GIPSA rules finally released
Subhead: Could help level the playing field for smaller producers
WASHINGTON, D.C. — A proposed set of rules to implement key fairness provisions of the Packers and Stockyards Act of 1921 were released last week and drew praise from a number of farm organizations, several of which had been pushing for the rules for years.
On Dec. 14, the U.S. Department of Agriculture (USDA) Grain Inspection, Packers and Stockyards Administration (GIPSA) proposed the “Fair Practices Rules,” previously known as the GIPSA rules, which are intended to facilitate competition in the livestock and poultry markets.
The rules have been on hold for a number of years. They were first proposed in 2010 but were met with fierce opposition from meatpacker lobbyists who succeeded in blocking the rules by getting lawmakers to insert language into several back-to-back appropriations bills that killed the USDA’s ability to make the rules.
The Montana-based beef cattle group, R-CALF USA, praised the newly unveiled rules, saying that the incoming Trump Administration should support them because they are “vital to reversing the ongoing decline of the U.S. cattle industry.”
Bill Bullard R-CALF’s CEO said the U.S. cattle industry is declining at an alarming rate and he hopes these rules can help stop that slide. Over half a million cattle farms, ranches and feedlots have exited the industry since 1980, he said, and the size of the U.S. cattle herd recently hit a 60-year low. The volume of beef produced from U.S. cattle has fallen to a 20-year low, he added.
“Our industry's decline is not the result of any natural phenomenon or legitimate economic force,” Bullard maintains. “It's the result of a failure to use the laws we have to protect competition. The new rules are aimed at implementing those critical protections.”
Zippy Duvall, president of the American Farm Bureau Federation agreed that the newly proposed rules could be an important step in leveling the playing field, but thought it’s greatest value would be in the poultry industry.
The “Farmer Fair Practices Rules” will ensure that companies follow the law and treat farmers fairly, without disrupting beef and pork markets, he added.
“Farm Bureau has long advocated for changes in the GIPSA rules. We have asked for changes to stop harmful business practices and protect chicken farmers. A one-size-fits-all approach doesn’t work here, and that’s why we have also worked to preserve the contract arrangements and marketing practices that make the beef and pork industries competitive,” he said.
The proposed rules, Duvall said, will strengthen GIPSA’s ability to evaluate business practices in the poultry industry and better protect individual farmers from discriminatory treatment.
“America’s chicken farmers have long called for greater transparency and a level playing field in our industry, and we appreciate USDA’s efforts to hold companies accountable and give farmers a voice,” he added.
The National Farmers Union said it was pleased that the long-awaited Farmer Fair Practices Rules were finally released and that they include an interim final rule that gives producers protection against unfair or discriminatory contract practices. Also included are two proposed rules that provide oversight for pricing and payment practices.
Concentrated market forces
“For too long, family livestock producers and poultry growers have endured a heavily concentrated market with little protection against unfair, anti-competitive practices,” said NFU President Roger Johnson. “We are glad that this important set of rules is finally moving forward.
“While the Farmer Fair Practice Rules do not fix all of the fraudulent practices in the livestock and poultry industries, these rules are certainly an important step in the right direction,” he added
A provision was included in the 2008 Farm Bill, authorizing USDA to improve GIPSA regulations. However, until recently, lawmakers repeatedly blocked the funding needed for USDA to finalize these protection rules for family farmers.
“Both producers and consumers benefit when the markets are competitive and the practices and processes are transparent. We look forward to thoughtfully reviewing the published rules and providing feedback to ensure the final rules will work for family farmers,” Johnson added.
Congress passed the Packers and Stockyards Act (PSA) 95 years ago to establish a legal framework within which a small number of concentrated meatpackers would compete for cattle sold by hundreds of thousands of widely dispersed cattle producers.
This framework included clearly defined rules of competition to ensure fairness despite the disparity in economic power between cattle sellers and cattle buyers. It is “unfortunate” that the largest meatpackers and producer groups to which they belong thwarted efforts by the USDA to finalize rules that would implement the decades-old legal framework, said Bullard.
One of the now-proposed rules would clarify what the PSA means by language prohibiting meatpackers from engaging in “unfair, unjustly discriminatory or deceptive practices” and from making or giving “any undue or unreasonable preference or advantage” to some market participants -- but not to all.
Bullard said the undue preferences prohibited by the PSA are known in the industry as “sweetheart deals” that meatpackers grant to preferred feedlots while other feedlots go broke because they are relegated to selling their cattle in a market that is rendered nearly devoid of competition.
Industry price data provided by the USDA and compiled by R-CALF shows that the average monthly return to U.S. cattle feeders for the past 15 years was a negative $27.13 per head per month, he said.
“This explains why 85,000 small- to mid-sized cattle feedlots have recently exited our industry, but it doesn't explain why the largest feedlots continue growing despite these prolonged losses,” Bullard said.
He believes the reason these largest feedlots continue to grow is that meatpackers are insulating their preferred, larger feedlots with sweetheart deals that allow them to profit even after competition disappears.
Another part of the proposed rule would rebalance the competitive scale used by poultry companies to pay poultry growers.
Protecting individual producers
The interim final rule included in the package clarifies that unlike older antitrust laws that largely protected competitive processes but not the actual competitors, the PSA does and should protect individual farmers and ranchers. Currently, farmers and ranchers are first required to “show injury” – which means they must prove they have been hurt by the competitive process prior to seeking protection under the law. That would change with these rules.
Meatpackers are geared up to fight the proposed rules, Bullard said. They want to capture the cattle supply chain away from independent cattle producers, he said, so they are fighting hard to kill these rules.
“Because these rules will implement the rules of competition, they will empower cattle producers to monitor the meatpackers’ conduct and enforce the rules when meatpackers act inappropriately,” Bullard said. “Importantly, producers would no longer have to wait for the federal government to act before anticompetitive conduct is corrected.”