By TIM ALEXANDER
Illinois Correspondent
 
PEORIA, Ill. — Speaking at the 2011 Illinois Pork Expo in the Peoria Civic Center on Feb. 16, an attorney specializing in agricultural law told pork producers that though new federal regulations affecting sales practices in the livestock and poultry industries are likely on the way, the changes promulgated through the USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA) will not be as severe as many producers have feared.

Soon after GIPSA’s “proposed rule” was announced by U.S. Secretary of Agriculture Tom Vilsack in June of 2010 as a measure that would ensure “a level playing field for producers by providing additional protections against unfair practices” and market conditions, the National Pork Producers Council and other livestock and poultry groups cast an immediate objection to segments of the proposed regulations. According to the NPPC, GIPSA’s proposed rules extend far beyond the power granted to the agency under terms of the 2008 Farm Bill, which assigned the USDA the task of reviewing and redefining the terms and enforcement procedures of the Packers and Stockyards Act.

Todd Langel of Des Moines-based Faegre & Benson, LLC, agreed that GIPSA overstepped their bounds in rewriting the Act, but is optimistic that GIPSA will consider the input of the nation’s farmers and ranchers and modify the proposed regulations before a final rule is published.

“I think (GIPSA) will publish a final rule that will be modified from their proposed rule,” Langel said following his presentation in Peoria. “I think they will back off the breadth and scope of some of the proposed rules. I think the proposed final rule will look more like (GIPSA) followed the 2008 Farm Bill directive.”
Langel highlighted key segments of GIPSA’s proposed rule and focused on problematic sections of the rule for pork producers attending the 2011 Pork Expo.

“The proposed rules go beyond what the 2008 Farm Bill essentially asked of GIPSA,” Langel said. “The farm bill required USDA to establish (several) areas of criteria, and they are supposed to be promulgating those criteria. Here we have a set of proposed rules that are quite a bit more broad.”

According to the NPPC, some of GIPSA’s proposed criteria for an updated Packers and Stockyards Act are contrary to the decisions of several federal courts and Congressional votes. GIPSA counters that in addition to fulfilling the terms of the Farm Bill, the agency is able to enact rules of its own volition.
“GIPSA correctly states that it has its own rule-making authority under the Packers & Stockyards Act. But opponents say that GIPSA went out of their way to produce a set of rules that are pretty sweeping,” Langel said.
An announcement from GIPSA regarding final rules for the Packers & Stockyards Act could come tomorrow, next week, or next year. USDA is currently conducting an economic impact study regarding GIPSA’s proposed rule at the behest of over 100 members of Congress who petitioned Vilsack.

“Other than (waiting for) the study, the rules are really in GIPSA’s hands. The public comment period has closed, and now it’s up to GIPSA whether or not to take the comments and the economic impact study into account when publishing their final rule in the Federal Register,” explained Langel.

“Some people in the industry are gearing up to be ready to comply if these rules are enacted. Some in the industry are preparing to back up basically every decision they make, because if they are doing anything other than giving everyone the same price across the board for every pig, then they’ve got to be able to justify every deviation from that,” Langel added.

“Others are gearing up to make a legal challenge to the rules. You may see a lawsuit in a federal court to enjoin GIPSA from enacting or enforcing the rules.”
A federal lawsuit would likely allege that GIPSA violated the Administrative Procedures Act by overstepping their authority if the proposed rules are enacted in full, Langel indicated.

Langel advised Illinois producers to keep meticulous records of any and all transactions. Sales options, premiums and discounts and production contracts could all be affected be the new rules, he warned.

“The big fear on the producer side is that it will eliminate options as to where to sell their products and what mechanisms are out there for risk protection and contracting. There are going to be fewer options for producers,” said Langel.

The 2008 Farm Bill required GIPSA to promulgate rules to address five specific issues in redefining the Packers & Stockyards Act. The proposals GIPSA returned will have a “chilling effect on innovation and flexibility,” according to the NPPC.

“Packers may forgo the hassle of ‘justifying’ and documenting different prices and simply pay one price (almost certainly the lowest) to all producers. Regulation and uncertainty – and this rule creates a lot of legal uncertainty – will drive costs higher and may drive the costs of using contracts at the production and packing level high enough that contract growers decide to own their own buildings or to produce their own hogs. The result will be a higher level of vertical integration and, almost certainly, a new push to limit or prohibit that vertical integration – even though laws and regulations caused the vertical integration in the first place,” the NPPC warned in their overview of GIPSA’s proposed rule.