By KEVIN WALKER
Michigan Correspondent FORT COLLINS, Colo. — Livestock groups hosted a press conference last week highlighting their opposition to proposed regulation.
This proposal, referred to as the GIPSA (USDA’s Grain Inspection, Packers and Stockyards Administration) livestock rule, was issued out of a mandate in the 2008 farm bill. The rule deals with poultry and swine contracts, arbitration use in contracts and establishes criteria for the USDA to consider in determining whether an undue or unreasonable preference or advantage has occurred in violation of the Packers and Stockyards Act.
GIPSA released its proposed rule on June 22. According to the National Cattlemen’s Beef Assoc. (NCBA), some of the provisions in the rule violate the spirit of the farm bill and will hurt producers, especially in the way cattle are marketed in the United States.
Concerning the proposed rule, GIPSA has been told by growers and producers – especially where contracts for the production or sale of livestock or poultry are involved – that producers are sometimes at a “distinct disadvantage” in negotiating the terms of a contract.
“These reports indicate that packers, swine contractors and live poultry dealers have exhibited a tendency to exert their disproportionate positions of power by misleading or retaliating against poultry growers, swine production contract growers or livestock producers, and that some growers or producers may have no choice but to acquiesce to the packer’s, swine contractor’s or live poultry dealer’s terms for entering into a contract or growing arrangement, or acquiesce to unfair conduct in order to continue in business,” the rule states.
It then proposes eight specific examples of conduct the GIPSA deems unfair. Some of the provisions involve requirements for more record-keeping and documentation.
For example, under the new rule it would be considered unfair to refuse to provide to a contract poultry grower or swine production contract grower, information and data used to determine compensation paid to the contract grower or producer, if they are requested. The information could include feed conversion rates, feed analysis, origination and breeder history.
National Pork Producers Council Sam Carney President said, “As I look at this rule, it’s going to put me out of business.”
NCBA President Steve Foglesong said of the proposed rule, “It’s not defined, it’s very vague. People don’t know what to do. As a producer, I’m very scared.”
In July statement, USDA Undersecretary of Marketing and Regulatory Programs Edward Avalos tried to provide some reassurance to stakeholders.
“I thought I would take this opportunity to provide some important explanations,” Avalos wrote. “This rule does not limit or prohibit marketing agreements, the use of premiums or other value-added activities. The rule does not require anyone to do business with any particular person or require packers to pay all producers the same price.”
Mark Legan, a pork producer from Coatesville, Ind., was also at the conference last week and testified. Legan said he’s concerned the new rule will negatively affect his ability to manage risk with production contracts. “I want to manage my risk and I can do that through marketing contracts,” he said. “Also, when we have periods of high production, I want to make sure I have a place to go with my pigs, that they can be killed.
“If we get back into another 1998 where we’ve got more pigs than we’ve got slaughter space, that really presents a challenge to people in the spot market. I think most independent producers today would rather be in the spot market than having a market contract, but here again it goes back to the idea of managing risk.”
Legan said he’s concerned the rule will negatively impact people who buy sows and cull breeding stock, and then resell them. He’s also concerned the rule will affect him negatively if he’s part of a marketing cooperative.
“I like having the ability to react to market signals,” he said. “I think all of the livestock industry has done an excellent job of producing a product that the consumer is wanting, and a lot of that has come about because of quality grades or incentives to produce that. If the GIPSA rule goes through, packers would have to document why they paid more for one type of pig or calf than another ...
“As you can imagine, I’m against government involvement as long as the markets are working, and I think they are working. I’m against burdensome paperwork in my business in the production and marketing agreements. All of these things have costs associated with them.”
Legan also said he’s concerned the rule will drive integration faster because integrators and packers might decide to own all of their pigs rather than deal with independent producers and contractors, out of a fear of litigation.
More on the proposed GIPSA rule is available online at www.GIPSA.USDA.gov |
