The Department of Agriculture is taking steps to increase competition in the meat processing sector and reform the poultry industry's contracting practices.
The department is making $200 million available to create a new processing capacity expansion program, providing $25 million for workforce training, and releasing the first of three planned rules designed to bolster enforcement of the Packers and Stockyards Act.
“USDA is committed to making investments that promote competition — helping support economic systems where the wealth created in rural areas stays in rural areas — and strengthening rules and enforcement against anticompetitive practices,” Ag Secretary Tom Vilsack said in a statement.
“The funding and new rule we’re announcing today ultimately will help us give farmers and ranchers a fair shake, strengthen supply chains, and make food prices fairer.”
The first of the three PSA enforcement rules is written to address the “tournament” system of compensation used in poultry production. Under that framework, producers in a given region are compensated based on a ranking formula.
USDA says the new rule would "stop unfair, deceptive, discriminatory, and anticompetitive practices in the meat and poultry industry.” It specifically seeks to require poultry processors to provide information used at various stages in the production cycle – USDA specifically cited “details of the inputs they provided each farmer and information about the input differences among farmers being ranked” – and also disclose “what financial returns the farmer can expect from the relationship based on the range of real experiences of other growers.”
Contracts would also be required to “contain guaranteed annual flock placements and density,” and company CEOs would be required to sign off on compliance practices.
USDA is also seeking information about whether or not some tournament practices “are so unfair that they should be banned or otherwise regulated,” including “whether the current tournament-style system in poultry growing could be restricted or modernized to create a fairer, more inclusive marketplace.”
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The move is certain to draw criticism from meat industry groups who have use the tournament system. Previous efforts to bolster PSA compliance during the Obama administration were either blocked by appropriations bills or withdrawn by the Trump administration.
National Chicken Council President Mike Brown called the rule "a solution in search of a problem."
"The last thing the Biden administration should be doing is pushing increased regulations, red tape and costs onto businesses at a time of record inflation and input costs, threatening food security and potentially raising grocery bills even further for Americans," he added in a statement. "There is a huge misunderstanding in this administration of how businesses operate. Everything this administration has touched has led to increased prices for consumers – whether its gas, home heating bills or infant formula. Chicken seems to be next."
USDA had previously announced details for investments in processing capacity expansion and the creation of the new Meat and Poultry Intermediary Lending Program.
The $200 million will “provide much-needed financing to independent meat and poultry processors to start up and expand operations,” USDA said. The program will provide grants of up to $15 million to qualifying recipients that will use the funding to create a revolving loan fund to finance capacity expansion.
Finally, USDA provided additional details on the previously announced workforce development funding for the sector that will be allocated through the National Institute of Food and Agriculture.
A $25 million investment will be split between a $5 million program to “support development of meat and poultry processing training and educational materials for place-based needs, particularly relevant to small- or medium-sized farmers and ranchers.” A separate $20 million fund will go toward community colleges “to support meat and poultry processing workforce development programs.”
USDA says it will also complete a “top-to-bottom review of its programs to ensure they promote competition” and plans to strengthen existing verification for animal husbandry claims “to ensure consumers are getting what they are paying for.” The department says the steps stem from a report required by an executive order President Joe Biden signed in July 2021.
Story updated at 1:30 EDT to include NCC comment.
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