that the current Packers and Stockyard Act regulations to protect farmers and ranchers from market manipulation and unfair practices had not kept up with the realities of the marketplace and acknowledged that the proposed rule is “aggressive.”
He also emphasized his concern that many farmers were reluctant to make comments at ongoing USDA /Department of Justice listening sessions on market conditions because of their fear of retaliation by packing and processing firms.
Major provisions in the GIPSA proposed regulation would do the following:
• Establish in regulation USDA’s position that a farmer or rancher who has shown an injury from an unfair or deceptive practice under the Packers and Stockyards Act does not also need to show a competitive injury to a regional marketplace because of the practice;
• Set out the criteria for USDA to determine if a packer or processor is providing an undue or unreasonable preference or advantage to a select group of producers without a legitimate justification and require packers, swine contractors and live poultry dealers to maintain written records to provide justification for any differential pricing or deviation from standard price or contract terms;
• Limit opportunities for market manipulation by preventing packers from acquiring livestock from another packer and by prohibiting a livestock dealer from acting as a packer buyer on behalf of more than one packer;
• Increase the ability of farmers and ranchers to make better informed business decisions and provide additional information to USDA by requiring packers, swine contractors, and live poultry dealers to provide USDA with copies of production contracts which will be available to the public;
• Require live poultry dealers to set a base payment for all growers raising the same type and kind of poultry in the same type of housing facility and prohibit poultry dealers from setting up a tournament or ranking system that would lower the base payment;
• Require that live poultry dealers provide at least 90 days notice to a grower before suspending delivery of birds to the grower and establish other criteria for determining whether or not a grower has been given reasonable notice of suspension of delivery;
• Establish criteria to ensure that processors do not require poultry or swine producers to make unreasonable additional capital improvements to their grow-out facilities during the life of a production contract;
• Require that a production contract with a poultry grower or swine producer is of sufficient length to allow the grower to recoup 80 percent of the investment costs related to the capital investments;
• Set out the criteria to determine whether a poultry grower or swine producer has been given a reasonable time to remedy a breach of a production contract before the contract is terminated; and
• Require that livestock and poultry production contracts include a statement in conspicuous print that a producer has the right to decline a contract clause requiring arbitration and establish the criteria for determining whether an arbitration clause provides a meaningful and fair opportunity for producers to participate in arbitration if they so choose.
The 2008 Farm Bill provision requiring USDA to issue these regulations was an NSAC farm bill priority issue.