New year, new rules? Packers and Stockyards Act being evaluated

With comments due Jan. 17, 2023, livestock organizations are discussing proposed changes to more than century-old Packers and Stockyards Act.

As for the current proposed rule, while R-CALF USA has not yet submitted its comments, generally, its position remains steady.

“They have established a category of ‘market vulnerable individuals’ which appears to be reserved for minority producers who have historically been less favorably treated. We believe this needs to be expanded to include producers who do not have sufficient marketing outlets for their cattle,” R-CALF CEO Bill Bullard said.

Colorado offers the perfect example, he believes. “There are too few markets in Colorado. All Colorado producers who sell to packers are disadvantaged because they don’t have access to price reporting. We believe all producers in Colorado who sell to packers should fall under the category of ‘market vulnerable individual’ because of the lack of competition in their marketplace,” he said. The confidentiality clause protects the one remaining large Colorado packer so that USDA hasn’t reported the price it pays for cattle over the past two years.

Secondly, R-CALF USA would like to see the Packers and Stockyards Act clarify that a packer cannot claim a business justification as a defense. In other words, they can’t claim that they did what they did because they had to do it in order to compete with the other packers. “That’s what ended the Pickett v. IBP case, for example. The court found Tyson (formerly IBP had a business justification for its otherwise unlawful action.”

Bullard said after this comment period, a third and final proposed rule is expected to be released for public comment. His organization has met with USDA to offer input on this yet-unannounced rule, and is optimistic it will be helpful to the independent cattle industry.

There are a couple of big adjustment R-CALF USA is pushing for. Currently, based on case law, the Packers and Stockyards administration requires that when a complaint is filed about harm due to lack of competition, the complaint must prove that the entire industry was harmed. R-CALF USA believes that the Packers and Stockyards Administration ought to take action when an individual is harmed, even if the entire industry was not harmed.

Additionally, R-CALF USA wants to see the rule prohibit anti-competitive contracts such as formula contracts that do not include a base price in the agreement.

R-CALF USA Director Eric Nelson, an Iowa cattle feeder and cow-calf producer, said the packers’ buying practices based on color last year is an unpleasant example of the flaw in the current interpretation of the law.

“About a year ago, maybe 14 months ago, in the corn belt, if you had colored cattle – you couldn’t sell them. They wouldn’t buy them. It was terrible. But in the south, they were buying cattle of every color under the sun. So the way USDA looks at it – because a big part of the country is being treated ok, it is not actionable. Yet those of us being mistreated are the ones they are trying to eliminate because we are the cash sellers up here in the north. Due to the way the ‘no harm to competition’ rule is interpreted by USDA, they are fine because the entire industry isn’t being affected.

Nelson said proof positive of a need for real P and S reform is the fact that the act itself now includes protection for hog contract producers. “The reason the swine industry went to contracts is because of screwed up competition. The original act was supposed to protect competition. It’s been so hijacked, they passed amendments to protect contract producers – but we wouldn’t have them if we had been protecting them,” he said. “The only way you could continue to raise hogs was to sign a contract. I went through it myself,” he said.

Todd Wilkinson, NCBA’s president-elect from De Smet, South Dakota, said his organization, is also still finalizing its comments.

“I’ve submitted complaints to the P and S over the years for clients,” said the attorney. “Scales being off, how a packer made a payment. And then P and S investigates them,” he said. “We have no problem with an individual filing a complaint, but the courts have interpreted the level of harm that has to be demonstrated. We don’t want to see rules written that will change the whole act,” he said.

Because the US Supreme Court has ruled that ‘harm to competition’ is only actionable when the entire industry is harmed, NCBA does not support changing this precedent. “If we’re trying to change by rule what the courts had previously established as a threshold, I think that could be problematic,” he said.

“We would be very comfortable with what the courts have established,” said Wilkinson. The P and S does need some tweaking, and NCBA will discuss any potential changes they might support at their upcoming convention, he said. It’s quite possible some suggested legislative changes will come out of the meeting, he said. “Whatever our membership tells us to do, that’s what we’re going to do,” he said.

“We’re reluctant to see a regulation make a change without the statute being changed,” said Wilkinson. “Trying to change by regulation the statuatory language is potentially dangerous,” he said. Why? “Because we have an established Supreme Court opinion. I don’t think you should change by regulation what you should change by statute. That opens up the whole WOTUS argument,” he said.

“NCBA is always in favor of a producer being able to go forward with a complaint. We wouldn’t want a packer to be able to retaliate, but what we wouldn’t want to do is change the Supreme Court’s interpretation of what harm is. That’s Congress’s job,” he said.