NPPC concerned about rules on livestock contracts

National Pork Producers Council expressed concern about USDA regulations on the buying and selling of livestock and poultry.

October 14, 2016

3 Min Read
NPPC concerned about rules on livestock contracts

The National Pork Producers Council today expressed concern about USDA regulations on the buying and selling of livestock and poultry. USDA today sent to the White House Office of Management and Budget for review three rules — the “Farmer Fair Practices Rules” — that, according to the agency, would “help balance the relationships between livestock producers, swine production contract growers, and poultry growers and the packers, swine contractors, and live poultry dealers with whom they interact.”

Issued by USDA’s Grain Inspection, Packers and Stockyards Administration as an interim final rule and two proposed rules, the regulations are supposedly revisions of rules first proposed by GIPSA in 2010 to implement provisions Congress included in the 2008 farm bill.

The 2010 rules, however, went well beyond the congressional mandates of the farm bill and would have had a significant negative effect on the livestock industry, according to an analysis conducted by Informa Economics, which found they would have cost the U.S. pork industry more than $330 million annually. (An update of the analysis found that today it would cost the pork industry $420 million a year to comply with the rules.)

As a result, tens of thousands of comments, including 16,000 from pork producers, were filed in opposition to the 2010 rules, and Congress several times included riders in USDA’s annual funding bill to prevent the agency from finalizing the regulations. But no rider was included in the fiscal 2016 agricultural funding bill, and USDA earlier this year indicated it would move forward with new rules.

“Pork producers are concerned that, like the 2010 proposed rules, the ones sent to OMB would have a negative effect on the pork industry, from producers to packers and ultimately consumers,” says NPPC CEO Neil Dierks. “While the specifics of the actual rules are not yet clear, we’re worried about their impact on the ability of producers to secure financing and to innovate and about them potentially leading to greater vertical integration without offering positive advantages to the industry and consumers.”

Of particular concern, Dierks says, is the interim final rule on the “scope” of sections of the Packers and Stockyards Act related to meat packers using “unfair, unjustly discriminatory or deceptive practices” and giving “undue or unreasonable preferences or advantages” to producers. While NPPC has yet to see the language of that rule, the 2010 version was overly broad, and most of the cost of complying with the 2010 rules would have come from that regulation.

Agriculture Secretary Tom Vilsack, in a letter sent this week to NPPC and to other agricultural organizations, said the interim final rule will “establish our interpretation of the (PSA) statute, which will then be entitled to judicial deference.”

NPPC’s fear is that the interpretation apparently will be that producers no longer will need to prove that a meat packer’s action injured or diminished competition in a “marketplace.” They only will need to show that a practice was “unfair” to them or that an “undue” or “unreasonable” preference or advantage was given to another producer or producers.

The Senate considered and rejected such a “no competitive injury” provision during debate on the 2008 farm bill. Additionally, eight federal appeals courts have held that it must be proved that competition in a marketplace was harmed for an action to be a violation of the PSA.

“The interim final rule will create legal uncertainty for producers and packers,” says Dierks, who pointed out that because the regulation is “final,” it will become effective as soon as it’s published in the Federal Register.

USDA will accept public comments on the interim final rule and on the two proposed rules once they are published in the Federal Register.

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