Ranch Group Seeks Comment Period Extension in USDA’s Undue Preference Rule

Billings, Mont. – In a formal letter sent today to the Packers and Stockyards Division of the U.S. Department of Agriculture, Agricultural Marketing Service (USDA-AMS), R-CALF USA requests that the agency extend the comment period in its proposed rule regarding undue preferences or advantages for at least 90 additional days beyond the current deadline of March 13, 2020.

In its letter the ranch group wrote that the proposed rule intending to implement the undue preferences prohibition contained in the Packers and Stockyards Act of 1921 (PSA) requires additional, extensive research before the group can formulate meaningful public comments.

The PSA makes it unlawful for a packer to grant any undue or unreasonable preference or advantage to particular cattle sellers, or to subject particular cattle sellers to any undue or unreasonable prejudice or disadvantage.

Although the PSA was passed nearly a century ago, the agency had never promulgated rules with which to implement this prohibition. Congress, in the 2008 Farm Bill, specifically directed the agency to do so.

The group offered three specific reasons why it must conduct extensive research that will take several months before it can begin to offer meaningful comments to the proposal.

First, the group states that the agency’s approach in its proposed rulemaking is highly unusual and raises the question of whether the proposed rule is even responsive to Congress’ 2008 directive. The group states that rather than establishing standards for determining what constitutes a violation of the PSA, the agency instead provides a laundry list of defenses that packers can use anytime they are confronted with an allegation that they violated the PSA. The group states that this laundry list only establishes what does not constitute a violation and that appears inconsistent with Congress’ directive, thus necessitating extensive research to determine whether the agency’s unusual rulemaking approach is even appropriate.

Second, the group states that the proposed rule relies on broad, sweeping generalizations and assumptions that the agency does not support with any evidence. As an example, the proposed rule makes the generalization that most court cases have required cattle producers to first show that a packer’s violation of the undue preference provision has caused harm to the competitiveness of the entire industry. However, the group asserts the agency did not mention any of those court cases and the group believes that decisions by the Eighth Circuit courts contradict the agency’s generalizations and assumptions. This, the group claims, requires more research to determine the validity of the agency’s assumptions that form the basis for the proposed rule.

Finally, the group states that the proposed rule, on its surface, appears to facilitate and promote unlawful collusion among packers because it includes as a defense to any alleged violation the question of whether the prices and terms of sale offered by one packer are similar or identical to the prices and terms offered by competing packers. But the group points out that the very agency that is proposing this rule has a policy to protect from public disclosure the prices and terms that any individual packer provides. The group explained that the USDA-AMS confidentiality guidelines associated with the Livestock Mandatory Reporting Act ensures that prices and terms offered by any individual packer are not disclosed to the public.

The group states that extensive research is needed to determine if the proposed rule is even lawful given that it appears to facilitate and promote collusion among packers to share confidential and proprietary pricing and terms of sale information with each other to ensure that the prices and terms they offer are similar, if not identical, to the prices and terms offered by their competitors.

“It is critically important to the U.S. cattle industry that the government establish appropriate standards to properly implement this important prohibition against offering sweetheart deals to select cattle sellers while depriving others of similarly favorable prices or terms,” said R-CALF USA CEO Bill Bullard who added, “We believe this issue explains why our industry has lost 75 percent of its smaller, farmer feeders over the past two decades while the largest of cattle feeding operations continue to expand.”