Supreme Court rules raisin program is "unconstitutional"

Posted June 23, 2015

In a 8-1 vote, the Supreme Court denied a raisin price-support program that dates back to the New Deal, ruling it unconstitutionally requires growers to surrender their crop to the government for future sale, according to The Wall Street Journal article available here. USA Today also published an article available here and Reuters here.

The federal program violates the Fifth Amendment prohibition of taking private property “for public use without just compensation,” according to Chief Justice John Roberts.

While the government can regulate production in order to keep goods off the market, the chief justice said it cannot seize that property without compensation, according to USA Today.

"Selling produce in interstate commerce ... (is) n ot a special governmental benefit that the government may hold hostage, to be ransomed by the waiver of constitutional protection," Roberts said. "Raisins are not dangerous pesticides; they are a healthy snack."

The raisin program was defended by the Obama administration as a win-win proposition. Prices remain high for farmers, and their excess raisins can be donated to school lunch programs or sold overseas. If profits exceed administrative costs, the farmers share in the excess.

Justice Sonia Sotomayor, the sole dissenter, said a court precedent requires that "each and every property right be destroyed by governmental action" before a taking has occurred. The program, she added, "does not deprive the Hornes of all their property rights," according to Reuters.

The Hornes came up with a plan to circumvent the program by packing and marketing their own raisins in a move they said would make them exempt from it. The government disagreed and sanctioned the Hornes for the 2002-2003 and 2003-2004 seasons.

Chief Justice John Roberts said the government should pay the Hornes the market value of the raisins and relieve them of the fine that was imposed. The total value is around $700,000.

The Hornes' constitutional challenge to the program has lasted a decade and previously led to another Supreme Court case they won in 2013.

The case is Horne v. U.S. Department of Agriculture, U.S. Supreme Court, No. 14-275.

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

Arkansas Farmers Suing Turner Grain

Posted August 21, 2014

On Monday, a group of farmers sued Turner Grain Merchandising Inc. for fraud, according to an Arkansas Business article by Mark Friedman available here. Arkansas Matters also published an article available here.

The farmers said they possessed commodity contracts to sell grain to Turner, and Turner has not paid them for their products or the received checks did not clear.

However, Turner has already sold the grain to a third party.

Based on farmer reports, Turner Grain was a middleman. Turner reached out to large buyers such as Tyson who would then set a price and a quantity of grain they were willing to purchase, which is process known as booking. Farmers use this process to eliminate risks by securing a price, according to Arkansas Matters.

It is speculated that Turner Grain may have extended its operations with some farmers by actually purchasing the grain and waiting for a buyer to connect with, which increases the price risk.

Farmers are worried whether or not their contracts are valid.

"Whenever you get this far in the year and somebody tells you your contracts aren't any good, it's scary," Justin Higgins of Marianna said. "If I hadn't booked my crops early, I would have to be selling it a dollar short today from what I had booked it at. A dollar might not sound like much, but you start multiplying that by thousands of bushels, and it can turn into $100,000. I don't know anyone who $100,000 wouldn't be a lot of money." 

If contracts are not valid or there is not anyone to buy it at the previously agreed price, farmers could be facing those devastating losses.

The farmers are also seeking an unspecified amount of damages for several counts including breach of contract, conversion, and negligence, according to Arkansas Business.

GIPSA Releases Final Rule on Weighing; Feed and Swine Contractors

Posted August 26, 2013

USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA) has released a final rule on “Weighing; Feed and Swine Contractors” according to the Federal Register notice, available here. 

The final rule amends regulations issued under the Packers and Stockyards Act of 1921 “to ensure that payments by live poultry dealers and swine contractors to poultry and swine production contract growers are based on accurate weighing of both inputs and outputs.”  Specifically, GIPSA is amending: a regulation about scale tickets to reduce redundant wording and to clarify weighing procedures, a regulation about reweighing to add swine contractors to the list of firms that must comply, and adding feed to the list of items for which reweighing may be requested.

The final rule also amends two other regulations about weighing livestock and poultry to add weighing processes for feed, to add a specific time limit for weighing poultry, and to add swine contractors to the list of firms that must comply with care and promptness requirements.

The effective date for the final rule is September 20.

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

Supreme Court Rules that Agricultural Marketing Agreement Act of 1937 Withdraws Tucker Act Jurisdiction; Takings Claim Can Be Raised as Affirmative Defense in USDA Enforcement Proceeding

Posted:  June 11, 2013

 

In action involving a constitutional challenge to the California Raisin Marketing Order under the Agricultural Marketing Agreement Act of 1937(AMAA), 7 U.S.C. §§ 701-714, §§ 671-674 Horne v. United States Dep’t of Agric., No. 12-123, 2013 WL 2459521, -- S. Ct. – (June 10, 2013), the United States Supreme Court held in Horne v. United States Dep’t of Agric., No. 12-123, 2013 WL 2459521, -- S. Ct. – (June 10, 2013) that the AMAA withdrew Court of Federal Claims jurisdiction arising under the Tucker Act.  The Court further held that the petitioners’ takings claim could be raised as an affirmative defense against the USDA’s enforcement proceeding against them.  In so holding, the Court reversed the decision of the United States Court of Appeals for the Ninth Circuit and remanded the matter to the Ninth Circuit for further proceedings consistent with its opinion.

In 2004, USDA brought an enforcement action against Marvin and Laura Horne, et al., (hereinafter petitioners) that alleged that the petitioners were “handlers” under the raisin marketing order and that they had failed to comply with several requirements under the order.  The petitioners asserted, inter alia, that they were not “handlers” and, therefore, excluded from coverage of the marketing order.  In addition, the petitioners argued that the marketing order violated the Fifth Amendment of the U.S. Constitution as a taking without just compensation.

 

In 2006, an Administrative Law Judge (ALJ) held that petitioners were “handlers” under the AMAA and that they had, as alleged by  USDA, violated several marketing order requirements.  The ALJ rejected the petitioners’ takings claim as well.  On appeal, a Judicial Officer affirmed the decision that the petitioners were handlers, but declined to render a decision on the petitioners’ takings claim.  The matter was appealed to federal district court where it was held that the petitioners were handlers and that the marketing order did not constitute a takings.  

On appeal, the Ninth Circuit affirmed the federal district court ruling that the petitioners were handlers.  The Ninth Circuit further held that when a handler raises a takings claim against marketing orders promulgated under the AMAA, the Court of Federal Claims jurisdiction under the Tucker Act is removed by the AMAA.  Interestingly, however, the Ninth Circuit determined that the petitioners were “producers” – instead of handlers – for purposes of their takings claim and, therefore, there was nothing in AMAA that prohibited the petitioners from raising their takings claim in the Court of Federal Claims.  And, on that basis, the Ninth Circuit held that the petitioners’ takings claim was not ripe for adjudication.

In reaching its decision, the Supreme Court stated the following:

Under the AMAA's comprehensive remedial scheme, handlers may challenge the content, applicability, and enforcement of marketing orders. Pursuant to §§ 608c(15)(A)-(B), a handler may file with the Secretary a direct challenge to a marketing order and its applicability to him. We have held that “any handler” subject to a marketing order must raise any challenges to the order, including constitutional challenges, in administrative proceedings. See United States v. Ruzicka, 329 U.S. 287, 294, 67 S.Ct. 207, 91 L.Ed. 290 (1946). Once the Secretary issues a ruling, the federal district court where the “handler is an inhabitant, or has his principal place of business” is “vested with jurisdiction ... to review [the] ruling.” § 608c(15)(B). These statutory provisions afford handlers a ready avenue to bring takings claim against the USDA. We thus conclude that the AMAA withdraws Tucker Act jurisdiction over petitioners' takings claim. Petitioners (as handlers) have no alternative remedy, and their takings claim was not “premature” when presented to the Ninth Circuit.

The Court further held that “[a]lthough petitioners' claim was not 'premature' for Tucker Act purposes, the question remains whether a takings-based defense may be raised by a handler in the context of an enforcement proceeding initiated by the USDA under § 608c(14). We hold that it may.”

 

Growers at odds over Tyson verdict

A recent McCurtain County, Oklahoma jury award of $7.3 million dollars to contract poultry growers for Tyson Foods has left some contact growers in McCurtain County divided over whether the suit is good or bad for growers, writes Randy Ellis for NewsOK online.

Some growers think the verdict was long overdue, arguing the poultry giant treats its contract growers like "'indentured servants,"' while other growers maintain that Tyson is the reason they are able to make money raising chickens.

The sentiment in the county seems to reflect the sentiment of the jury. The decision against Tyson was 9-3 and 10-2 on damages awarded to the individual growers. Jury foreman James Doyle believes the majority of the jurors found the growers' testimony more convincing than the witnesses put forward by Tyson.

Ellis reports that the "jury found Tyson guilty of deceptive trade practices, including failing to disclose that growers would not receive a fair return on investment." Tyson is planning to appeal.

Tyson is very much a part of McCurtain County's economic backbone. The company employs almost 1,100 residents, and its operations at Broken Bow "produce an annual economic benefit of $75 million [,]" reports Ellis. With more companion fraud trials between the company and McCurtain County growers upcoming, the company has stated it is "'concerned about the legal climate in McCurtain County' and was 'was assessing all options[.]"'

To read the Ellis article, click here.
To read a previous US Agricultural & Food Law and Policy Blog post on the case, click here.

Posted: 04/14/10

Justice and Agriculture Department workshops on competition start this week

This week the Des Moines, Iowa suburb of Ankeny will play host to the first workshop jointly held by the Department of Justice (DOJ) and the US Department of Agriculture (USDA) that will take a look at consolidation and competition in agricultural industries.

As Christopher Leonard of the Associated Press reports, many in the industry believe that this workshop will provide insight into the seriousness of the Obama administration in taking on consolidation and competition issues in agriculture. Administration officials believe the meeting on Friday will provide those interested in these issues, from attorneys to regulators, "their first chance to work side-by-side and examine the concentration of power in rural America."

Farmers are certainly interested in what will come out of the workshops to see if their "long-standing complaints" about big business drowning out smaller operations is actually addressed, or if the meetings are mere "political theater." Leonard quotes Tara Smith, the director of congressional relations for the American Farm Bureau Federation, as stating, '"This is certainly a much brighter spotlight than we've seen in the last 10 years [.]"'

Christine Varney, the head of the DOJ's antitrust division has complained that the previous administration was too hesitant to act when concerns over concentration were raised. Varney hopes to change this perception and believes vertical concentration in the market is worth taking a closer look at.

USDA Secretary Vilsack will be joining Varney at the workshops. Vilsack hopes what they hear and learn will yield "policies to foster competition in agriculture, rather than scattered enforcement actions." Additionally, Vilsack stated that if the competition practices are fair, then the government will take no action. It is their hope not to stifle large agricultural business operations, but to create a level playing field.

For their part, as Leonard reports, industry groups do not believe consolidation in the industry leads to price fixing or a lack of competition." The American Meat Institute has filed testimony in which they argue that companies have become consolidated because government regulations require large monetary investments that lead to the merger of companies in order to afford the costs of regulations.

Regardless, both sides, in theory, now have an audience to air their views on the issues. There will also be four other meetings following the meeting in Iowa.

To read the AP article by Leonard, click here.
To read previous US Agricultural & Food Law and Policy Blog Post on the announcement of the workshops, click here.

Posted: 03/08/10

New York State Legislature Considers Farm Labor Bill

The New York State Assembly and Senate have legislation before their respective bodies, Assembly bill 1867 and Senate Bill 2247, that expands the rights of farm laborers, and at the same time has pitted agricultural interests against each other.

As Tom Rivers reports for the Daily News online, one side argues the bill puts in place rights for farm workers that some consider long overdue. The rights include giving farm workers overtime pay for working more than 10 hours in a day or 60 hours in a week. Jordan Wells, who is a coordinator of the Justice for Farmworkers campaign says the bill puts in place basic rights and claims the bill is a work of compromise as it includes “feedback from the New York Farm Bureau.”

However, the New York Farm Bureau (NYFB) has a different opinion of the legislation than that of Mr. Wells. The NYFB claims the legislation would put New York farmers and agriculture at a “competitive disadvantage” with neighboring states and Canada. Julie Suarez is the public policy director for the NYFB, and she stated to Rivers that ‘"If this passes we won't be producing things like fruits and vegetables in New York State . . . We'll be doing wheat and oats that can be machine-harvested."

This bill is not new to the New York legislature. The bill was presented and rejected “several times last year [.]” However, Wells is hopeful that the new changes to the bill will lead to its passage, though he is not prepared to make any predictions.

Among the changes to the bill from previous measures, the legislation would not be implemented until 2011 if it passed in 2010. Collective bargaining rights for farmworkers would only be available to workers on farms that have sales exceeding $500,000. Wells claims this exempts 95 percent of agriculture. Additionally, the overtime provision has been changed from 8-hour days to 10-hour days and 40-hour weeks to 60-hour weeks, and on a seventh consecutive day of work before time-and-half pay would kick in. There are also changes on unemployment tax liability wages for guest-workers that could save farmers $1 million, according to the Justice campaign. There will also be exemptions for small farms.

Still, the NYFB is not yet on board. Dean Norton, the NYFB president argues the bill will add $200 million in mandates to farmers and will hurt the Long Island and upstate economies. The NYFB also claims that if the bill passed only California would have stronger farm labor laws.

Other organizations have joined the NYFB in opposing the bill, including Farm Credit East, which conducted a study on New York farm labor costs, based upon the 2007 Census of Agriculture. Farm Credit East found that “New York farmers paid $13.82 for every $100 of production, or 56 percent more than the U.S. average of $8.88.”

To read the Rivers article, click here.

To visit the National Agricultural Law Center's reading room on Farm Labor, where you can find case law and statutes on the issue, click here.

Posted: 1/19/10

Monsanto Legal Battles in the News

Monsanto Co. is getting a lot of attention from federal courts these days, and the news is following the agricultural giant’s courtroom fights.

First, Reuters is reporting that despite the US government’s opposition, the United States Supreme Court said on Friday, January 15, 2010 that the High Court will hear Monsanto’s appeal of an earlier ruling that prevented the company from selling genetically modified alfalfa seed until an environmental review is conducted.

The Supreme Court will be reviewing a ruling issued by a U.S. appeals court in California. That court upheld an earlier injunction barring Monsanto from selling alfalfa seeds that are resistant to roundup, which is why they are called Roundup Ready seeds, until “the federal government finished an environmental impact study on how the Roundup Ready seed could affect nearby crops.”

The seed did originally receive approval by the US Department of Agriculture (USDA) back in 2005. This led environmental groups and “conventional seed companies, led by Geertson Seed Farms,” to sue the USDA in February 2006. Monsanto intervened on the government’s side in the lawsuit.

Monsanto received support in its appeal to the Supreme Court from agricultural industry trade groups like the American Farm Bureau Federation, the Biotechnology Industry Organization, the American Seed Trade Association, and the National Corn Growers Association. The Supreme Court expects to hear arguments in April. Justice Stephen Breyer did not take part in considering the case as his brother is the federal judge in California that ruled on the lower court injunction in the case.

In other legal news, Reuters is also reporting that Monsanto is claiming victory over rival DuPont after a federal court ruled in Monsanto’s favor and found that DuPont violated a licensing agreement “in trying to combine certain genetic seed traits developed by Monsanto with its own [,]” writes Reuters’s Carey Gillam.

For their part, officials with DuPont argue the decision was ‘“narrow’” and will allow DuPont to continue with its anti-trust allegations against Monsanto. Gillam quotes DuPont spokesman Doyle Karr as stating, ‘“We’re going to move ahead because the case isn’t over yet [.]”’

This case started in May, 2009, when Monsanto sued Pioneer Hibred International, DuPont’s agricultural “unit.” Monsanto claims that DuPont was exceeding the scope of their licensing agreement because they were combining Monsanto’s Round Ready “genetic trait with DuPont’s Optimum GAT genetic traits in corn or soybeans.”’ Monsanto believes DuPont was going to use their product’s genetic traits to cover up any problems with DuPont’s product.

Scott Partridge is chief deputy general counsel for Monsanto, and he states in the Gillam story that ‘“The court ruled that the Monsanto-DuPont license agreements ‘are unambiguous and do not grant Pioneer the right to stack’” the two genetic traits from the two different products.

DuPont did counter-sue Monsanto last year. DuPont argued Monsanto was illegally acting to control the agricultural seed market by limiting competition. Monsanto is the largest player in the seed market. Gillam reports that “[a]mong other things, DuPont and others have specifically alleged that Monsanto has been trying to limit availability of its Roundup Ready gene, which comes off patent in 2014, as it pushes it second-generation, patented "Roundup Ready 2 Yield" genetic trait into the marketplace.”

The Justice Department is now involved in the allegations.

To read the Reuters article on the Monsanto alfalfa case click here.
To read the Reuters article on Monsanto and DuPont, click here.

Posted: 01/19/10

GIPSA final rule coming for transparency and equity in the poultry market

US Department of Agriculture (USDA) Secretary Tom Vilsack announced “that USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA) will publish a final rule tomorrow to increase fairness and equity in the poultry industry by amending regulations under the Packers and Stockyards Act of 1921 to provide poultry growers with new information and improve transparency in poultry growing arrangements.”

Secretary Vilsack issued this statement in the department’s news release, ‘“The Obama Administration is committed to ensuring that the marketplace for our farmers and ranchers is free from unfair and deceptive practices. . . This new rule will provide much-needed information and basic protections for poultry growers that will enable them to make better business decisions and safeguard their livelihood.”’

The new regulations will require contract growers be given a written copy of a growing arrangement in a “timely manner.” The arrangement must include “information about any Performance Improvement Plans and provisions for written termination notices of the arrangement. And, notwithstanding confidentiality provisions, the rule allows growers to discuss the terms of poultry growing arrangements with designated individuals.” The rule was first published August 1, 2007.

“Failure to disclose certain terms in a poultry growing arrangement constitutes an unfair, discriminatory, or deceptive practice in violation of section 202 (7 U.S.C. 192) of the Packers and Stockyards Act.” The rule will become effective on January 4, 2010.

The rule can be found here.
To read the USDA news release click here.

Posted: 12/02/09

Update: Former Tyson Executive Takes Stand in Poultry Case

In the latest update in a case this blog has been posting about since its inception, Justin Juozapavicius with the Associated Press reports that former Tyson director of environmental agriculture (until he left the company in 2005) Preston Keller faced questions of whether or not the company cared more about its public image “than protecting a million-acre watershed from environmental pollution,” as claim attorneys for the state of Oklahoma.

Keller is the first current or former executive of the eleven poultry companies being sued by the state over the pollution of the Illinois River watershed to take the stand. Oklahoma alleges the practice of using excess bird litter as a fertilizer on farms near the some 1,800 poultry houses that dot the watershed’s landscape on both the Arkansas and Oklahoma side of the Illinois River lead to pollution of the watershed and put the state’s citizen’s health in jeopardy—violating both state and federal law.

The companies maintain that their contract growers in the watershed have not broken any laws because they received permits from both Oklahoma and Arkansas “to spread the waste as an inexpensive fertilizer on fields or sell it to other farmers.” State attorney Louis Bullock showed a PowerPoint presentation made by Tyson in which the company emphasizes its main concern is maintaining a positive public image. The state alleges the company cared little, if any, about issues of environmental protection from poultry waste as long as the public thought it did. Keller testified Tuesday that, ‘“Obviously, if we’re viewed as pursuing the right thing, we’d be better perceived [.]”’

Oklahoma argued to U.S. District Judge Gregory K. Frizzell, who is hearing the non-jury case, that in the reality of contract-grower poultry production the company owns the birds from birth to processing, so “they also own the waste that comes with them.” And presumably this would make them responsible for disposing the waste. The companies argue the “waste is the responsibility of their contract growers.”

Keller’s testimony on Tuesday was the sixteenth day of what Juozapavicius labels a “sprawling trial, which began in September.” The case has been ongoing, in some form, for years with plenty of significant developments over that time.

To read the Juozapavicius article for the AP click here.

Posted: 11/04/09

Justice Brings Antitrust Questions to Monsanto

Lauren Etter is reporting for the Wall Street Journal online that Monsanto Co. “said Thursday that it has received request from the U.S. Department of Justice (DOJ) ‘in recent month’ over whether or not the seed giant has violated antitrust laws.

The St. Louis-based company is the biggest manufacturer of genetically modified seeds farmers use survive through droughts and fight off pests. This look into Monsanto’s operation, according to the DOJ, could be part of a larger effort of the department “to scrutinize competition in many sectors of agriculture industry, including seeds, dairy, and meat.”

Some regular readers may remember that a time back the DOJ and the U.S. Department of Agriculture (USDA) announced they were going to host a serious of workshops across the nation and competitiveness issues would be something they were going to examine. While it appears only one such workshop has been held, Christin Varney, chief of the DOJs antitrust division is committed to looking into competition issued in agriculture. For their part, Monsanto maintains the inquiry is business as usual.

Over the years Monsanto has acquired other companies, some of them competitors, and because of some of these acquisition, the company has also had to divest itself of some its own business. Right now Monsanto is involved in a patent-infringement lawsuit against DuPont, who, for their part have filed a counterclaim “that alleges Monsanto has waged an anti-competitive campaign to win market share.”

We have the two branches of the government and two major companies all looking into each others’ work. Interesting.
To read the post about the DOJ joining up with the USDA click here.
To read Lauren Etter’s report for the Wall Street Journal click here.

Posted: 10/09/09

Dairy Farmer Anger on Display in Europe

Much like some of their
American contemporaries, dairy farmers in Europe are growing increasingly frustrated over the low milk prices. Yet, the actions dairy farmers have taken to express their frustrations is quite different from the lobbying being done by the dairy industry in the United States. The anger has about boiled over, and so today, in an act of protest, dairy farmers watered fields in Belgium with roughly 3 million liters of fresh milk.

This is just another step dairy farmers have taken to express their frustration and protest the current pricing situation. According to a story in Reuters, farmers have previously blocked deliveries, held back supply, and thrown away millions of liters of milk. The farmers blame the European Commission and local governments for “what they argue is a failed liberalization and milk quota system.”

According to the story for Reuters, in 2007 dairy experienced a price spike, but following this spike prices dropped dramatically for dairy around the globe. In Europe prices have fallen to roughly 20 (euro) cents per liter. “Most farmers say about 40 cents per liter is needed to cover costs and generate a basic revenue.”

“Leaders of the protests say they want the European Union to freeze planned increases in production quotas and on Wednesday they demanded the creation of a pan-European institution to regulate the demand and supply of milk.” Further, the protesting farmers would like to see a monitoring agency created which would have all the milk market stakeholders represented (farmers, consumers, and politicians).

Not all European dairy farmers remain supportive of the protests. Following an agreement reached on July 20 in Spain, in which the producers, wholesalers and government agreed to use “collective agreements to buy milk at indexed prices,” leading farm unions called off protests.

Still, despite today’s actions, and the other acts of protest before it, the European Commission, the body in charge of farm policy for the 27 Union members denies the current system is to blame for the low prices. The quota system is set to expire in 2015.

To read the story in Reuters, click here.

Posted: 09/16/09

More Dairy Pricing News

Yesterday, this blog did a post on the ongoing antitrust lawsuit between several dairy farmers and dairy co-ops. Now, the United States Senate is starting to look into the issue of dairy prices with a little more vigor. Yesterday Senate Democrats “said they would investigate whether a few companies are monopolizing the dairy industry and keeping retail milk prices high, even as struggling farmers cope with falling revenue.”

According to New York Senator Charles Schumer, ‘“dairy farmers are in the worst shape I’ve ever seen.”’ The Senator is concerned that without providing the farmers with some immediate financial assistance then several farms will ‘“ . . . go under[.]”’ In 2007, dairy prices were $21.70 per hundredweight, according to Jennifer A. Dlouhy’s article for the Houston Chronicle. Now farmers are getting less than $12 per hundredweight. This is a bad reality for dairy farmers as one financial services firm estimates it cost more to produce a hundredweight of milk (roughly $17.58) than the farmer can hope to recover at the market.

This is why Senator Patrick Leahy (VT), Chairman of the Senate Judiciary Committee, plans to hold a field hearing this coming Saturday in St. Albans, VT to look into ‘“the state of competition . . . in the Northeast dairy industry [.]”’ Officials from both the Justice and Agriculture Departments will testify. Specifically, Leahy is interested in the disparity between what milk costs at the store (roughly $3 a gallon) and what farmers are being paid. Leahy is also concerned that anti-competitive actions might be behind the disparity, and he is concerned by ‘“the fact that the market is controlled by a couple of monopolies . . .” Dallas-based Dean Foods Co., may end up being one of the top targets of any hearings, just as the company is major part of the antitrust lawsuit.

Congress and the government have taken some steps, as of late, to try and provide some relief to the struggling dairy farmers. For instance, US Department of Agriculture Secretary Tom Vilsack “temporarily increased the amount the government pays for nonfat dry milk and cheddar purchased through its Dairy Product Support Program — an increase that will cover August through October.” Additionally, last month the Senate voted for a measure that provides an additional $350 million to the Dairy Product Support Program, but similar language was not a part of the House’s bill. Regardless, Senator Bernie Sanders (VT) and Schumer said they will push to keep the measure intact during negotiations on a compromise bill.

To read the Houston Chronicle article click here.

Posted: 09/16/09

Dairy Antitrust Lawsuit Moving Forward

Last week, U.S. District Judge J. Ronnie Greer heard arguments from attorneys on issues of disclosure of confidential information and granting class-action status to the plaintiffs of an antitrust lawsuit that is being brought by several dairy farmers against dairy co-ops, including Dairy Farmers of America and Dean Foods Co.

Farmers from as far away as Clinton, Arkansas traveled to Greeneville, Tennessee to ‘“ . . .see justice done,”’ according to Tonya Kuny of Wellsland Dairy. The antitrust case was first filed in February of 2006. In 2007 it was updated to add more plaintiffs. While the case involves Southeastern dairy farmers, the precedential impact from the case could affect the dairy industry nationwide.

According to Hugh G. Willett’s article for the Knoxville News Sentinel, the farmers brought the lawsuit to change the way dairy markets operate. As John Harrison, a dairy farmer from Loudon County, Tennessee stated, ‘“They’ve fixed the price of milk in the Southeast so that no one’s competitive anymore.”’ Harrison and other farmers are worried their operations will go under given the current market conditions. That is exactly what happened to Tonya Kuny of Clinton, Arkansas when her “60-year-old dairy recently went out of business after losing $3 million in the last year [.]”

Farmers argue that right now the price they are getting per hundred-weight does not cover their costs, noting that over the last couple of decades feed costs have risen by 40 percent and fertilizer is 200 percent more expensive. The Farmers believe the dairy industry is setting the price for milk to low for dairy farmers to maintain viability. John Campbell, an area farm management specialist for the University of Tennessee acknowledges that the current supply-and-demand situation is threatening dairy farms. While acknowledging that consolidation in the milk-process industry has reduced competition, supply and demand is still the biggest problem facing farmers in Campbell’s opinion.

Again, arguments last week focused on confidential information and class action status. The plaintiffs want class action status because of the number of plaintiffs there are ( “as many as 4,500 dairy farmers across the South”) and because the complaints are similar. For their part, the defense counters that each dairy farmer has an individual contract that is at issue and that “market forces have determined the pricing structure.” Judge Greer has decided to hear arguments in the case on December 10, 2009.

To read Willet’s article click here.

Posted: 09/15/09

Little Help For Farmers in MO Grain Fraud Hearing

Missouri farmers caught up in the in the Missouri grain fraud case got little relief last week, August 7, 2009, following an administrative hearing for the case.

According the Associated Press report, which can be accessed at CNBC.com, Deparment of Agriculture officals reported that the majoriy of the 180 farmers who lost roughly $27 million in the scheme will only receive payments equivalent to 2% of their total claims. State agriculture director John Hagler was dissapointed in the ruling, and stated in the AP article that "'This is a sad day for Missouri agriculture . . . Our farm economy is built on trust. when that trust is iolated, the entire communities are harmed."'

Cathy Gieseker is accused of operating the largest grain fraud scheme in Missouri history. She currently is facing 15 federal and state felony charges. Gieseker is a grain dealer and owns a trucking company in northeast Missouri.

Gieseker is accused of promising farmers returns between 50 and 100$ above the market through contracts, ultimately found to be non-existant, with Archer Daniels Midland Co. According to the Associated Press story Gieseker, "instead sold grain at spot prices and used proceeds from other grain sales to pay inflated prices to some farmers, the indictment alleges. Others earned nothing in what authorities call a classic Ponzi, or pyramid, scheme."

During the 30 minute hearing no testimony from affected farmers was taken. While it would not be enough to cover all the losses, additionaly money could be recovered from seizing Gieseker's assets. To read the AP story click here. To read a previous US Agriculture and Food Law and Policy blog post click here.

Posted: 08/10/09

Fifth Circuit Grants En Banc Review in Wheeler v. Pilgrim’s Pride

Last July, a three judge panel of the Fifth Circuit Court of Appeals ruling on a Packers and Stockyards case held that a plaintiff did not have to present evidence that the defendant’s conduct had an adverse effect on competition. To view a summary of the Wheeler decision, click here. This decision in Wheeler v. Pilgrim’s Pride Corp., 536 F.3d 455 (5th Cir. 2008) was counter to other circuits that had found the Packers and Stockyards Act requires a showing the defendant’s conduct had an adverse effect on competition.

This decision in Wheeler is now in doubt with the majority circuit judges voting in favor to rehear Wheeler en banc. To view a copy of the opinion granting the petition to rehearing en banc, click here.

Posted: 7/30/09

Trouble for the Other White Meat?

The two year slow down in pork demand has taken its toll on Tyson Foods Inc (Tyson). Both Reuters and the Wall Street Journal are reporting the company is set to sell five hog farms. This will reduce the company’s sow herd by 20,000 head, or roughly 30%. To see the Reuters story click here. To see the Wall Street Journal story here (must be subscriber). Seventy-six jobs in Arkansas, Missouri, and Oklahoma are expected to be lost as a result of the 10 week sale.

Tyson cited the high cost of grain, a reduced demand for pork, and a lack of capital for the sale. Though it cannot be contacted through pork consumption, the outbreak of the H1N1 influenza, or swine flu, may have played some role in the need for the sale. The Wall Street Journal’s Lauren Etter writes the USDA is reporting a 36% decrease in pork exports in May from the previous year.

Amidst the sow sale news, Tyson’s stock was up 38 cents Wednesday according to the Arkansas Democrat Gazzette’s Steve Painter. For Painter’s story click here.

Tyson Inc. will hold its third quarter earnings conference call on August 3, 2009 at 9 a.m. Eastern (8 a.m. Central). To listen to the live webcast, go to http://ir.tyson.com.

Posted: 07/16/09

Chicken Growers Make Losing Bet

The international outlook is grim: Russia and China, the chicken industry's two biggest foreign markets, are cutting back on their orders. And the national outlook is even worse. Consumers are cutting back on chicken purchases, and Pilgrim's Pride of Pittsburg, Texas, one of the country's largest chicken companies with $8.5 billion in sales last year, filed for Chapter 11 bankruptcy protection in December, at the same time that fuel prices were surging wildly, driving up the cost of chicken feed. The effect on chicken growers has been harsh and swift. According to the Los Angeles Times,

"Nationally, 800 to 900 chicken farmers have lost contracts since last fall, almost all of them in the South, said Gary McBryde, an economist with the Department of Agriculture. Chicken production is down 7% since April 2008, the National Chicken Council said."

Raising chickens on contract requires that the grower build expensive chicken houses, set to specific company standards In return for the estimated half of the capital that the farmers supply, they earn only 1% to 3% on their investments, versus more than 20% for integrators in boom times, according to the National Contract Poultry Growers Assn. When that contract is cancelled by the integrator, often with little notice, the house is useless. And with even the poultry federation predicting that the market for chickens won't recover until "at least next fall or winter," for many of those farmers, bankruptcy may be the only solution.

Posted: 4/17/09

Production Contracts

Subject Description: Agricultural production contracts are agreements between producers and contractors, typically agricultural commodity processors, that detail an arrangement for raising agricultural commodities. These contracts usually identify the production practices to be used, identify the party responsible for supplying the required resources, and specify the quantity, quality, and method of payment for the product. A number of legal and policy issues can arise under these contracts, and this subject area will focus on covering developments involving those issues.