Nebraska law allows meatpackers to own hogs

Posted February 16, 2016

Per nationalhogfarmer.com, Nebraska meatpackers can now own hogs.

Under LB176, passed February 5, a person who owns, leases or holds a legal interest in a swine production operation can enter into a contract to produce swine for a packer. The producer, or contract grower, will own the land and facilities used to raise the livestock while the packer owns the swine.

State Senator Ken Schilz said Nebraska was the only state that prohibited packers from directly or indirectly owning hogs. Because packers in other states are not subject to that restriction, packers who process Nebraska hogs could move to neighboring states.

In an editorial in the Schuyler Sun, Senator Jerry Johnson observed, “Supporters of LB176 argued that passage of this measure would give the Nebraska farmer another tool to compete in today's economy. It was said that young farmers would be helped by this bill as providing a source of income in an otherwise volatile industry with less risk. It was also said Nebraska farmers contract now with big corporations like Smithfield or Tyson, but ship their animals out of state for processing. Under this bill, processing will take place in the state. Jobs will be created and economic advantages will result.”

Opponents of the bill argued it would negatively impact family farms. Senator Al Davis of Hyannis told Fortune magazine that contract farming has become more prevalent in livestock states where packer bans have been overturned and that the contract model can be dangerous for farmers. Davis contends that many farmers who sign such contracts take on huge loans to pay for the infrastructure required to meet packers’ demands for large herds, leaving them unable to negotiate higher prices.

A copy of the approved bill may be viewed here. 

Market agencies selling on commission, GIPSA accepting comments

Posted July 14, 2015 

The United States Department of Agriculture's (USDA) Grain Inspection, Packers and Stockyards Administration (GIPSA) is seeking comments from the public regarding regulations issued under the Packers and Stockyards Act, 1921, as amended and supplemented.

GIPSA regulations address circumstances under which a market agency is allowed to sell livestock on a commission basis to its owners, officers, and employees. GIPSA would like to determine whether additional information is needed in clarifying the circumstances under which key employees of the market agency, those designated as an auctioneer, weighmaster, or salesman, may purchase livestock.

Comments are accepted until August 14, 2015.

For more information, the Federal Register is available here.

For more information on GIPSA, please visit the National Agricultural Law Center’s website here.

Farmer Sues Pilgrim's Pride for Breach of Contract

Posted May 27, 2015

A West Virginian poultry farmer is suing Pilgrim’s Pride Corp. for breach of contract, according to MeatingPlace. West Virginia Record also published an article available here.

M&M Poultry Inc. filed a complaint May 8 in the U.S. District Court for the Northern District of West Virginia, claiming that Pilgrim’s Pride defrauded M&M by using a “tournament” ranking system that pit the plaintiff against follower growers and led to the unlawful termination of its contract. 

M&M owner David Mongold executed a production agreement with Pilgrim’s in June 2009, amending an agreement in January 2010 and “upon insistence of Pilgrim’s” executed another production agreement in February 2012. The company had operated six chicken houses, which could house almost 148,000 birds at peak capacity. 

M&M claims under the terms of the broiler production agreement, Pilgrim’s Pride agreed to deliver flocks of chicks to M&M’s facility, according to West Virginia Record.

M&M claims Pilgrim’s Pride defrauded the plaintiff by imposing and utilizing a tournament system that wrongfully placed M&M in competition with its fellow growers, while requiring M&M to accept chicks which were genetically different, chicks with varying degrees of healthiness and feed of dissimilar quantity and quality.

The defendant knowingly made and continues to make materially false representations about future income, costs, expenses, company policies and working relationships to M&M and its fellow growers, or concealed related material facts and information, according to the suit.

M&M claims the defendant violated the Federal Packers & Stockyards Act and breached its contract with the plaintiff.

M&M is seeking compensatory and punitive damages. It is being represented by Keith Lively of Doyle, Barlow & Mazard PLLC; and J. Dudley Butler of Butler Farm & Ranch Law Group.

For more information on the Packers and Stockyards Act, please visit the National Agricultural Law Center’s website, here.

Hearing Scheduled for Motion to Dismiss in BPI “Pink Slime” Case

Posted October 24, 2013

A December hearing has been set for a motion to dismiss in a defamation lawsuit over ABC News’ coverage of a meat product called “pink slime,” according to an article by  KELO Land available here.  The motion to dismiss is available here.

The lawsuit was filed by Beef Products Inc. (BPI) and was moved from federal court to South Dakota circuit court in June.  BPI claims that ABC damaged the company by misleading consumers into believing that its signature product, “lean, finely textured beef,” is unhealthy and unsafe.  BPI is seeking $1.2 billion in damages.  BPI’s complaint is available here.

BPI officials say that the product is safe and the coverage led to the closure of three plants and roughly 700 layoffs.

Attorneys for BPI filed four briefs late last week, opposing motions by ABC and other defendants to dismiss the case, according to an article by the Sioux City Journal, available here.  The briefs make similar arguments related to a series of reports in March 2012 by ABC anchor, Diane Sawyer and two other reporters involved, arguing that the evidence it is presenting shows the defendants “knew their statements and implications were false,” and that consumers were misled by the reports.  BPI’s opposition brief is available here.

BPI’s separate briefs relate to three other defendants: former U.S. Agriculture Department employees Gerald Zirnstein and Carl Custer, and former BPI employee Kit Foshee. 

The hearing is scheduled for December 17 at 1 p.m., according to the Union County Clerk’s office.

For more information on the product and the controversy, a Congressional Research Service report on the subject is available here.  

5th Circuit Reverses $25 Million Damages Award Against Pilgrim’s Pride

Posted August 30, 2013

The U.S. Court of Appeals for the Fifth Circuit has reversed a $25 million damages award against Pilgrim’s Pride Corporation, ruling that it did not violate the Packers and Stockyards Act because its actions were neither “illegitimate nor anticompetitive”, as reported by Reuters.  According to the Reuters article, available here, the court also said that PPC’s “unilateral” attempt to raise prices was not anticompetitive and was “merely the legitimate response of a rational market participant to changes in a dynamic market.”  An article on the case by MeatPoultry.com, is available here.

The text of the decision, Agerton v. Pilgrim’s Pride Corporation, No. 12-40085, (5th Cir. August 27, 2013), is available here. 

In 2008, PPC faced severe economic difficulties and the business was no longer profitable.  Id. at *2. PPC concluded that it was “unnecessarily producing a surplus of commodity chicken at a great cost to itself.” Id.  In an effort to “stem its losses and streamline operations, PPC closed or idled several processing and distribution facilities, divested assets, restructured supply contracts, and laid off a number of employees.”  Id.  These efforts, however, “proved ineffective and PPC ultimately filed for Chapter 11 bankruptcy relief in December 2008.”  Id.  Its processing complex in El Dorado, Arkansas was one of the facilities “most affected by the company’s financial challenges” and was “officially idled in May 2009” after PPC was unable to solicit an acceptable offer on the facility.  Id. at *3.  As a result, PPC rejected Poultry Grower Agreements with 163 contract chicken growers.  Id.

In response to the termination, a group of the growers filed suit under the Packers and Stockyards Act, 7 U.S.C. §§ 181 et seq. and arguing that PPC engaged in a course of business for the purpose of “manipulating or controlling prices” in violation of PSA § 192(e).  Id.  A magistrate judge for the Eastern District of Texas found that one of PPC’s goals in the idling of the El Dorado facility was to “reduce the supply of commodity chicken and thereby pressure prices upward.”  Id.  Since this action was likely to result in competitive injury, the judge held that PPC’s actions violated PSA § 192(e) and awarded the growers over $25 million.  Id. at *4.

In its reversal, the Fifth Circuit stated that PPC had overextended itself into the commodity chicken market, was producing more chicken than the market needed, and as a result, was “driving the market price of chicken down at a great cost to itself.”  Id. at 8.  PPC’s decision to stop flooding the market with unprofitable chicken was a “unilateral” decision that “had nothing to do with competition.”  Id.  The court concluded that PPC’s conduct was “merely the legitimate response of a rational market participant to changes in a dynamic market” and held that PPC did not violate PSA § 192(e) by reducing its commodity chicken output.  Id. at 9. 

For more information on the Packers and Stockyards Act, please visit the National Agricultural Law Center’s website, here.

A federal judge ruled Pilgrim's Pride knowingly tried to manipulate the price of chicken in 2009

A U.S. magistrate in Texas has awarded nearly $26 million in damages to 91 Arkansas poultry producers who supplied Pilgrim's Pride. In 2009, the producers filed suit when Pilgrim's Pride closed a chicken processing plant in El Dorado, Arkansas.

The Magistrate ruled the move was made in an effort to affect the national supply and prices of chicken. The ruling stated that it was a violation of the Packers and Stockyards Act and that the growers were directly affected by the decision to close the plant instead of sell it.

In 2008, Pilgrim's Pride filed for bankruptcy protection.

For more information, click here.
Posted 10/4/2011

GIPSA Timeline is Flexible

The Grain Inspection, Packers & Stockyards Administration (GIPSA) livestock marketing rule is currently under a cost-benefit analysis, but Agriculture Secretary Tom Vilsack has stated that there is no deadline for completing those considerations.

Public comments were accepted on an extended timeframe regarding perceptions of GIPSA and how the marketing rule should be treated, and those comments are now being processed by chief economist Dr. Joe Glauber of the USDA and his team. These comments may have a significant effect on the final analysis produced by Dr. Glauber.

Despite the lack of a firm deadline, Vilsack has expressed interest in completing the process as quickly as possible while still focusing on accuracy. Vilsack discussed the topic during a hearing regarding the state of the national agricultural economy, during which participants discussed GIPSA and other relevant concerns.

Posted: 3/15/11

Supreme Court Will Not Hear Case Against Tyson

A Tennessee poultry producer brought a Packers and Stockyards Act case against Tyson foods, but the Supreme Court will not hear his appeal. Tom Terry requested to watch while his birds were weighed, and when Tyson officials would not allow it, Terry filed complaints with GIPSA.

Terry stated that the company reacted to his complaints by sending him fewer deliveries that often included sick birds. After Tyson ended Terry's contract, resulting in his bankruptcy, he accused Tyson of unfair practices under the Packers and Stockyards Act.

The issue in the case was whether an injury to competition must be pleaded and proved to establish liability for violation of the Packers and Stockyards Act, and also whether courts should have deferred to USDA decisions that a showing of injury is not required. The Supreme Court did not comment on why it chose not to hear the case.

To read the Sixth Circuit opinion, click here.

Posted: 2/2/11

GIPSA Comment Period Closing Soon

The comment period on the proposed GIPSA regulations ends in six days, on November 22, 2010. These rules- if finalized- would drastically change the way that producers, packers, dealers and contractors raise, buy, and sell livestock and poultry. According to an Informa Economics study sponsored by the National Cattleman’s Beef Association, the National Pork Producers Council, the National Chicken Council and American Meat Institute, the proposed regulations would cost the U.S. meat industry indirect losses of “1.34 billion annually, including one-time costs of $136 million, and annual costs of $169 million.”

To read the Reuters article, click here.

To read the study, click here.

For an overview of the proposed rules, compiled by the National Agricultural Law Center, click here.

To read the proposed rules, click here.

Posted: 11/16/2010

Grandin Critical of Proposed GIPSA Rules

Temple Grandin, author, professor, and consultant to the livestock industry on animal behavior whose life story won many Emmys "is now speaking out about changes to livestock marketing rules that she says will have negative consequences for animal welfare" according to Dan Flynn of Food Safety News.

USDA's Grain Inspection, Packers & Stockyards Administration (GIPSA) is the federal agency responsible for issuing regulations that govern contracting, buying and selling of livestock and poultry.  GIPSA proposed new rules in June and have extended the comment period to November 22, 2010.

For the full text of the proposed rules, click here.

Grandin says that the new rules could mean that animals will be mistreated.  She has filed comments with USDA  and wrote a guest column in a recent Huffington Post.  Grandin outlined some undesirable situations that she says will occur if packers are prohibited from purchasing or receiving livestock from another packer or packer-affiliated company.  Some of these situations included that older breeding stock may have to be shipped longer distances which would subject older animals to additional stress of loading and unloading and cause more bruising of the animals.

Grandin stated, "I am a big proponent of the specialized niche markets where a producers is paid a premium for raising animals to a particular specification such as high welfare or other specialized markets."

To read the Food Safety News story, click here.
For more information on GIPSA and the Packers & Stockyards Act, click here.

Posted: 10/25/2010

10th Circuit Upholds Ruling in Packers & Stockyards Act Case

Chris Clayton, of the DTN Ag Policy Blog reports that the Tenth Circuit Court of Appeals recently upheld the lower court ruling in Been v. O.K. Industries, No. 08-7078, ruling that a poultry integrator engaged in unfair practices against a group of poultry contract farmers.

This case involves that Packers & Stockyards Act of 1921 (PSA) which was enacted "to assure fair competition and fair trade practices, to safeguard farmers and ranchers ... to protect consumers ... and to protect members of the livestock, meat, and poultry industries from unfair, deceptive, unjustly discriminatory and monopolistic trade practices."  For more information on the Packers & Stockyards Act, click here to visit the National Agricultural Law Center's Reading Room on the subject.

The original jury award was $21.4 million, but the district court lowered the award to $14.4 million.  O.K. Industries filed its appeal in August of 2008.

On appeal, O.K. argued that the PSA requires growers to prove unfair practices with respect to actual, live birds that have already hatched."  "In effect, the integrator argued that it wasn't engaging in unfair practices if it was breaking eggs before allowing them to hatch to control flocks."  O.K. Foods also argued that the growers were unable to prove that "consumers were injured or that there was sufficient evidence to prove liability against the company."

The Tenth Circuit, however, ruled that O.K.'s "practices of controlling flocks, reducing chicks and demanding housing upgrades all lead to practices that reduced the prices paid to growers for their poultry."

The court stated, "As we have previously recognized, price manipulation in the form of arbitrarily reducing production may violate the PSA as an unfair practice."

The full-text of the Tenth Circuit opinion is available, here
To read the DTN Ag Policy Blog story, click here.

Posted: 10/19/2010

NALC to Host Webinar on Proposed GIPSA Rules

On Thursday, October 14, 2010, the National Agricultural Law Center will host a nationwide webinar from 11 a.m. - 1 p.m. (CST) on rules proposed by the Grain Inspection Packers and Stockyards Administration (GIPSA).

To participate in the webinar, simply click on the following or copy and paste it into your browser to enter the meeting: http://connect.extension.iastate.edu/aglaw.  A login page will appear.  Enter your name under the "Enter as a Guest" heading, then click on "Enter Room."  For questions or other information about the webinar, click here or contact Shannon Mirus at smirus@uark.edu or (479)575-2364.  The webinar and other workshops are free and open to the public.

GIPSA is the federal agency responsible for issuing regulations that govern contracting, buying and selling of livestock and poultry.  The proposed rules, if finalized, would drastically change the way that producers, packers, dealers and contractors raise, buy, and sell livestock and poultry.

During the webinar, staff attorneys will provide an overview of GIPSA's proposed rule changes for poultry and livestock, review the GIPSA rule making process, explain how to submit comments for the proposed rules, and end with a question and answer session.

For more information and materials for the webinar and other workshops, click here.
For the full text of the proposed rules, click here.
For more information on the Packers and Stockyards Act, click here.

Posted: 10/11/2010

ID Senators Ask USDA to Reconsider GIPSA Proposed Rule

Senators Mike Crapo and James Risch from Idaho "are urging the USDA to reconsider the purpose and benefits of its proposed Grain Inspection, Packers and Stockyards Administration livestock procurement rule, citing concerns about the rule's impact on the livestock and poultry industries" according to Pork Magazine.

The letter, available here, states that they "agree that transparent and efficient markets benefit producers, processors, retailers and consumers, and that additional regulations may be needed to protect producers and encourage competition" but, the regulations may have unintended consequences that harm "the very farm and ranch families that the rule is intended to protect."

The National Agricultural Law Center is currently hosting workshops including a webinar on the GIPSA proposed rules.  The webinar will take place on Thursday, October 14, 2010 from 11-1 CST.  For materials and more information on the workshops and webinar, click here.

To read the Pork Magazine story, click here.

Posted: 10/05/2010

NALC to Host Workshops on Proposed GIPSA Rules

The National Agricultural Law Center (NALC) will host a series of workshops, including a webinar, on the rules proposed by the Grain Inspection, Packers and Stockyards Administration (GIPSA) for poultry and livestock producers.  For more information, click here.

At the workshops, staff attorneys will provide an overview of GIPSA's proposed rule changes for poultry and livestock, review the GIPSA rule making process, explain how to submit comments of the proposed rules, and end with a question and answer session.  The webinar will be hosted via eXtension for nationwide participants and all workshops are free and open to the public.

GIPSA is the federal agency "responsible for issuing regulations that govern contracting, buying and selling of livestock and poultry."  GIPSA's mission is "to facilitate the marketing of livestock, poultry, [and] meat ... and promote fair and competitive trading practices for the overall benefit of consumers and American agriculture."

The proposed rules, if finalized, "will significantly affect the livestock and poultry industries."  Among other things, the proposed rules include "examples of packer, live poultry dealer, and swine contractor behavior that would be prohibited."  Additionally, the changes would affect the "tournament system" used for many poultry and swine contracts.

For the schedule of the workshops, click here to read the NALC press release.
For more information on the workshops and the GIPSA proposed rules, click here.
For the full text of the proposed rules, click here.
For more information on the Packers and Stockyards Act, click here.

Posted: 09/01/2010

Participants Voice Opinions at Livestock Workshop

The US Department of Agriculture and the Department of Justice held a workshop on competition in the livestock industry on Friday in Fort Collins, CO.

Secretary of Agriculture Tom Vilsack and US Attorney General Eric Holder opened the discussion, according to Reuters.

NPR reports that many participants voiced differing opinions on the rule proposed by the Grain Inspection, Packers & Stockyards Administration (GIPSA) which "aims to preserve competition in a livestock industry dominated by a handful of corporate giants."  The proposed rule is intended to keep "markets fair and competitive for livestock producers dealing with meatpacking" companies and would also articulate a standard under the Packers and Stockyards Act that, in certain situations, claimants do not need to prove "industrywide anticompetitive behavior to file suit."

Vilsack stated that he was "deeply concerned" about the impact of consolidation on rural America.  "Since 1980, the number of hog farms has dropped from 660,000 to 71,000, according to the Department of Agriculture.  The number of cattle farms has fallen from 1.6 million to 950,000."

The National Cattlemen's Beef Association says that the contracts "allow ranchers to manage risk" and "they can earn lucrative premiums for high-quality cattle, even if they have to accept steep discounts for inferior beef."

Ranchers represented by R-Calf USA argue that "the contracts thin the spot markets, which help to determine prices for those contracts, thereby depressing prices for everyone."

The comment period for the proposed rule was recently extended November 22, 2010.  The proposed rule is available here.  For more information on the proposed rule, click here and here to read past US Ag&Food Law and Policy blog posts on the subject.

To read the Reuters story, click here.
To read the NPR story, click here.

Posted: 08/30/2010

USDA and DOJ Announce Agenda for Livestock Workshop

The US Department of Agriculture and the Department of Justice announced the agenda for the livestock competition workshop to be held in Fort Collins, CO on August 27, 2010, according to a press release.

The workshop "will begin with opening remarks and a roundtable discussion including U.S. Attorney General Eric Holder, U.S. Agriculture Secretary Tom Vilsack and Assistant Attorney General for the Justice Department's Antitrust Division Christine Varney."  Other state attorney generals and representatives will join the discussion.  There will be three panels "composed of ranchers, farmers, academics, and other industry stakeholders."  Three hours will be dedicated to public testimony.

The workshop and testimony will likely focus on the proposed rules published by the Grain Inspection, Packers and Stockyards Administration (GIPSA) recently.  These proposed rules have created discussion in the livestock industry and Congress over fairness, competition, and transparency.  To read past US Ag&Food Law and Policy blog posts on these issues, click here, and here, and here.

Those wishing to participate in the workshop can register here.

For the full agenda and press release, click here.

Posted: 08/24/2010

Senators Express Support for GIPSA Proposed Rule

Senator Tom Harkin (D-IA) and other senators expressed support for the rule proposed by USDA's Grain Inspection, Packers and Stockyards Administration (GIPSA) in a letter to Agriculture Secretary Tom Vilsack, according to Drovers.  

The proposed rule, issued on June 22, 2010 "responds to a directive in the Food, Conservation, and Energy Act of 2008 (the farm bill) to clarify and spell out how the protections contained in the Packers and Stockyards Act apply and are to be enforced in livestock and poultry marketing and contract production and growing arrangements."

GIPSA recently extended the comment period to November 22, 2010.   For more information on the proposed rule click here and here to read past US Ag&Food Law and Policy blog posts on the subject.

Agri-Pulse reports that the National Farmer's Union (NFU) President, Roger Johnson, praised the senators, saying "On behalf of U.S. farmers and ranchers, I thank the 21 senators who have signed on to this letter.  The establishment of greater stability through transparency in the marketplace is of utmost importance for the future of the livestock industry."  He continued, stating that the proposed rule was a "significant step" to providing producers with "the means to sell their products in a fair marketplace."

The letter also urges Secretary Vilsack to "issue a final rule as expeditiously as possible once the comment period is closed and the Department has reviewed the comments and made any appropriate modifications to the proposed rule."

For the text of the proposed rule published in the Federal Register, click here.
To read the full text of the letter, click here.
To read the Drovers story, click here.
To read Agri-Pulse story, click here.

Posted: 08/17/2010

GIPSA Extends Comment Period for Proposed Rule

USDA's Grain Inspection, Packers and Stockyards Administration announced yesterday that it will extend the comment period for proposed regulations to November 22, 2010, according to the press release.

The proposed rule (75 FR 35338) was published on June 22, 2010 and includes proposed definitions and new sections to the regulations under the Packers and Stockyards Act of 1921 (P&S Act).  The purpose of the P&S Act is "to assure fair competition and fair trade practices, to safeguard farmers and ranchers ... to protect consumers ... and to protect members of the livestock, meat, and poultry industries from unfair, deceptive, unjustly discriminatory and monopolistic practices."  To read an Ag&Food Law and Policy blog post on this subject, click here.

This extension comes after controversy over the proposed provisions and many requests to extend the comment period for 120 days.  Additionally, 22 House members and 17 Senators requested the extension, according to Pork Magazine.

Edward Avalos, Under Secretary for Marketing and Regulatory Programs, issued a letter stating that the proposed rule "seeks to improve fairness and transparency" and "also seeks to address concerns raised by thousands of producers across the country that have called on USDA for decades to evaluate deceptive and anticompetitive practices in the market."  He then recognizes that there have been misunderstandings about the contents of the proposed rule, stating that this "rule does not limit or prohibit marketing agreements, the use of premiums, or other value-added activities."  He continues, "The rule does not require anyone to do business with any particular person or require packers to pay all producers the same price."  To read the full text of the letter, click here.

Avalos also issued a document containing a list of misconceptions and individual explanations.  The first issue addressed, and also the most detailed explanation given, dispels fears on the competitive injury issue.  The explanation states that the "proposed rule embraces the concepts of competitive harm and likelihood of competitive harm in certain circumstances; the proposed rule states that whether proof of harm or the likelihood of harm to competition is necessary depends on the nature and circumstances of the challenged conduct."  The explanation continues, stating that if the matter deals with "practices that could cause competitive harm, such as manipulation of prices, the producer would need to show harm or the likelihood of harm to competition."  If, however,  "a producer filed a claim on matters that do not involve competitive harm, such as retaliatory conduct, using inaccurate scales, or providing a grower sick birds, proof of competitive injury or the likelihood of competitive injury would not apply."

Other misconceptions addressed include marketing agreements, packer to packer sales, return on production contracts, premiums, and privacy issues related to contracts.  The full text of the misconception/explanation document is available here. 

The National Cattlemen's Beef Association (NCBA) and the American Farm Bureau Federation (AFBF) petitioned for the 120 day extension, but applauded the USDA's 90 day extension of the comment period, according to Feedstuffs.

For the full text of the proposed rule, click here.
To read the USDA press release, click here.
To read the Pork Magazine story, click here.
To read the Feedstuffs story, click here.

Posted: 07/27/2010

GIPSA Publishes Proposed Rules

Today, the Grain Inspection, Packers and Stockyards Administration published proposed rules as required by the 2008 Farm Bill.  The proposed rules would add "several new sections" to the regulations under the Packers and Stockyards Act of 1921, 7 U.S.C. §§ 181-229.  The purpose of the Packers and Stockyards Act (P&S Act) is "to assure fair competition and fair trade practices, to safeguard farmers and ranchers ... to protect consumers ... and to protect members of the livestock, meat, and poultry industries from unfair, deceptive, unjustly discriminatory and monopolistic practices."

According to the summary of the proposed rules, the new regulations would "describe and clarify conduct that violates the P&S Act and allow for more effective and efficient enforcement by GIPSA.  The proposed regulations would clarify conditions for industry compliance with the P&S Act and provide for a fairer market place."

The proposed regulations would add several definitions to section 201.2.  The proposed definitions include:

• "Capital investment" is defined as "any initial capital investment of $25,000 or more paid by a grower for growing and raising facilities.  Such term includes the the total cost of equipment, goods, plus any increased labor and operating costs that are directly attributable to the capital investment."
• "Additional capital investment" is defined as "a combined amount of $25,000 or more paid by a grower or swine production contract grower beyond the initial investment for growing and raising facilities by the grower to make a capital improvement to the raising or growing facility ..."
• "Likelihood of competitive injury" is defined as "a reasonable basis to believe that a competitive injury is likely to occur in the ... marketplace.  It includes but is not limited to situations in which a packer swine contractor, or live poultry dealer raises rivals' costs; improperly forecloses competition in a large share of the market through exclusive dealing; restrains competition ...; or represents a misuse of market power to distort competition...  It also includes situations in which a packer, swine contractor, or live poultry dealer wrongfully depresses prices paid to a producer or grower below market value, or impairs a producer's or grower's ability to compete ... or to impair a producer's or grower's ability to receive the reasonable expected full economic value from a transaction in the market channel or marketplace."

The proposed rule also outlines examples of "unfair, unjustly discriminatory and deceptive trade practices or devices" in section 201.210.  Section 201.212 prohibits packers from purchasing, acquiring, or receiving "livestock from another packer or another packer's affiliated companies, ..."  Section 201.213 requires a "sample copy of each unique type of contract or agreement" be submitted to GIPSA for publication.

Section 201.214 requires that if a "tournament system" is used, the live poultry dealer must pay all growers raising the same type of poultry the same base pay, the pay many not be decreased below the base amount, and live poultry dealers must rank growers in groups with other growers having similar housing or facilities.  Section 201.215 outlines criteria for determining "reasonable notice" for the suspension of delivery of birds.

Section 201.216 outlines "capital investment" criteria to determine whether there is a violation of the P&S Act and section 201.217 discusses requirements and prohibitions when capital investments are required.  Section 201.217 states that if a contract requires a grower to make an initial or additional capital investment, it "must be accompanied by a contract duration of a sufficient period of time for the poultry grower or swine production contract grower to recoup 80 percent of the cost of the required capital investment."

Section 201.218 outlines criteria for determining whether the grower has been given a "reasonable period of time to remedy a breach of contract that could lead to contract termination."  Additionally, section 201.219 outlines criteria for determining whether the arbitration process described in a contract "provides a meaningful opportunity" for the grower or producer to "participate fully in the arbitration process."

GIPSA will consider comments on the proposed rules until August 23, 2010.

For the full text of the proposed rules, click here.
For more information of the Packers and Stockyards Act, click here.
For more information on GIPSA, click here.

GIPSA to Publish Proposed Rule

Secretary Vilsack announced that the Grain Inspection, Packers and Stockyards Administration (GIPSA) will publish a proposed rule "that would provide new protections for producers against unfair, fraudulent, or retaliatory practices."  The proposed rule will be published on June 22, 2010.  

The proposed rules were required by the 2008 Farm Bill to improve fairness in the livestock and poultry industries.  "Many of the concerns in the rule were raised during the dozens of Administration Rural Tour stops attended by Secretary Vilsack last year and the joint USDA-Department of Justice Competition Workshops held this year."  Some of the concerned voiced at the meetings "were related to increasing consolidation and vertical integration in the livestock and poultry marketplace, and shrinking farm numbers."

Some of the protections in the proposed rule will include definitions of practices that are unfair, unjustly discriminatory, or deceptive, retaliatory, fraudulent or misleading representations, and undue or unreasonable preferences or advantages.  The rule will include "new protections for producers required to provide expensive capital upgrades to their growing facilities, including protections to ensure producers have the opportunity to recoup 80 percent of the cost of a required capital investment."  The rule will also prohibit packers from purchasing or receiving livestock from other packers.  In addition, the rule will state the USDA's position that producers do not need to prove "harm to competition" when they have suffered violations of the Packers and Stockyards Act.  

Secretary Vilsack, in an interview with the Associated Press, stated that "it's fair to say what we're proposing is aggressive.  The reality is, the Packers and Stockyards Act has not kept pace with the marketplace ... Our job is to make sure the playing field is level for producers."

The proposed rule will be open for comment until August 23, 2010.

To read the USDA Press Release, click here.

To read the AP story, click here.

Posted: 06/21/2010