Cattle components missing in GIPSA rule

Nov 11, 2011

USDA submitted modified sections of the proposed Grain Inspection, Packers and Stockyards Administration (GIPSA) livestock marketing rule as Final and Interim Rules for review by the Office of Management and Budget (OMB). The Final Rule contains provisions required by the 2008 farm bill relating to suspension of delivery of birds, additional capital investment criteria, breach of contract and arbitration, along with a section on swine and poultry sample contracts. The separate Interim Rule contains a modified version of the section on poultry tournament systems and is open for additional public comment.

National Cattlemen’s Beef Association (NCBA), the American Meat Institute, the National Pork Producers Council and the National Chicken Council, along with other ag groups, have been critical of the initial proposed rule.

“All along, TCFA, NCBA and other like-minded organizations have been working to ensure that the spirit of the law was adhered to and cattle producers were not harmed by imposing unrealistic and unnecessary restrictions on the ownership and marketing of cattle,” said Texas Cattle Feeders Association Government Relations Director Josh Winegarner. TCFA and NCBA will continue to closely monitor the actions of GIPSA.

North Dakota Stockmen’s Association President Jason Schmidt of Medina, ND, sent out a statement: “The North Dakota Stockmen’s Association (NDSA) is pleased that the U.S. Department of Agriculture’s Grain Inspection, Packers and Stockyards Administration has decided to postpone action on its proposed livestock competition rule as it relates to the beef industry.”

Other groups were quick to point out the missing controversial components. “The portions of the original rule that have been included in the final rule will provide poultry and pork producers with a degree of protection from abuse by integrators and processors,” said National Farmers Union (NFU) President Roger Johnson.

But he added that “USDA did not yet forward to OMB the most critical parts of the rule, which include a clearer definition of US- DA’s interpretation of competitive

injury. The competitive injury definitions address the fundamental problems that have plagued the livestock and poultry industries.”

But groups like NDSA see flaws in the original rules, and are relieved to see some of them omitted.

“Cattle producers want good prices, fair practices and the freedom to operate our businesses without unnecessary government intrusion. We support valuebased marketing and were very concerned with the proposed language that would have hindered these profit opportunities for producers,” Schmidt said.

“The NDSA thanks USDA for taking into account the opinions of thousands of family farmers and ranchers who offered input at various listening sessions as well as through the public comment period,” added Schmidt.

In a letter to USDA Secretary Tom Vilsack, Rocky Mountain Farmers Union (RMFU) has urged the Obama administration to stand up to corporate agriculture and implement the GIPSA rules. “The Packers and Stockyards Act (PSA) was passed 80 years ago,” RMFU President Kent Peppler said.

The South Dakota Stockgrowers also sent a press release stating, “To our great disappointment, the provisions to stop packer to packer sales, stop buyers from buying for more than one packer, and the record keeping requirements that we worked for have not been included in the rule at this time. The rule does contain some of the provisions regarding litigation and provides protections for poultry and hog operators.”

According to information posted on the OMB website, USDA is no longer pursuing several provisions from the original proposal, including the sections that prohibit packer-to-packer sales, prohibit a packer buyer from buying for more than one packer, and require packers to maintain records. Other provisions from the original proposed rule remain under consideration.

The information, which was released in a Washington, D.C., briefing, indicated that the rule had been broken into different pieces.

GIPSA will likely move forward with final rules on four of the five topics the 2008 farm bill required it to address. Those four were regulations governing the timely delivery of birds to contract poultry growers, criteria under which a requirement of additional capital investment in growing barns would violate the PSA, contract terms that allow contract growers to remedy a breach of contract, and required contract language regarding mandatory arbitration. A final rule on these topics has been sent to OMB for a review that could take up to 45 days. Once OMB signs off, the rules will go into effect 60 days later.

All four proposed changes will primarily impact the poultry sectors and the last three will apply to hog contractors and growers. None of them have an impact on the beef sector.

Rules impacting beef producers regarding definitions of unfair practices, undue preference, and unlawful discrimination and competitive injury were listed as “items for further consideration” and will likely be reproposed.

There is nothing in the final or interim final rules that will materially impact markets. The key issue will be GIPSA’s action on the topics in the “further consideration/re-propose” group.

According to NCBA, “The fifth farm bill provision relates to definitions of unfair practices and undue preference. We had a significant concern with this language because it could have led to common practices such as quality and quantity premiums being considered unfair and thus subject to litigation, which would have a negative impact on marketing opportunities. This has been one of our core fights on the original GIPSA rule. Action on this provision has been postponed.”

NCBA added, “The ban on packer-to-packer sales, and the requirement to only have one buyer per packer, have been eliminated.”

Jim Brownlee, communications coordinator, Office of Communications, USDA, provided the following background on the rules:

• Decisions about what to include in these rules and how to modify the contents have been guided by the comments received and the updated cost benefit analysis.

• The Final Rule contains provisions required by the 2008 Farm Bill (the sections related to suspension of delivery of birds, additional capital investment criteria, breach of contract and arbitration) in addition to a section on swine and poultry sample contracts.

• There will also be a separate Interim Rule, which contains a modified version of the section on poultry tournament systems and would be open to additional public comment.

• USDA estimates show these two rules combined have a cost of less than $100 million.

• There are several provisions from the original proposal that USDA is no longer pursuing, including the section on packer-to-packer sales and packer buyers and the records retention section. — Traci Eatherton, WLJ Editor