NSAC's Blog

Livestock and Poultry Industry Groups Continue Efforts to Stall USDA Protections for Farmers

October 11, 2016

Credit: Tom Chalkley

Credit: Tom Chalkley

Six years ago, powerful corporate livestock and poultry industry groups released a report claiming that the U.S. Department of Agriculture’s (USDA) 2010 Grain Inspection Packers and Stockyards Administration (GIPSA) rule would harm family poultry and livestock producers. In fact, what they were really worried about was interrupting the anti-competitive, vertically integrated livestock and poultry systems that they had worked so carefully to construct.

On September 19, these same groups released another, strikingly similar, report (“Proposed GIPSA Rules Relation to the Chicken Industry: Economic Impact”) in an attempt to continue stalling USDA’s efforts to protect the rights of livestock and poultry farmers. The groups also issued a letter, signed by groups representing corporate livestock and poultry companies (The National Cattlemen’s Beef Association, the National Chicken Council, the National Pork Producers Council, the National Turkey Federation, and the North American Meat Institute), requesting that USDA delay finalizing the GIPSA rules in order to take additional comments – despite the fact that more than 60,000 comments have already been submitted, and despite the fact that USDA is planning for a new public comment period.

The authors of the letter and report spend a significant amount of space outlining the Obama administration’s transparency initiatives – specifically, a 1993 executive order about timely rule making. The report and letter rather ironically bemoan the fact that the GIPSA rule making as been anything but timely, despite the fact that they themselves have been the chief stumbling blocks in the process. Contract farmers and their supporters, in contrast, have been clamoring for timely rule making on GIPSA for years. Big Meat (including the organizations signed on to the letter) are the ones that have spent the last 5+ years working against contract farmers’ efforts, and pressuring their friends in Congress to insert riders in appropriations bills to circumvent the rule making process at USDA.

The National Sustainable Agriculture Coalition (NSAC) and our members are urging USDA to move forward quickly with the rule making – after all, nearly 100 years after the passage of the Packers and Stockyards Act (1921) seems like more than long enough for livestock and poultry farmers to wait for regulations that enforce the law and protect their basic rights. We are also actively encouraging Congress to resist the behind the scenes influence of industry groups and reject their pleas to insert another anti-farmer GIPSA policy rider into the fiscal year (FY) 2017 omnibus bill.

What is USDA Actually Working On?

USDA has been very public about the fact that it is working to finalize one final rule and two proposed GIPSA rules. The two proposed rules would be subject to a new public comment period and then further revision before becoming a final rule. One of these proposed rules deals with the poultry tournament payment system and the other addresses undue preference.

USDA has stated that they are re-proposing those regulations, instead of issuing final rules on these topics, because their approach is significantly different from what was originally proposed in 2010. Seeming to ignore this fact, the meat and poultry industries have relied upon the old proposals when issuing their critiques of the rules’ supposed economic impacts.

The one rule that USDA is planning to finalize at this point, would clarify that Sections 202(a) and (b) of the Packers and Stockyards Act do not require claims against the contract meat industry to also demonstrate harm to competition.

The rule would reassert the original, plain language of those two sections of the Packers and Stockyards Act, which imposed a reasonable burden of proof on a farmer bringing a claim against a corporate meat integrator or meat packer. Recent court decisions had twisted the regulation, forcing farmers to prove that the harm done to them had not just affected their operations, but also the entire livestock or poultry market.

To use an analogy, imagine if someone burned down your house. In order to file a claim of harm against them, should you have to prove that the action affects the value of all homes in your state before you can get any legal remedy? Of course not, and likewise neither should farmers have to claim harm done to them affects their entire industry in order to receive justice in the courts. Nowhere in the Packers and Stockyards Act is this required, and the current rule USDA is finalizing will only make this plain fact more clear. This clarification has been supported consistently by previous Administrations of both parties.

The Claims of 2010 Revisited

The industry group’s letter and report claim that things have changed dramatically in the contract livestock and poultry industries since the draft GIPSA rules were released in 2010, and that there is now no need for common-sense legislation to protect farmers’ rights. Both documents fail, however, to make any new revelations of industry-wide change or reform that would render the GIPSA rules unnecessary. Many of the groups’ key attacks, in fact, are on provisions that USDA has clearly stated it is no longer pursuing as part of the GIPSA rules.

The report and associated letter are clearly designed to be hyperbolic, in an effort to scare Congress into blocking USDA from protecting America’s contract farmers. This approach may have worked in the past, but if Congress is paying any attention they should be able to clearly see that this “new” report is outdated and full of many of the same inaccuracies at the first version.

Throughout their letter, the industry groups decry the negative effects GIPSA would supposedly have on farmers. Flying in the face of this claim, however, is the fact that the five organizations signing on to it have no clear loyalty to serve farmers at all: two of the groups represent only integrators and meat packers, and the other three have major conflicts of interest as they represent farmers, integrators, and processors.

It is also concerning that the report relied mainly on integrator and packer insider interviews to develop its cost estimates, the very people that have the most to gain by inflating the cost impacts of the rules. Though the industry letter portends to be concerned about the impact of the rules on farmers, the report includes no direct farmer input as far was we can tell.

In addition to NSAC, both the American Farm Bureau Federation and the National Farmers Union have opposed the GIPSA rider and supported the efforts of USDA to move ahead with the rule making.

Has the Situation Really Improved Since 2010?

The study’s authors argue that the landscape of livestock and poultry production has significantly improved since 2010. In fact, the situation is likely far worse for contract farmers today than it was six years ago.

Since 2010 there has been an increase in the concentration of control among the four largest cattle and hog companies, further increasing Big Meat’s influence. In the beef industry, the top four companies control 85 percent of the market. In the pork industry, concentration has reach 74 percent among the top four companies as a result of the recent JBS/Cargill merger. Power in the poultry industry remains concentrated among the top four producers; the top four control 50 percent of an industry that is already completely vertically integrated, with very few independent producers left.

The GIPSA rules seek to correct an industry rife with injustice, and industry in which:

  • The tournament payment system that pits farmers against one another, guaranteeing that half will always lose, still dominates.
  • There is little to no transparency in how farmers are paid.
  • If a farmer is subject to an unfair practice, they have little recourse unless they can prove harm to their entire industry.
  • Farmers have no protections from retaliation if they speak out and seek to better their situation.

In the years during which USDA has not been able to finalize any rules that would protect the basic rights of contract farmers, many contract farmers have continued to go bankrupt and lose their farms, while others have simply taken on so much debt to raise their animals that they have little chance of ever breaking even. The loading of debt onto the farmer in the contract industry is actually by design, as is noted on page 17 of the report (page 67 of the combined PDF). Contracts with farmers allow the industry integrators to keep that debt off their balance sheets, while they retain almost complete control over every aspect of the profit center (the animals).

As if the crushing debt and lack of control over their own operations weren’t enough to make it clear that industry-wide reform is needed, farmers are also routinely retaliated against when they speak out against company abuses or infractions. Some farmers, like Craig Watts and Mike Weaver have taken huge risks and made their stories public. For most contract farmers ( many who are barely making ends meet in the first place), however, the price for speaking out against Big Meat is simply too high. And if farmers cannot tell their stories, it becomes all too easy for the industry to continue to get away with unfair practices.

Where do we go from here?

Sometime before the end of this year, USDA will make good on their promise and issue a final and two proposed GIPSA rules. Once they do so, both supporters and opponents of the rules will have their chance to comment.

We urge USDA to move forward quickly. We also urge Congress to stand up to the deep pockets of Big Meat, and resist industry pressure to short circuit USDA’s laudable effort to bring fairness to and industry built on inequity.

Categories: Competition & Anti-trust, Sustainable Livestock

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