USDA advances revised livestock industry rules

WASHINGTON, Oct. 14, 2016 - The Agriculture Department is advancing a revised set of new rules to tighten regulations on contracting practices in the livestock and poultry industries. 

Three rules, which the department is calling the Farmer Fair Practices Rules, were sent Friday to the Office of Management and Budget for final review. The proposals are expected to face stiff industry resistance. 

In a letter to industry officials, Agriculture Secretary Tom Vilsack said the rules “seek to 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.”

But Vilsack said the rules have been modified from the original versions proposed in 2010 because of provisions in the 2008 farm bill. 

There are two proposed rules, one to address unfair practices and undue preferences that violate the Packers and Stockyards Act and another addressing ranking systems that poultry processors use in paying producers, Vilsack said. 

A third, interim final rule will lay out a new interpretation of a section of the Packers and Stockyards Act that lists banned industry practices. The new interpretation is designed to guide future court decisions on producer-packer disputes. 

Vilsack’s letter said the new rules would drop provisions in USDA’s 2010 proposals on the “applicability to livestock production and marketing contracts, including formula and forward contracts; the requirement that packers, swine contractors, or live poultry dealers maintain written records that provide justification for differential pricing or any deviation from standard price or contract terms; the requirement that packers refrain from entering into exclusive agreements with livestock dealers; prohibiting packers from purchasing livestock from other packers, (and) requirements that packers and live poultry dealers submit sample contracts to GIPSA for posting to the public.”

Once the OMB review is completed, USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA) will take public comment on each of the rules before they are finalized. 

As a practical matter, that means that the rules won’t become final before a new administration takes office. While Donald Trump has pledged to roll back the Obama administration’s regulatory agenda, a Hillary Clinton administration would likely move forward with implementing them.

Barring a Trump victory in November, the industry’s best chance of stopping the rules is likely to rest with a fiscal 2017 spending agreement that lawmakers hope to approve in December. However, if Clinton is elected, any provision barring implementation of the rules is likely to face stiff resistance from the White House and congressional Democrats. 

Congress cleared the way for USDA to finish work on the rules when a longstanding prohibition was dropped from the fiscal 2016 spending legislation enacted in December 2015.

Senate Agriculture Chairman Pat Roberts, R-Kan., issued a statement Friday expressing disappointment that USDA was moving forward with the rules. 

“While the impact of these rules is not fully known, if they are in any way similar to the 2010 GIPSA proposal, I have serious concerns that the U.S. livestock, poultry, and meat sectors will be tremendously burdened and experience irreparable harm during already difficult economic times,” Roberts said. 

Industry groups wrote Vilsack in September appealing to him to allow comment on the regulations. 

Barry Carpenter, president and CEO of the North American Meat Institute said the interim final rule would “open a floodgate of litigation, up-end the established system for marketing cattle, pork, and poultry in the U.S., and add costs at every step along the process from producers to consumers.”

Mike Brown, president of the National Chicken Council, said the rules should be called the “Gift to Trial Lawyers Rules” and that USDA is “ignoring years of congressional intent.”

Tracy Brunner, president of the National Cattlemen’s Beef Association, said the rules would be “extremely troubling to our industry at a time when we are already grappling with volatile futures markets and a fragile cash market.”

However, groups that believe that industry practices are unfairly squeezing many producers welcomed USDA’s action. 

"Once enacted, these common-sense rules will provide the first real protections in decades for producers,” said Ferd Hoefner, policy director for the National Sustainable Agriculture Coalition. “These rules will shield thousands of American farmers, ranchers, and contract producers against the anticompetitive, retaliatory and abusive business practices, which they have toiled under for far too long.”

Roger Johnson, president of the National Farmers Union, said, “Livestock producers and poultry growers have been waiting too long for much needed protections against the fraudulent, anti-competitive practices they fall victim to in the marketplace.”

(Updated 4 p.m. EDT with additional comment.)

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