GIPSA’s proposed competition rule divides cattlemen
October 8, 2010
In the 2008 Farm Bill, USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA) was directed to issue regulations regarding poultry and swine contracts, as well as to establish a list of criteria for the Secretary to consider in determining whether an undue or reasonable preference has occurred in violation of the Packers and Stockyards Act. GIPSA released their proposed rule on June 22, 2010. Since then, a nationwide debate has ignited on both sides of the pasture fence.
Allan Sents, the marketing chairman for the United States Cattlemen’s Association (USCA) from Marquette, KS and Britton Blair, South Dakota Cattlemen’s Association (SDCA) Young Producer’s Council (YPC) President from Sturgis, SD, offered their different perspectives on the GIPSA proposed rule for their fellow cattle producers to consider.
“The marketing workshop held by the Department of Agriculture and Department of Justice in Fort Collins has generated much discussion,” said Sents. “Unfortunately, there continues to be much confusion about the upcoming rules that are currently open for public input. It’s important to remember the recent workshop was not intended to discuss the proposed rules, but rather the current state of affairs in livestock marketing. The issue of captive supplies is not directly addressed in the proposed rules. Discussion from the workshop raises the question of potential need to more directly address that impact on the market.”
Sents added that opponents to the proposed rules most often target a perceived impact that would eliminate value-based marketing.
“This is completely unfounded,” he explained. “The GIPSA Web site affirms there is no restriction in the proposed rules affecting differing payments for different quality cattle. In fact, it would seem more a violation of the rule to procure all types of cattle at one price per pound. That’s an unreasonable approach that could be more subject to litigation than rule critics will acknowledge. Critics also claim these rules will lead to more litigation. Yet, these changes clarify the language which should reduce litigation potential from the current broad language.”
Blair disagreed, and he stands behind the SDCA belief that GIPSA’s proposed rule will hurt producers and would drastically change the way cattle are marketed in the U.S.
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“This rule really equalizes things, but it takes away the incentive to raise higher quality cattle,” said Blair. “As young producers, there are ways to capture money to add value to your cattle. This will take those opportunities away from us young people. This rule will inhibit many of the value-added cattle marketing options available today and hinder our ability to be successful in our businesses.”
In a discussion at a recent YPC meeting, Blair shared with his fellow cattle producers that he feared the rule would result in more than just lost opportunities. He sees increased litigation, added regulation, government determination of acceptable prices, the end to private business deals and an invasion and loss of privacy as unintended consequences of the rule. Furthermore, he worried the rule would encourage packer consolidation and negatively restructure the industry.
“I think a lot of folks don’t necessarily understand this proposed rule and what negative affects it might have on cattle producers,” added Blair. “This rule has gained in popularity because so many producers see the packer as the enemy. To me, the packers are our customers, so why would we try to hurt them through this rule?”
Sents concurred that there are some legitimate concerns to think about.
“Who is a packer under these rules?” asked Sents. “Do U.S. Premium Beef unit holders qualify as a packer? One would think not since they do not participate in daily management, but it needs to be clarified. Similar concerns were raised about a packer in an isolated geographic location being limited in trading practices in another area unrelated to the primary location. Other concerns were raised about the written justification requirements. Again, current grid type sales do that, but some seem to imply these rules will require more paperwork. We need to see that implementation is reasonable and not over-burdensome.”
“USCA believes the proposed rules are necessary,” according to Jess Peterson, chief lobbyist for the organization. “We also believe there are marketing practices, such as decreased negotiated sales, that may need to be addressed down the road. In the meantime, GIPSA needs to receive constructive comments to fairly implement reform to our marketplace with the least amount of burden possible.”
“Long-standing SDCA policy opposes legislation and regulations that restrict cattle marketing options,” according to Cayla Christiansen, communications director for the organization. “We believe cattlemen deserve to decide for themselves which marketing option is most profitable for their operations.”
It’s time for the industry to decide. The commenting deadline is Nov. 22, 2010. Comments may be submitted via e-mail to firstname.lastname@example.org. For more information, check out http://www.gipsa.usda.gov.