NSAC's Blog

USDA to Tackle Corporate Concentration in Livestock Sector

July 2, 2019

Farmer Blaine Bruner with his grandson. Photo credit: National Farmers Union.
Farmer Blaine Bruner with his grandson. Photo credit: National Farmers Union.

Rising consolidation among meatpacking and processing companies over the past few decades has steadily eroded fair competition within the poultry and livestock industries. Despite years of clamoring from producers and advocacy organizations like the National Sustainable Agriculture Coalition (NSAC) for legislation and regulations needed to address this problem, progress has so far been painfully slow and stunted.

After years of stymied progress, the U.S. Department of Agriculture (USDA) has recently indicated that they will be revisiting one particular set of regulations that govern the relationship between livestock and poultry producers and large meatpacking companies. USDA’s Agricultural Marketing Service (the agency that recently took over oversight of these issues) intends to publish proposed regulations later this summer to address one component of this broken system: undue preference.

This blog breaks down exactly how we got here, what “undue preference” is and why it matters to a more sustainable food system, and what the public can do to take action on this important, but often overlooked issue of corporate concentration.

Background: The Packers and Stockyards Act

The 1921 Packers and Stockyards Act (P&SA) was introduced to protect livestock and poultry producers from market manipulation and retaliatory practices by meatpackers and processors. The agency responsible for enforcing P&SA most recently was the Grain Inspection, Packers and Stockyards Administration (GIPSA), prior to the Trump Administration eliminating that agency and turning its duties over to AMS. Specific policies under the P&SA are often referred to as either “GIPSA rules” or “Farmer Fair Practices Rules” (FFPR) after the proposed, but unadopted, set of rules that USDA put forward in 2016.

From 1921 to 2008, the P&SA did not go through the rule making process, and was therefore largely unenforceable. The 2008 Farm Bill directed USDA to establish rules under which P&SA could actually be enforced. Since that time, P&SA has been through the political ringer of appropriations riders that blocked enforcement, riders sought and won by a handful of large multinational meatpackers and processors to increase corporate profit at the detriment of independent and contract poultry and livestock producers.

Background: GIPSA under the 2008 Farm Bill

Following the direction of the 2008 Farm Bill, USDA and the Department of Justice (DOJ) held five listening sessions to bring together producers, experts, and lawmakers to set criteria for P&SA enforcement. In 2010, those joint sessions produced a proposed regulation to increase protections for farmers and ranchers in their dealings with large packers and processors. Even though producers were fearful of participating in the sessions due to processor and packer retaliation (e.g., the sudden cancellation of contracts), many opted to participate and were among the over 60,000 public comments submitted to USDA on these proposed regulations.

Quickly following the Department’s announcement of the finalized rule, a congressional policy rider was included in the fiscal year (FY) 2012 Agriculture Appropriations bill that effectively blocked the provision’s funding, and therefore its enforcement. Despite the efforts of many stakeholders to bring fairness to the livestock industry, corporate interests succeeded in pressuring lawmakers to tack riders on Agriculture Appropriations bills to stop progress in FY 2013 and FY 2014 as well.

Background: GIPSA under the 2014 Farm Bill

The effort to block fairness and transparency in the livestock industry did not stop with those appropriations riders, however. During the 2014 Farm Bill, industry giants managed to persuade the House Agriculture Committee to approve a complete reversion of all progress to date back to the original 1921 version of P&SA. Thankfully, this proposal was rejected in the final version of the 2014 Farm Bill, although this did not stop a negative GIPSA rider from making its way into the FY 2015 appropriations bill.

The FY 2016 appropriations package was the first in several years that did not contain a GIPSA rider, and with no rider in place, producers were finally allowed to enjoy the small protections of the 2010 rule. Unfortunately, however, further progress was stopped in its tracks by a 2017 Trump Administration Executive Order. This order delayed the pending final rule, which USDA Secretary Sonny Perdue subsequently decided to abandon altogether later that year. Additionally, Secretary Perdue also demoted Packers and Stockyards from its own agency within USDA to a division within the Agricultural Marketing Service. The Administration’s actions so outraged producers and farmer advocacy groups that the Organization for Competitive Markets (OCM) sued USDA in 2018 for ignoring the 2008 Farm Bill directive.

The United States Court of Appeals for the Eighth Circuit ultimately ruled in favor of USDA and denied OCM’s petition for review. However, USDA promised in court filings to issue a proposed rule, with public notice and comment, to crack down on undue preferences.

USDA’s Upcoming Proposed Rule

Fulfilling their obligation to the court, USDA is now promulgating a proposed rule for comment focused on one specific provision (undue preference) of the 2010 rule making. Section 202(b) of the P&SA specifically prohibits meatpackers from giving an undue preference or advantage to any person or subjecting any person to undue or unreasonable prejudice or disadvantage. Undue preference or advantage can exist when growers who produce the same or similar poultry or livestock receive different treatment by the company – like providing better feed, chicks, and contract terms to certain growers over others. Undue preference can also include retaliation to growers that speak out against company abuse, providing a preference to those growers who don’t speak out. It also encompasses pricing issues, such as unfair volume discounts and premiums that stack the deck against smaller operations.

The upcoming proposed rule will provide criteria for the Secretary of Agriculture to use when determining if there has been a violation of Section 202(b) of the P&SA. The proposed rule is set to be published in late summer and will have a 60-day comment period for the public to weigh in.

For more background on undue preference and other ways that packers and integrators utilize their corporate power to create unfair competition for independent farmers, check out our GIPSA 101 blog post or this explanation by HBO’s John Oliver.

NSAC is a longstanding advocate of fairness in the livestock industry. In the past, we have advocated for protections against undue preference like the elimination of the tournament system in poultry production and the exclusion of “legitimate business purposes” as a defense to violations of Section 202(b). In partnership with other allies who have long been fighting this fight, we will soon develop our own recommendations and guidance for the rule, and will deliver those recommendations to USDA.

Taking Action

NSAC is actively pursuing policy and grassroots advocacy opportunities to finally advance this important rule. We have already signed on to a petition, generated by NSAC members Rural Advancement Foundation International-USA (RAFI-USA) and the Organization for Competitive Markets (OCM), as well as the Government Accountability Project (GAP), which asks USDA for four specific principles to be included in the proposed rule.

Together, we believe that the rule should:

  • Ensure freedom for growers to speak the truth;
  • Ensure freedom for growers to join together in producer associations;
  • Ensure protection from corporations enforcing a self-serving system; and
  • Contain clear criteria with detailed, specific rules that adequately cover different types of livestock, and are suitable for the future.

Interested groups and individuals can take action by this petition led by RAFI-USA, OCM, and GAP, and supported by NSAC.

The petition will be delivered to the USDA to show support for robust regulations that provide relief for growers suffering from discrimination and unreasonable prejudice. NSAC will also submit detailed comments on the rule once it is released.

Additional information on this rule and advocacy opportunities can be found here. We will also publish a detailed analysis of the final rule once it is released.

Categories: Competition & Anti-trust, Sustainable Livestock

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