US - When farmers thought regulations couldn’t get more difficult, the USDA began moving forward with new rules that will likely impact contracts and litigation, writes Rachel Lane.
The Grain Inspection, Packers and Stockyards Administration, GIPSA, is part of the United States Department of Agriculture (USDA). In the 2008 Farm Bill, congress outlined five things the members wanted the USDA and GIPSA to address.
“In 2010, the USDA proposed rules to implement those five provisions. It went well beyond what congress asked for,” said David Warner, director of communications for the National Pork Producers Council.
As a result, several of the new provisions were never funded by congress. Congress added a rule in the budget that prevented the USDA from funding the provisions.
In the 2016 Farm Bill, however, congress didn’t add the stipulation not to fund the programmes and the USDA started working on updated versions of the Farmer Fair Practices Rules.
Two proposed rules and one interim final rule were passed along for approval to the White House Office of Management and Budget. If approved, the rules will be released for public comment.
The interim final rule will become immediately enforceable, but public comments might cause the USDA to make changes, Warner said. This rule has the largest potential to cause trouble in the industry.
No one outside the USDA has seen the final versions of the rules, but USDA secretary Tom Vilsack released a letter giving an overview of the rules. Based on what was presented in 2010, pork, beef, and poultry farmers are worried.
Why are some farming organisations concerned?
Mr Warner summarised his concerns by saying the interim rule would allow farmers to sue in federal courts anyone that has shown undue preference to other farmers or practices that harm the farmer.
Currently, the stockyard and packers rule has been understood to require harm to a competitive marketplace, not an individual, Mr Warner said. Individual farmers, however, can take similar cases to court at the state level.
“So much of what the government does has unintended consequences,” Warner said. “The Packers and Stockyard Act is supposed to protect competition, not individual farmers.”
At the moment, most hog growers have contracts with companies. The companies own the hogs and the feed, tell the farmer how to care for the animals. Mr Warner said the contracts guarantee the farmers a specific income and the companies to a certain quality in the animal.
With the new rules, opening up the companies to more lawsuits, Mr Warner said the companies may decide they don’t want to contract out the work anymore and will have farms owned by the companies and farmers who are company employees raise the animals instead.
Tom Super, vice president of communications for the National Chicken Council, NCC, said his farmers aren’t interested in having government interfere with their contracts.
“The proposed GIPSA rules would impose rigid, one-size-fits-all requirements on chicken growing contracts that would stifle innovation, lead to higher costs for consumers and force the best farmers getting out of the chicken business,” Mr Super said.
“Most of all, some of these provisions would have a detrimental impact on the welfare of the birds by eliminating competition and the incentive to provide the best care possible on the farm.”
Joel Brandenberger, president of the National Turkey Federation, said he has had concerns from the beginning. “However noble the intentions might be, this is rule-making that is just ripe with possibility to have unintended consequences,” he said.
Hope for modernisation
Allan Sents, marketing chairman for US Cattlemen’s Association, said it’s hard to judge when the specific haven’t been released but he’s glad the process is moving forward and something is being done. “Hopefully, it’ll modernise some regulations,” he said.
Some of the issues he would like to see addressed are the undue preference, allowing farmers another avenue of protection in the legal system, and defining terms used in the rules, like undue preference.
“In 2010, a lot of that opposition came from the packers interest that bad-mouthed the entire deal,” he said. "Many producers, out of fear, either didn’t speak out at all or sided with the packers."
He said about 60,000 comments were made during the public comment period in 2010. Many of those comments complained about the rules but didn’t offer any suggestions on how to fix the problems in the rules.
“Cattle organisations and packers could have worked together to fix the language,” he said. “Instead, they were just against the rule.”
He said the cattle market’s biggest concern right now is the market price. He said the new rules might help shift leverage at the market from the packers to the producers.
“It is our hope that something is done to modernise the Packers and Stockyard Act, to keep a competitive marketplace that doesn’t show undue preference to one producer,” Mr Sents said. “We’re trying to represent the grass roots type farmers.”
Chase Adams, with the National Cattlemen’s Beef Association, said he knows what the rules are trying to do, protect farmers, but the rules are more likely to limit options for farmers.
A part of the rule, as written in 2010, took away the ability to pay farmers a premium for products like Angus beef or grass-fed cattle. Mr Adams said not having premium programmes would limit the choices customers have and limit advancement in the market because there is no incentive to do something different.
“We see this as a government solution looking for a problem. Right now, we don’t have a problem with marketing,” Mr Adams said.
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