GUEST opinion

Jul 29, 2011
by WLJ

GIPSA’s far-reaching effects will harm producers and consumers

Many producers I have visited with lately have said, “GIPSA, I thought that was already decided..” While we may all wish it would just go away, the reality is that we need to continue working to stop the U.S. Department of Agriculture’s (USDA) Grain Inspection, Packers and Stockyards Administration’s (GIPSA) proposed marketing regulation from going forward. I recently testified in front of the U.S. House of Representatives Small Business Subcommittee on Agriculture, Energy and Trade, chaired by Rep. Scott Tipton from Colorado, to encourage the committee to stop the proposed USDA regulations.

I am a cow/calf producer and small meat packer. I have been a producer all of my life, first in Wyoming, and now in Colorado. My family has joined with six other families as co-owners of Homestead Meats, a direct-beef marketing business. To enhance its directmarketing beef business, Homestead Meats owns its own USDA-inspected packing plant, therefore making us producers, feeders and packers. We have chosen this small business model as a way to differentiate our product, brand our product, and provide ourselves with our own dedicated marketing program. The proposed GIPSA rule will significantly hinder our small business model, force us to lay off our employees, and cripple our ability to market our cattle the way we want.

Our cow/calf business is built on relationships and alliances. We have successfully marketed our calves through an alliance for several years. That alliance has provided a relationship that has provided feedback on the quality of our cattle—quality that earns us a premium. This information has been used to address specific genetic traits for marbling, and the result is a significant increase in the Choice grade and subsequent price received for our cattle. The proposed rule would require my buyer to justify any discount or premium paid.

These contracts are private business transactions and should not be made available for public review and scrutiny. I strongly believe in the fundamental American business tenet of a willing seller and a willing buyer being able to enter into a private business transaction as it protects my pricing and marketing mechanisms.

This alternative marketing arrangement has worked for our family and many other producers. For years, we’ve been doing exactly what USDA has promoted— selling directly to the consumer; operating as a small processor in a strategic area of the country; being rewarded for adding value to the end product; and producing local food. However, under this rule, our marketing options will be limited because we were innovative and took market risks.

Value-based marketing has given our family and small producers across the country the opportunity to compete at the highest level. The consumer has been the one to determine the fair and justified price paid for the value-added product, not USDA. The proposed GIPSA rule ultimately may take away the choice consumers want, demand and deserve at the meat case. These alternative marketing arrangements have allowed producers to get paid for the added value. These arrangements ensure a consistent supply of livestock and poultry that meet the requirements of such programs.

Without this consistent supply, these programs cannot be sustained.

I am also concerned that there is neither clarity nor clear definition in terminology in the proposed GIPSA rule. The vague definitions, such as “unfair” or “reasonable person” will open the door to an increased number of lawsuits because mere accusations, without economic proof, would suffice for USDA or an individual to bring a lawsuit against a buyer. This will be a trial lawyer’s bonanza and will devastate small businesses such as mine.

The proposed rule changes allow for persons to sue without proof of injury or harm.

They just have to say that their price was not fair. Who determines fairness? Will increased government intervention and litigation determine fairness? Arbitrary judgment by a federal agency will only increase paperwork and costs. Who pays for this increased intervention and litigation? The producer will. When costs increase for the processor, the trickledown effect is to decrease the price paid to the producer that supplies the raw commodity. The proposed rule changes are not clearly understood, and the unintended consequences are farreaching across this industry and will ultimately harm small- and medium-sized producers and consumers the most.

The agriculture marketplace has given our family the opportunity to raise beef, improve our product, enter into value-added contracts, receive payment for that improved product, and expand our business into a direct-marketing enterprise. Each step has been a private business contract between a willing buyer and a willing seller. I do not want increased scrutiny in private business contracts, nor increased litigation. Government intrusion into the marketplace is not the answer.

The House has spoken and blocked funding for the proposed rule. Now it is the Senate’s turn. My fellow producers, join me in urging the U.S. Senate to take a stand on the side of cattlemen and women, on the side of the free enterprise marketplace, on the side of consumers, and stop the proposed GIP- SA rule from moving forward. — Robbie LeValley