Agriculture Secretary Tom Vilsack announced March 11 that the U.S. Department of Agriculture (USDA) will expand guidance for loans to contract poultry operations meant to protect them from questionable business practices to include contract pork operations.
USDA currently provides county Farm Service Agency offices analysis and evaluation of applications for direct and guaranteed loans for contract poultry operations, and how those loans are issued and serviced.
“Contract poultry and pork operations face increased risk in these challenging economic times, and this additional guidance for pork, putting it in agreement with the poultry guidance, will aid the loan officers in county offices as they continue to make informed decisions on loans for contracted pork operations, providing opportunities for producers while at the same time protecting the interests of the taxpayers who fund the loans USDA makes,” Vilsack says.
In response to depressed economic conditions and increases in energy and feed costs, some companies who contract with poultry and pork producers have closed processing plants, reduced placements and declined to renew production contracts.
Cancelled contracts have left some producers with debt for their contract operations and no income to repay their USDA direct or guaranteed loan.
USDA’s Farm Service Agency is also issuing an Advanced Notice of Proposed Rulemaking to gather input from the pork and poultry industries on the prevalence of type of contract.
Also, USDA’s Grain Inspection, Packers and Stockyards Administration will investigate charges from producers that companies are targeting producers for contract termination and whether that action violates Section 202 of the Packers and Stockyards Act.