By DOUG SCHMITZ
Iowa Correspondent

DES MOINES, Iowa – Iowa Agriculture Secretary Bill Northey recently told the head of the USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA) the newly-proposed rules concerning price discrimination and manipulation would negatively affect the livelihoods of every U.S. farmer – not just Iowa producers – if implemented.

“As I have traveled around the state and visited with farmers, I have heard concerns from several producers that the final rules and implementation could significantly affect existing marketing arrangements that they already have in place,” Northey wrote in a Nov. 22 letter to Tess Butler, GIPSA administrator.
“I appreciate the USDA’s need and desire to assure a competitive marketplace for all producers, but I do have concerns about unintended consequences of the current proposal and stress that it is very important that negative effects on farmers are avoided,” said Northey, who’s also a fourth-generation corn and soybean farmer from Spirit Lake, Iowa.

Northey’s letter centered around the livestock industry, which he said “is vitally important to Iowa and the economic health of our state … so the proposed rule is of critical importance.”

Under the Packers and Stockyards Act of 1921, provisions were set in place that banned price discrimination, the manipulation of prices, weight manipulation of livestock or carcasses, manipulation of carcass grades, commercial bribery, and misrepresentation of source, condition, or quality of livestock, in addition to what lawmakers then perceived as other unfair and deceptive practices.

According to the Institute of Local Self-Reliance (ILSR)’s New Rules Project, “the importance of the law has increased as concentration in the livestock industry continues to grow dramatically,” but is only “a model case of a good law that is not enforced.”

“Complaints and petitions to the GIPSA are not acted upon, and the agency remains understaffed,” the ILSR’s mission statement concerning the act read. “A recent GAO report chastised GIPSA for not using its authority to protect farmers, and made a list of recommended reforms.

“A primary problem with enforcement is the difficulty in proving anti-competitive practices,” the ILSR said. “Concentration caps have been proposed to automatically bring action to maintain competition if one firm controls a certain percentage of the market.”

Kent Pruismann, a Rock Valley, Iowa, cattle feeder and president of the Iowa Cattlemen’s Assoc. (ICA), said in an effort to level the playing field for small producers like himself, the proposal would require processors to pay the same price to everyone.

“Instead of the feeder or cow/calf producer seeing the benefit of production practices, the processor could do a ‘cooler sort’ to capture premiums for themselves,” he said. “While there are some reasonable suggestions in the proposal, many of the proposed rules overstep the statutory authority that Congress provides the GIPSA.”

Recently, Minnesota passed legislation that mirrors the GIPSA language directly into state law, making it easier to bring GIPSA state cases on the state level, the ILSR said.

As a result, Northey said a broad coalition of Iowa agricultural groups has submitted extensive comments – developed on behalf of and in cooperation with the ICA and the Iowa Pork Producers Assoc. – on the proposed rule (which was issued in June for public comments and expired on Nov. 22), asking the GIPSA to give their suggested changes full consideration.

In his letter to Butler, Northey first proposed “separating or splitting” of the current rule into “species [of] specific language.”

“The structure of each industry is so different that I believe in their current form, the rules create unnecessary confusion,” he said. “Creating different sections for each of the species would add needed clarity and allow the rules to be more specific in each area.”

Secondly, Northey said because the proposed rule goes into great detail about requirements and conditions “whereby “Capital Investment” or “Additional Capital Investment” can be required and prescribes value thresholds,” the rule could be simplified and clarified if it would only deal with the subject of “Additional Capital Investment.”

“When farmers are making a ‘Capital Investment,’ they have significantly more options, including the ability to simply decline the contract as being unfair or otherwise unworkable,” he said. “But, additional protections surrounding requirements for ‘Additional Capital Investment’ after entering a contract are understandable and necessary.”

Northey concluded by expressing his concerns about the definition of a forward contract as a “fixed price or basis contract, oral or written” for the purchase of a specified quantity, or lot or lots of swine, where delivery will occur more than 14 days after the agreement is entered.

“The 14-day period as is currently proposed is too short and the definition should be set for both beef and pork as “greater than 30 days prior to delivery,” he said. “Few industry forward contracts are entered into with as little as 15 days for delivery and as a result changing it to 30 days would better serve the industry.

“I believe with these changes – and the others highlighted by the Iowa agricultural groups that have weighed in – will allow these new rules to better protect both farmers and packers, and benefit the entire livestock industry,” he said.