By DOUG SCHMITZ
Iowa Correspondent

WASHINGTON, D.C. — According to the National Council of Farmer Cooperatives (NCFC), the USDA Grain Inspection, Packers and Stockyards Administration’s (GIPSA) newly-proposed rules would harm farmer-owned livestock marketing co-ops and lead to a less competitive marketplace for producers.

“One concern with the proposed rule is the requirement that would require that a dealer who operates as a ‘packer buyer’ only purchase livestock for the packer that identifies the deal as its ‘packer buyer,’” said Chuck Conner, NCFC president and CEO.

“Since a packer will likely not be able to send an exclusive buyer to smaller sales, such as those that many livestock marketing co-ops hold, the result could actually be fewer buyers in the market.” Producers will have even fewer options, with fewer buyers, the (NCFC) comments emphasize.

Conner said farmer co-ops – including those that market livestock and own auction barns – are an essential element in ensuring that farmers and ranchers remain competitive and receive a fair price for what they produce.

“This proposal would hurt livestock co-ops,” he added, “and will have a direct, negative impact on the bottom lines of the co-op’s farmer-owners.”

Other provisions the NCFC identified as problematic include competitive injury provisions, a provision that would require public filing of private contracts, and a provision that would enact a blanket prohibition against packer-to-packer sales.

The National Meat Assoc. (NMA) also submitted comments to the GIPSA, which called for the withdrawal and complete reworking of a proposed rule, which would go far beyond the requirements in Title XI of the 2008 Farm Bill.
“If implemented as written, the GIPSA’s proposal will devastate the industry, particularly small and medium-sized packers,” said Barry Carpenter, NMA CEO. “The rule would upend livestock purchasing arrangements, and prevent small packers from competing in certain markets.”

The NMA hired Informa Economics, Inc. of Memphis, Tenn. to conduct an examination of the proposal’s impact, which indicated the loss of more than 22,000 jobs, an annual GDP loss of $1.5 billion, and an annual tax revenue loss of $359 million.

“And it would do all this by changing the basic meaning of the Packers & Stockyards Act, which is something only Congress can do,” Carpenter said. “The GIPSA should withdraw the proposal and issue a new rule limited to the matters identified in the 2008 farm bill.”

In addition to highlighting the cost of the proposal, the NMA’s comments criticized provisions of the proposal it said would:

•Eliminate the legal yardstick of “unfair competition,” which has been affirmed as part of the Packers & Stockyards Act by eight United States Courts of Appeal decisions over a period of more than 70 years.

•Subject packers to substantial litigation risks, which would lead to added costs, more industry concentration and the end of agricultural marketing agreements, which offer premiums to producers and added value to consumers.
•Limit packers’ ability to use strategic marketing agreements to ensure that producer-suppliers implement critical food safety controls necessary to protect consumers from dangerous pathogens.

Carpenter added that any new rule should be supported by both a proper economic impact analysis and an explanatory preamble that addresses the issues raised during the comment period by the NMA and other agriculture groups.

The American Meat Institute (AMI) also filed comments urging the GIPSA to withdraw its proposed rule. According to the AMI, the new rule exceeds the congressional mandate in the 2008 farm bill; would eliminate more than 100,000 jobs and destroy partnerships between livestock producers and meat companies that have improved product quality; and would raise meat and poultry prices to consumers.

Conversely, in late September, the GIPSA charged JBS USA, LLC’s plants in Marshalltown, Iowa, Worthington, Minn. and Louisville, Ky. with deliberately underpaying hog farmers by a total of $350,000 during an 11-month period in 2007, which violated the stipulations of the act.

According to a formal complaint, the GIPSA alleged JBS – formerly Swift & Co. and Swift Pork Co. in Greeley, Colo. – used an electronic probe called a “Fat-O-Meat’er” to calculate the lean percent of processed hogs in order to adjust carcass merit payments to hog sellers.

The suit claimed the JBS probe “occasionally failed to obtain lean data for a particular carcass or carcasses in a lot and a lean percent was not calculated for carcasses with missing data.” The GIPSA complaint stated that JBS bought the hogs on a carcass merit basis and when lean percent data was missing, “substituted an arbitrary lean value of 49 percent without disclosing that fact to the seller.”

The complaint also said producers who sold hogs at the JBS plants were paid an automatic discount of $1-$2 per cwt. for carcasses with missing “Fat-O-Meat’er” data and were unable to receive possible premiums of up to $5.30 per cwt.