Updated rule to give GIPSA enforcement authority
December 14, 2016
The Agriculture Department's release today of new rules to enforce the Packers and Stockyards Act resulted in predictable comments from the producers, companies and politicians involved in the issue, although in somewhat more colorful language that probably reflects a push to convince the incoming Trump administration to overturn the rules.
USDA released an interim final rule and two proposed rules – known collectively as the Farmer Fair Practices Rules – that Agriculture Secretary Tom Vilsack said would protect poultry growers in particular from "damaging unfair and deceptive practices."
The National Farmers Union, the American Farm Bureau Federation, the National Sustainable Agriculture Coalition and the U.S. Cattlemen's Association praised it, while the National Chicken Council, the National Pork Producers Council and the National Cattlemen's Beef Association denounced it.
The White House also weighed in with a blog post in which Charlie Anderson, a senior adviser to the director of the National Economic Council, said, "These three rules are another step forward in response to the president's Competition Initiative announced in April, which has the goal of enhancing competition to help consumers, workers, and small businesses get a fair shake in the economy."
“The Trump Administration should support these rules because they are vital to reversing the ongoing decline of our U.S. cattle industry. Our industry’s decline is not the result of any natural phenomenon or legitimate economic force; it’s the result of a failure to use the laws we have to protect competition. The new rules are aimed at implementing those critical protections.” Bill Bullard, R-CALF USA CEO
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In a call to reporters, Vilsack said that the interim final rule would give USDA the same powers of enforcement against live poultry dealers that it has against beef packers and swine contractors when they engage in practices that are unfair to producers. Without the rules, Vilsack said, the courts have ruled that USDA's Grain, Inspection, Packers and Stockyards Administration did not have enforcement powers. An important element in the rule, Vilsack said, is that poultry growers would no longer have to prove that an action against one grower hurt competitiveness in the industry.
While the rules are focused on poultry producers, some cattle and pork groups have said it would interfere with contracting for those animal species as well. But Vilsack said that the rule was substantially rewritten from a 2010 proposal and that the groups had overreacted to that older proposal.
"All too often, processors and packers wield the power, and farmers carry the risk. Today, USDA is taking a big step toward providing the protections that farmers deserve and need," Vilsack said.
USDA added, "The four largest processors in the poultry sector in this country control 51 percent of the broiler market and 57 percent of the turkey market. In part due to this concentration, poultry growers often have limited options for processors available in their local communities to contract with. Fifty-two percent of growers have only one or two processors in their state or region to whom they can provide grower services. That means processors can often wield market power over the growers, treating them unfairly, suppressing how much they are paid, or pitting them against each other."
The timing of the issuance of the rules means that final decisions on the rules will be up to the Trump administration. National Farmers Union President Roger Johnson and Mike Weaver, president of the Contract Poultry Growers Association of the Virginias, noted that President-elect Donald Trump had won lots of votes in rural America, and they said they hope he would allow the rules to be finalized.
"American family farmers came out of the woodwork to support Trump, and we need some consideration," said Weaver. But Weaver noted that the Trump transition team "does not have one small family farmer."
Johnson added, "Producers said they were Trump supporters because they believed Trump would stand up for the little guy." Johnson, a former Democrat agriculture commissioner in North Dakota, added that he doesn't have any "insights" into the Trump administration.
The National Pork Producers Council said that the rules were "an apparent attack on rural America for its role in helping elect Donald Trump as president" and the council "will work with the Trump administration and the new Congress to repeal the unnecessary, destructive and illegitimate midnight rule."
Asked on the call to respond to NPPC, Vilsack said, "That is absurd. It is unfortunate they would use such rhetoric." The rules, he said, are designed to finish the work of the 2008 farm bill passed during the Bush administration, but stopped for several years by congressional appropriations riders.
"This has nothing to do with the election of 2016; it has to do with what is fair to producers," Vilsack said.
Congress stopped putting the riders into appropriations bills after TV host Jon Oliver brought up the issue. Vilsack said today that, if Congress had not interfered, the rule would have been in place several years ago.
Senate Agriculture Committee Chairman Pat Roberts, R-Kan., and House Agriculture Committee Chairman Michael Conaway, R-Texas, both criticized USDA's actions.
Roberts said that USDA "has chosen to ignore my persistent appeals over the last six years – along with the appeals of livestock producers – by finalizing rules that will limit the economic freedom of America's farmers and ranchers. I will take a hard look at the rule, but I have strong concerns based on the previous direction taken by USDA. The so-called GIPSA rule has been wrought with controversy since originally proposed in 2010 and will have a devastating impact on America's farmers and ranchers and how they buy and sell cattle, hogs, and poultry. I'm deeply disappointed Secretary Vilsack and the Obama administration are taking such action towards rural America as their terms come to an end and during the holidays."
Conway said, "I'm disappointed that the generally productive and non-partisan relationship I've developed with USDA over the past two years has culminated in a last-minute effort to push through a partisan trio of rules — even despite assurances that they would be tabled for more thorough and appropriate consideration by the incoming administration. It is particularly troubling given Congressional disapproval with the overreach of these costly rules dating back to their original proposal in 2010."
Conway added, "I plan to closely review the rules, but stand committed to working with industry, the incoming secretary of Agriculture, and my colleagues in the House and Senate to ensure that the livestock and poultry industries remain able to do business without the constraint of unnecessarily burdensome regulations. I will make it a priority to roll back these and other midnight regulations from the Obama administration, as soon as Congress returns in January."
But Senate Judiciary Committee Chairman Charles Grassley, R-Iowa, praised the rule.
"For too many years, these rules have been stymied by appropriations riders," Grassley said. "Now we're finally seeing some results of the 2008 farm bill. While weaker than I had hoped, it appears to be a step in the right direction in addressing the unprecedented level of concentration in agriculture that is putting independent producers at a disadvantage. I've heard loud and clear from Iowa cattlemen over the last several months about the power packers continue to exercise, to the detriment of independent livestock operators.
"The Farmer Fair Practices Rules enjoy bipartisan support in Congress." Grassley added. "I'm glad Secretary Vilsack has finally been able to take action which will help level the playing field for small producers in rural America."
The National Chicken Council said the rules will "strangle" the industry.
National Chicken Council President Mike Brown said, "The vast majority of chicken farmers in rural America are happy and prosper raising chickens in partnership with companies, and they don't want the government meddling on their farms and telling them how they should run their businesses. Business under the current contract structure has given thousands and thousands of farm families the opportunity to live in rural America and operate profitable businesses that allowed them to build nice homes, expand other aspects of their farm enterprises and put their children through college.
"These rules, however, could lead to rigid, one-size-fits-all requirements on chicken growing contracts that would stifle innovation, lead to higher costs for consumers, and cost jobs by forcing the best farmers out of the chicken business," Brown added. "The interim final rule on competitive injury would open the floodgates to frivolous lawsuits."
National Pork Producers Council CEO Neil Dierks said, "I can't imagine a more devastating regulation on an industry. The rule, which creates legal uncertainty, will destroy opportunities for many in the U.S. pork industry, with no positive effect on competition, the regulation's supposed goal.
"The rule will be a boon to trial lawyers and a weapon [that] activist groups will use to attack segments of the livestock industry," he added. "The inevitable costs of the regulation could lead to further vertical integration of the pork industry, driving packers to produce more of their own hogs.
"The bottom line," said Dierks, "is that the White House picked trial lawyers and activists over farmers in forcing this regulation on rural America. We need to kill this illegitimate midnight rule."
National Cattlemen's Beef Association President Tracy Brunner said, "The GIPSA rules are especially troubling to the cattle industry. As we have consistently stated, if adopted, this rulemaking will drastically limit the way our producers can market cattle and open the floodgates to baseless litigation. In a time of down cattle markets, the last thing USDA needs to do is limit opportunity. The fact of the matter is: We don't trust the government to meddle in the marketplace."
The American Farm Bureau Federation joined the National Farmers Union in praising the release of the rules.
"Farm Bureau has long advocated for changes in the Grain Inspection, Packers & Stockyards Administration's rules," President Zippy Duvall said. "We have asked for changes to stop harmful business practices and protect chicken farmers. A one-size-fits-all approach doesn't work here, and that's why we have also worked to preserve the contract arrangements and marketing practices that make the beef and pork industries competitive.
"These proposed rules will strengthen GIPSA's ability to evaluate business practices in the poultry industry and better protect individual farmers from discriminatory treatment," Duvall added. "America's chicken farmers have long called for greater transparency and a level playing field in our industry, and we appreciate USDA's efforts to hold companies accountable and give farmers a voice."
The National Sustainable Agriculture Coalition said the rules "will finally give the largely toothless [Packers and Stockyards Act] some bite."
The interim final rule, NSAC said, "simply confirms what successive administrations have held and what the law plainly says: The Packers and Stockyards Act does not require a showing of competitive injury. The idea that contract farmers should have to prove injury to the whole sector in order to receive compensation for having been the victim of an anti-competitive practice is an impossible standard. This rule upholds the original intent of the law."
NSAC continued, "Although farmers are often promised a minimum base pay, when they sign a contract many find that their entire income relies on a system that pits farmers against their fellow farmers – a system in which many farmers lose and the companies always win. In theory, this system is supposed to ensure the best and healthiest birds, but in reality it is often used by the industry to play favorites and punish growers who speak out. The new proposed rule will address some of the most egregious aspects of the tournament system by identifying and stopping discriminatory practices like retaliating against growers by intentionally giving them lower quality feed or chicks."
"The second proposed rule addresses undue preference and unfair practices of certain sellers by animal purchasers," NSAC said. "This rule defines criteria for what would amount to undue preference for one producer over another, and it also defines unfair practices."
U.S. Cattlemen's Association Marketing Committee Chairman Allan Sents said, "Today marks an important step to advance competition and true price discovery in the cattle market. The Farmer Fair Practices Rules will seek to restore order in the marketplace, allowing the USDA to maintain their oversight role and prevent anti-competitive buying practices in the livestock sector."
"The Trump Administration should support these rules because they are vital to reversing the ongoing decline of our U.S. cattle industry," said R-CALF USA CEO Bill Bullard.
Bullard said the U.S. cattle industry is declining at an alarming rate. He said over half a million cattle farms, ranches and feedlots have exited the industry since 1980, the size of the U.S. cattle herd recently hit a 60-year low, and the volume of beef produced from U.S. cattle has fallen to a 20-year low.
"Our industry's decline is not the result of any natural phenomenon or legitimate economic force; it's the result of a failure to use the laws we have to protect competition. The new rules are aimed at implementing those critical protections," Bullard said.
"We applaud USDA in standing up for the family farmer by moving forward with the Farmer Fair Practice Rules. We hope these rules will begin to establish a new baseline of fairness for farmers in the poultry and livestock industries," said Sally Lee, program director at Rural Advancement Foundation International-USA and director of the upcoming documentary "Under Contract," which investigates the struggles poultry farmers face.
These rules are a critical step in providing some basic fair business standards to govern how poultry companies treat the contract farmers that produce the chicken," said Steve Etka, policy director for the Campaign for Contract Agriculture Reform.
"The Trump administration should support these rules because they are vital to reversing the ongoing decline of our U.S. cattle industry," said R-CALF USA CEO Bill Bullard. "Our industry's decline is not the result of any natural phenomenon or legitimate economic force; it's the result of a failure to use the laws we have to protect competition."
–The Hagstrom Report