Ag Policy Blog

Battle Reignites Over Proposed GIPSA Rules

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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USDA, livestock producers and Congress could find themselves in a race to see whether the Obama administration is going to dramatically overhaul rules under the Packers and Stockyards Act this year or face another appropriations rider that would block such action.

Based on Congressional hearings over the past few days in both the House and Senate, leaders of some livestock groups are upset that the proposals are being revived in USDA's Grain Inspection Packers and Stockyards Administration.

USDA came out with a statement Tuesday after some members of the House Agriculture Committee and livestock groups criticized the department's agenda regarding different provisions that highlighted major livestock industry rifts when they were first debated in 2010. USDA stated Congress should not return back to policy riders in appropriations bills to try to block the changes.

USDA stated, “Any efforts to once again block GIPSA’s rules to ensure fair treatment of livestock and poultry growers are not acceptable to this Administration, and do not look out for the best interests of America’s farmers, ranchers and rural communities. The incessant GIPSA rider demonstrates a complete lack of concern for honest, hardworking families. Maybe some people don’t remember the hardships recently suffered by our farming families in 2008 and 2009 when producers in Arkansas, Alabama, Florida, Georgia, Louisiana, North Carolina, Pennsylvania, Tennessee and Texas lost millions of dollars and their livelihoods when just one of the major poultry businesses went under. The focus should be on how to ensure a fair marketplace and a level playing field for our farming families—nothing less. Just ask the American Farm Bureau Federation, the National Farmers Union and the National Sustainable Agriculture Coalition—groups that represent our farmers—and you’ll hear that this GIPSA rider is bad for family farmers, bad for the agriculture industry and bad for our rural communities. Everyone deserves a level playing field. Everyone deserves a fair shot.”

The rider, however, wasn't in the 2016 funding bill that passed in December. The House Appropriations Committee has language seeking to reestablish the blocking move in the FY 2017 bill.

In the meantime, USDA detailed the proposals in the department's agency rule list for Spring 2016 under the White House Office of Management and Budget website.…

Based on the rules agenda, USDA is breaking up different sections from a more comprehensive proposal in 2010 on livestock marketing rules. Instead, USDA is seeking to introduce or propose different provisions of the controversial rule individually.

Scope and Unfair Practices

USDA seeks to finalize in September a proposal from June 2010 that would deal with the issues of litigation brought by poultry growers. The courts have often rules that in order for a plaintiff (a grower) to make the case that a packer imposed unfair discriminatory practices or undue preferences under Section 202 of the Packers and Stockyards Act, then the grower has to show that the packer's actions had "an adverse effect on competition." USDA is proposing to change the Packers and Stockyards Act to sway the courts into recognizing that unfair practices against an individual grower doesn't have to show harm to competition to be enforced.…

A little more background here: The federal appeals courts have repeatedly looked at a grower's arguments in a case and concluded that the packer's treatment of the producer did not adversely affect the markets so the grower essentially has not case. Some of that was detailed in the 2010 appeals ruling, Terry v Tyson.…

Tournament System in Poultry

GIPSA will propose a rule in September under Section 201 of the P&S Act addressing the tournament system in poultry payments. Companies often group growers together and then rank them on performance with those who rank higher getting more pay and those that rank lower getting more. USDA states its rule would set some requirements for companies to determine a grower's payment.

"These requirements would help to ensure fairness for poultry growers who are currently being paid according to a ranking system regardless of type and kind of poultry, age range, and target weight of birds. A live poultry dealer’s failure to comply would be deemed an unfair, unjustly discriminatory and deceptive practice according to factors outlined in the proposed rule."…

Undue Preference and Advantage

This language was one of the key provisions that set off a firestorm among cattle and pork producers. It has to do with whether contracts between packers offering producers special premiums or pricing create undue pricing advantages for those producers. The rule would set criteria for USDA to decide if elements of these contracts would violate section 202 (b) of the Packers and Stockyards Act.…

Leaders from the National Pork Producers Council and National Cattlemen's Beef Association argue that giving GIPSA oversight of marketing contracts would simply translate into packers further vertically integrating and owning the livestock outright. NPPC and NCBA both complained about USDA's potential rules in hearings this week.

“Pork producers are very concerned about the so-called GIPSA Rule,” said NPPC past president Dr. Howard Hill before the Senate Ag Committee on Thursday. “The livestock industry will be fundamentally and negatively changed, and the increased exports and jobs created from TPP will be negated” if the rule is implemented."

Said Tracy Brunner, president of NCBA, "What we do not need is the USDA dictating how we market cattle or manage risk in the cattle industry. The industry has developed tools and alternative marketing arrangements that benefit cattle producers and consumers. We’re not asking the Senate to intervene in our contracts; we’re asking the Senate to play their role in expanding market access and ensuring we are not regulated out of business.”

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11/23/2017 | 6:20 AM CST
5/27/2016 | 9:09 AM CDT
Correction: "How many people would like their return on investment of half a million dollars" The OF in the above sentence should have been "on". It should read, "How many people would like their return on investment on half a million dollars per year to be cut by a potential $60,000.00?" Meat packers are keen on spending other people's money and profiting the gains from those investments. They are also keen on switching their pay schemes through their market power to attain such goals. It is nothing more than fraud and a competent reading of the Packers and Stockyards Act and a good jury should take care of this type of economic abuse. Today, federal judges are blocking the effectiveness of one of the best written market rules in the economy with their legislating from the bench. They are doing this to protect fraudsters who have market power over their suppliers---- the very reason the PSA market law was written.
5/26/2016 | 9:04 PM CDT
The CFR's in the link define additional capital investments as $12,500.00 per structure. On my farm that would amount to an investment of $60,000.00 "over the life of the poultry growing arrangement or swine production contract" which was for me a 12 month contract. These additional rules are a joke. Did the meat industry write them? How many people would like their return on investment of half a million dollars per year to be cut by a potential $60,000.00? That is 12 percent per year. The return on investment could easily be negative for the farmers while the meat packers put the screws to them in their contracts. We need real enforcement of the Packers and Stockyards Act, not this fake BS. The rent seekers (meat packers) have gutted these rules before they are even adopted. There is no wonder why Americans don't like Congress. They are some of the most corrupt people governing a nation. They want to claim they are public servants but the truth is they serve the wealthy and powerful. There are so many other issues with the current rules that they can't be addressed in a small comment. Thanks for the update, Chris.