GIPSA rule division continues
November 19, 2010
KANSAS CITY, MO (DTN) – If William Shakespeare could have mused about the divide among livestock producers over USDA’s proposed marketing rule, it might have read something like this:
“Two households, both alike in trade, in fair Kansas City where we lay our scene, from a not-so-ancient grudge break to new raging debate over whether contract or cash markets make a cattle buyer’s hands unclean.”
Tragically, it isn’t that dramatic. Both sides are convinced the Grain Inspection, Packers & Stockyards Administration’s so-called “GIPSA rule” will affect their bottom lines. And on Wednesday (Nov. 10) in downtown Kansas City, with a plethora of reporters from the National Association of Farm Broadcasting group on-hand, the opposing sides held back-to-back news conferences in adjacent hotel conference rooms.
Roger Johnson, president of the National Farmers Union, said in the pro-GIPSA briefing that farmers are constantly receiving a smaller share of the meat dollar, while packers and retailers receive more. Johnson added there is something wrong with a system in which packers can force a producer to sign a marketing contract without allowing the producer to have the contract reviewed by an attorney. That’s an example of onerous market power, he said, that would be fixed under the proposed rule.
“We really view it as a farmer and rancher bill of rights,” Johnson said of the GIPSA rule, later adding, “We have a system in the meat market that is basically broken.”
Groups opposed to the rule – the National Cattlemen’s Beef Association, National Pork Producers Council and National Meat Association – released a study by Informa Economics on Wednesday that estimated the proposed rule would lead to about 23,000 job losses and an annual gross domestic product loss of $1.5 billion. The analysis states packers would reduce premium options for producers to avoid potential legal liability.
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Stemming from provisions in the 2008 farm bill, USDA proposed the rule in June, setting off a firestorm of debate about the potential impact.
The proposed rule has several major provisions, including one that states livestock producers would not be required to show “harm to competition” in federal lawsuits against packers. Federal courts have repeatedly ruled against producers because the producers have failed to show that a packer’s actions harmed overall livestock market competition.
In talking with industry players to produce the study, Informa Senior Vice President Rob Murphy said basically three-quarters of the cost impact in the study comes from the provision that producers would not have to show harm to competition. He said packers would fear a large class lawsuit over premiums. In 2004, producers thought they won a $1.3 billion case against Tyson Foods over unfair practices, only to see a federal judge overturn the ruling based on the harm-to-competition language.
The Informa study projects the rule would cause contraction in major livestock industries, such as a 494,000-head reduction in cattle, a 1.25-million-head decline in hogs and 55.2-million-head reduction in poultry.
Further, Murphy said the rule had the potential to force 200 sale barns to close nationally and create more vertical integration as some packers may consider it more beneficial to own their own cattle rather than buy them from producers.
The rule also would prevent packers and poultry integrators from retaliatory practices such as terminating contracts for joining a particular organization or filing a GIPSA claim. Another key provision provides better protections for producers regarding requirements from packers to upgrade poultry or swine houses and defines when certain upgrade requirements are unfair.
Another provision in the rule would prevent packer-to-packer sales of livestock. That provision has raised questions about the effect it could have on small packers who may own livestock several states away, or producers who also are investor-owners of a packing plant.
The comment period for the proposed rule ends Nov. 22. Already, roughly 16,000 comments have been received. Because USDA will have to analyze and respond to each comment, it could be several months before a final rule is ready.
NCBA President-elect Bill Donald, who has criticized USDA for not conducting its own, more thorough analysis, said the higher costs imposed from the rule will not be borne by packers or retailers.
“Either producers like myself take less or consumers pay more,” Donald said.
The Republican takeover of the House of Representatives in last week’s elections will also affect the rule, Donald said. People in Congress and the regulatory agencies, he said, should have “heard a message from the American people that they are not happy with the direction the country has been going. And I think these Obama regulations will be scrutinized further, especially by the House of Representatives.”
Peter Carstensen, a law professor at the University of Wisconsin, said through a phone conference call he didn’t think Congress would be able to act to remove the language before the 2012 farm bill, and that would give time for the effects of the rule to be seen.
“By then I would anticipate there would be some actual experience with the rules,” Carstensen said.
Bill Bullard, chief executive officer with the Ranchers-Cattlemen’s Action Legal Fund, said he has heard concerns that opponents may try to use the appropriations process to stop USDA from using any funds to implement the rule. That actually occurred after the 2002 farm bill with the country-of-origin-labeling rule, stalling that provision effectively through the life of that bill.
Colin Woodall, a lobbyist for NCBA, said his group is looking at any and all ways to stop the rule because they disagree with it and want it pulled. Still, Woodall said an ag appropriations bill likely won’t begin to move in the new House until sometime in the spring.
The Federal Register posting for the GIPSA rule can be found at http://archive.gipsa.usda.gov/rulemaking/fr10/06-22-10.pdf.