GIPSA Rule Aims at Poultry Right Now

GIPSA Rule Aims at Poultry Right Now

USDA's proposal to increase regulation of livestock industries still around but limited for now to poultry industry

By Rod Smith.

The U.S. Department of Agriculture's sweeping proposal to change the playing growers and buyers and sellers of livestock apparently was defused by more than 60,000 public comments and significant congressional consternation.

The competitive markets rule USDA sent to the White House Office of Management & Budget (OMB) Nov. 3 was far less overreaching than had been feared.

Now, the rule, developed by USDA's Grain Inspection, Packers & Stockyards Administration (GIPSA) and known as the "GIPSA rule" -- actually broken into two rules -- mostly affects the relationships between contract poultry growers and integrators.

OMB will have 45 days to review the main rule, after which it will be published in the Federal Register as a final rule and will become effective 60 days later.

USDA did indicate that it may not be done yet as it said some provisions in the proposed rule are "items for further consideration" that it may re-propose.

The rule was originally proposed last year. It immediately drew opposition from livestock, poultry and packer/processor organizations that said the rule would disrupt years of progress from farms to consumers and drew support from other groups that said the rule would rebalance the opportunities between the concentrated, large-scale and independent, moderate-scale sides of the industry.

A rule was required by the 2008 farm bill, but members of both the House and Senate told Agriculture Secretary Tom Vilsack and GIPSA Administrator J. Dudley Butler that the rule went far beyond the issues the farm bill wanted addressed.

The House, in fact, adopted legislation in the 2012 agricultural appropriations bill prohibiting USDA from spending any money to finalize the rule. The Senate's version of the bill does not include that provision. House and Senate negotiators are now in conference committee to work out a final bill.

Poultry mostly targeted

Details of the rule will not be made public until it's published in the Federal Register. However, Lilia McFarland, a special assistant in USDA's Office of Congressional Relations, briefed industry representatives Nov. 4.

Included in the rule are provisions governing integrators' delivery of -- or decisions not to deliver -- chicks and poults to contract growers, the extent to which growers can be required to make capital investments in their barns, remedies for breach of contract and mandatory arbitration.

The last three of these provisions also apply to hog growers and integrators but "are generally solutions looking for a problem" because grower-integrator relations in the swine sector are not strained, according to an analysis by economists Steve Meyer and Len Steiner.

Not cattle

The provisions have no impact on the cattle industry, they said.

USDA also sent OMB an interim rule concerning "tournament" payment systems for growers that bases growout payments on a grower's performance (feed use, livability, weight gain, etc.) relative to other growers. Again, tournaments are a poultry issue and have no impact on the cattle and hog sectors, Meyer and Steiner said in an issue of their "Daily Livestock Report."

The June 2010 proposal also included provisions defining practices by integrators and packers that are unfair or unjustly deceptive or discriminatory and stating that livestock and poultry producers need only to show that buyers were engaged in these practices to prove violations of the Packers & Stockyards Act (PSA).

These provisions go against nine separate circuit court decisions that a practice does not violate PSA unless the action harmed marketplace competition, not parties in the marketplace.

However, McFarland indicated that these provisions were being held in the "further consideration" category.

This issue was included in the 2008 farm bill, so it's likely that GIPSA will propose a new rule surrounding the matter, sources said.

Provisions removed

Gone from the original proposal are provisions that would have prohibited packer-to-packer sales and order buyers from representing more than one packer, as well as provisions that would have required packers to justify, with documentation, any differences in prices paid for livestock on the basis of costs and value.

Accordingly, the final rule does not prohibit livestock marketing contracts, as the original rule suggested it might.

USDA said its rule will cost $70 million per year for compliance, which is less than the $100 million threshold for it to be considered economically significant and, thus, require extensive economic analysis by the government.

An analysis Informa Economics conducted for the National Meat Assn. concluded that the original rule would have had an annual cost of $1.643 billion.

Smith is with Feedstuffs Weekly Newspaper for Agribusiness, a sister publication of Beef Producer.

TAGS: Regulatory
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