The Hagstrom Report

Agriculture News As It Happens

Farm groups have mixed reaction to final GIPSA rule

The Agriculture Department’s scheduled publication today of the final rule implementing the 2008 farm bill provisions of the Grain Inspection, Packers and Stockyards Administration has elicited a wide range of reactions from farm groups.

Congress directed USDA to make changes to protect livestock producers and poultry growers, but the Obama administration proposal became highly controversial, with major livestock and poultry groups protesting the rule and Congress finally intervening to restrict its implementation.

Tom Vilsack
Ag Secretary Tom Vilsack
“As I travel throughout the countryside, I often hear from farmers and ranchers about their concerns with the marketplace becoming more concentrated,” Agriculture Secretary Tom Vilsack said in a news release.

“While concentration certainly comes with some efficiencies, Congress recognized in the 2008 farm bill that additional protections for producers are warranted,” Vilsack said. “Today’s rule will implement these targeted protections and help provide more fairness and transparency in the marketplace.”

The provisions were modified from the June 22, 2010 proposed rule.

USDA said these sections include criteria the secretary may consider when determining whether a live poultry dealer has provided reasonable notice to poultry growers of any suspension of the delivery of birds, when determining whether a requirement of additional capital investments over the life of a poultry growing arrangement or swine production contract constitutes a violation of the Packers and Stockyards Act and when determining if a packer, swine contractor, or live poultry dealer has provided a reasonable period of time for a grower to remedy a breach of contract that could lead to termination of a production contract.

The rule also includes a section requiring contracts that require the use of arbitration to include language on the signature page that allows the producer or grower to decline arbitration, and provides criteria the secretary may consider when determining if the arbitration process provided in a contract provides a meaningful opportunity for growers and producers to participate fully.

Vilsack noted that USDA planned to seek additional public comment on several other revised provisions from the June 22, 2010 proposed rule, but that fiscal year 2012 Agriculture appropriations bill included language prohibiting the department from moving forward with those provisions.

The areas on which further comment would have been sought included changes to the tournament system of payment for poultry growers, requirements to collect and post sample contracts and to address the issue of need for producers to show harm to competition prior to asserting a violation of the Packer and Stockyards Act, Vilsack said.

USDA estimates the rule could cost the poultry industry between $9.8 million and $55.5 million a year and that the cost to all industries could be between $21.3 million and $72.1 million a year, according to an Associated Press report.

Mike Brown
Mike Brown, National Chicken Council
National Chicken Council President Mike Brown, who represents the nation’s major chicken producers, said that his organization will work with its members to facilitate compliance with the rule when it takes effect on February 7, 2012, but that members “are disappointed that the final rule still includes provisions estimated to cost the chicken industry as much as $55.5 million annually.”

“This is especially burdensome on an industry that has struggled financially in the face of this difficult economic climate and record-high costs of production,” Brown said.

Brown also said the National Chicken Council “appreciates the work of Congress to limit the final regulations to the requirements of the 2008 farm bill, as Congress intended.”

Other groups representing smaller producers said they were pleased that USDA had put out the rule, but disappointed that Congress placed restrictions on it.

“The protections in this rule are an overdue and hard-won step in the right direction,” said Becky Ceartas, contract agriculture reform program director at the Rural Advancement Foundation International – USA. “Hundreds of farmers have risked their livelihoods to speak up for this rule despite the threat of retaliation.”

“The administration responded to farmers’ concerns and introduced some fairness and transparency into an industry that is plagued by exploitative contracts and an unequal balance of power between companies and farmers,” Ceartas said.

Some of the sections that were not allowed to be written would have addressed retaliation by the companies against farmers, erosion of growers’ rights to a trial by jury, and whether contracts are long enough for farmers to recoup at least 80 percent of their sizable investments, she added.

The National Sustainable Agriculture Coalition said that “the protections” under the final rule “are an important but very modest first step to ensuring farmers and ranchers a fair shake in dealing with meatpackers and poultry processors.”

The arbitration provision of the final rule is an improvement over the proposed rule, NSAC said. Farmers who do not choose whether or not to be bound by an arbitration clause in a production contract are deemed by the rule to have declined to be bound by arbitration, the group added.

But NSAC said the final rule:
  • Weakens provisions that a processor that requires a farmer to make initial and additional capital investments must also provide a reasonable opportunity for the farmer to recoup the investment over the life of the production contract.
  • Limits the recoupment requirement to additional capital investments required after a production contract is entered into and omits the recoupment requirement for the initial capital investment.
  • Weakens a requirement that packers and processors provide poultry and livestock contract farmers with notice and a reasonable opportunity to remedy an alleged breach of a production contract.
  • Includes a new broad exemption from the requirements if the packer or processor contends that food safety or animal welfare was concerned in the breach.
  • Provides no safeguards or procedures in the final rule to ensure that packers and processors document these contentions.
Roger Johnson
Roger Johnson, National Farmers Union
“While the final rule is a good first step, it is certainly not a last step,” said National Farmers Union President Roger Johnson, adding that the rule “will make the livestock market at least somewhat more transparent and fair.”

“The rule clarifies whether the requirement of additional capital investments for poultry growers and swine producers violates the Packers and Stockyards Act, and ensures poultry dealers have a reasonable period of time to remedy a breach of contract,” he said.

Johnson said his group was disappointed that Congress prevented the Obama administration from advancing other parts of the rule.

“It is critical that the competitive injury portion of the rule be implemented,” Johnson said.

“Currently, a producer must prove that a packer’s anti-competitive practices damaged the entire marketplace. Clarification of competitive injury is needed so that the producer would only have to prove that his or her operation was hurt by such actions, a much more reasonable standard. In choosing to prevent the competitive injury portion of the rule from moving forward, Congress has clearly chosen to put the interests of large packers ahead of family farmers and ranchers.”