GIPSA rule divides ag organizations
January 25, 2017
The U.S. Department of Agriculture's Grain Inspection, Packers and Stockyards Administration is making some waves with the December announcement of an interim final rule and two proposed rules, called the Farmer Fair Practices Rules. Among other things, the final rule changes the burden of proof for producers to show a particular practice might be in violation of GIPSA.
The proposed rules aim to establish some clear criteria about compensation that poultry dealers have to provide to poultry growers, determine whether ranking systems used by the poultry dealers are unfair and decide if the dealers have engaged in retaliatory behaviors against poultry growers.
In the weeks since the announcement, reactions have split the industry. Groups such as the National Farmers Union and American Farm Bureau Federation approve of the changes, while the National Pork Producers Council and the National Cattlemen's Beef Association do not support these rules.
As the rules currently stand, "you have to prove that what has been done to you and unknown others is of such a nature that you have damaged the industry. That is not a provable thing, so you have what amounts to an inappropriate standard that is virtually impossible to prove," said John Hansen, president of the Nebraska Farmers Union.
“The Packers and Stockyards Act already has provisions in there. What this rule does do is broaden it.... We believe it needs to be enforced as it is now.” Colin Woodall, Vice president of government affairs for the National Cattlemen’s Beef Association.
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The interim final rule would take away the requirement to prove harm to the entire industry.
Hansen said that since the Packers and Stockyards Act took effect in 1921, the meatpacking industry has worked to create "a regulatory track record that makes it impossible for the PSA to do its job. There's been a clearly identifiable need for some time to update the definitions to make (the rules) more legally clear so they are legally enforceable."
Some of the organizations against the changes have expressed concern that the interim final rule would encourage a flood of litigation.
"The Packers and Stockyards Act already has provisions in there. What this rule does do is broaden it. … We believe it needs to be enforced as it is now," said Colin Woodall, vice president of government affairs for the National Cattlemen's Beef Association.
One of the things the new rules would target is retaliatory behavior on the part of meatpackers and poultry dealers. That includes cancelling contracts and industry blacklisting.
"When contracts are cancelled it almost universally means people go into bankruptcy and lose their farms … when poultry producers suggested they want an independent weigh (of the product), (dealers) say your contract won't be renewed. (If growers) said something in a publication and if the company didn't like their answer, their contract could be cancelled," Hansen said.
Another issue addressed in the rules is ranking systems, often called tournament pricing, where poultry dealers pay more to the best-ranked producers in a given area by taking the bonuses out of the paycheck of the lower-ranked producers in that same area.
"A lot of the time, the producers at the bottom were the ones who asked the most questions and caused the most trouble. (The poultry companies) have complete and total control over you as a producer once you sign that contract. … If I'm raising birds which are not good to start with, there's low-quality food, then there's no way I can possibly win. Then to penalize me because the birds and the feed were not on par is unfair," Hansen said.
The proposal for the changed rules first came about in 2010, following related provisions in the 2008 farm bill, but numerous riders in congressional appropriations bills have kept the changes off the table until now.
One thing that helped get the wheels turning was a 2015 segment on John Oliver's Last Week Tonight that outlined the difficulties poultry farmers face, according to Larry Mitchell, who just stepped down as the administrator of GIPSA.
"I think the packer industry and integrated poultry producers mobilized their forces on the Hill," Mitchell said. "It took us a full calendar year to dust off the cobwebs to … streamline them from what was in the 2010 proposal."
Mitchell said he has seen some of the retaliatory behavior Hansen described.
"When we're talking about unreasonable preference, we're talking … if you've gone to a meeting to organize and protest, you may get less quality chicks delivered. In 2010, when the Secretary of Agriculture and the Secretary General conducted meetings, some of the poultry producers that stood up in one of those town halls lost their contracts," Mitchell said.
Mitchell stands by the Farmer Fair Practices Rules.
"I think it will give more fair and competitive markets for the growers of the chicks, with the definitions and rules on what's fair and reasonable preference, I think it will provide protections for all producers," Mitchell said.
The interim final rule could go into practice as soon as February if the new administration does not stand in its way, he said.❖