By MEGGIE. I. FOSTER
Assistant Editor

WASHINGTON, D.C. — A recently released economic analysis estimates that the proposed USDA rule on livestock and poultry marketing would impose a lofty reduction in annual gross domestic product, result in substantial job loss and cause financial strain on both farmers and consumers.

The study, released last week and conducted by Informa Economics, Inc. on behalf of the National Cattlemen’s Beef Assoc. (NCBA), the National Meat Assoc. (NMA), the National Pork Producers Council (NPPC) and the National Turkey Federation (NTF), showed that the USDA’s Grain Inspection, Packers and Stockyard’s Administration (GIPSA) rule would result in job losses of more than 22,800, with an annual drop in gross domestic product by as much as $1.5 billion and an annual loss in tax revenues of $359 million.
“Informa confirms that this rule is disastrous, over-reaching; and bad for consumers, livestock producers and rural America,” said NPPC President-elect Doug Wolf, a pork producer from Lancaster, Wis.

In turn, the NCBA, NMA, NPPC and NTF have asked USDA Secretary Tom Vilsack to withdraw the much-criticized rule and start over.
“The GIPSA rule is very vague and ill-defined, will create considerable uncertainty among producers and packers alike and will have a detrimental effect particularly on small producers,” added Wolf. “The bottom line is that the rule will add to the costs of buying and selling hogs, increase the risk of litigation and lead to more vertical integration in the pork industry, all of which means lost jobs and higher meat prices.”

During a news conference in Kansas City, Mo., last week, Rob Murphy, senior vice president for Informa, explained that the indirect costs, such as lost efficiencies and damage to demand, are where the real losses will occur including $800 million in beef, $401 million in pork and $341 million in poultry, annually.

“Beef will suffer the most in terms of what we like to describe as demand destruction as packers pull back on use of alternative marketing agreements,” said Murphy. “The costs for all species will be in effect for 10 years, peaking at about the third of fourth year following implementation.”

Murphy confirmed effects of the rule and impact will not be immediate. In fact, he said it may take two to three years to reach the levels projected in the study.

“Effects will have a very long tail,” he said “The affected industries will still be feeling an impact a decade or more into the future. All signs point to detrimental outcomes for small producers, the very ones the rule is designed to help.”

Bill Donald, a third generation cattle rancher from Montana and president-elect for NCBA, also expressed grave concern that if passed as written, the proposed GIPSA rule may force his family out of business.

“Well, we are talking about nearly $1 billion in direct and indirect annual new costs for the beef industry. And if this study is correct that 82 percent of these costs will fall on U.S. cattle producers like me, then we will see a lot of for-sale signs in rural America,” said Donald. “If the beef industry looses 494,000 head as this study suggests, we will see higher prices for food and a slow and painful death to the American rancher. I’ve spent my entire life working on my family’s operation. I’m not going to stand by and allow this administration to advance a rule that could put my family’s operation out of business.”

Jim Maxey, a veteran NMA member and past chairman of the board claims this rule would stifle normal business relations and “does not consider the huge potential economic impact.”

“The USDA never consulted with the (livestock and poultry) industry in the GIPSA rule,” said John Burkel, a fourth generation Minnesota turkey producer. “This rule is hugely misguided, it will result in job loss, fewer small farmers. The contract process may never be perfect, but it also doesn’t need government interference. The USDA needs to withdraw this rule and start over.”

Following the news conference, Informa sent the findings of the study to the Office of Management and Budget for consideration. The USDA will be accepting comments on the proposed GIPSA rule until Nov. 22.

Comments may be sent via e-mail to comments.gipsa.@usda.gov or sent by snail mail to Tess Butler, GIPSA, USDA, 1400 Independence Ave., SW, Room 1643-S, Washington, D.C., 20250. For a full description of the proposed rule, visit www.gipsa.usda.gov
To review an executive summary of the Informa study, visit www.beefusa.org/goveGIPSAProposal.aspx