By James C. Webster

© Copyright Agri-Pulse Communications, Inc.

Washington, Nov. 5 – USDA should adopt large parts of proposed Packers and Stockyards Act regulations designed to protect contract poultry growers but abandon some that would impede marketing agreements for cattle and hog producers, the American Farm Bureau Federation has told the department.

AFBF stakes out a middle ground that President Bob Stallman characterizes as a “good news/bad news” position that differentiates between production contracts that dominate the poultry industry and marketing contrasts that prevail in the beef and pork sectors. “We sort of split the baby in half,” he told reporters at a briefing Thursday. “We didn’t like the ban on packer-to-packer livestock sales,” he said, and called for elimination of a “competitive injury” test in determining unfair practices in poultry contracting but not in beef and pork marketing.

In detailed comments submitted this week to USDA’s Grain Inspection Packers and Stockyards Administration, Farm Bureau endorsed a more thorough economic assessment of the impact of the proposed rule. The letter by Mark Maslyn, AFBF’s executive director of policy, urged USDA to “reconsider its initial evaluation that this rule does not require more rigorous economic analysis than what is already included.” However, he added, “we do not believe this rule should be pulled in order to provide additional economic analysis,” which could be done in a separate procedure “after this rule’s comment period is complete but before the final rule is issued.”

Noting “substantial interest and concern” among its members, Farm Bureau opposed a section of the proposed rule that tries to eliminate a requirement imposed by several federal appeals courts that challengers must show likelihood of “competitive injury” to prove an unfair practice under the P&S Act. The section “could harm the ability of our livestock producers to utilize marketing contracts,” AFBF said. Rather than a eliminating the “competitive injury” test entirely, “USDA should focus its efforts on recognizing the anti-competitive nature of certain common practices that have emerged within the poultry sector. USDA would likely find widespread agreement – and Farm Bureau would certainly agree – that many aspects of the poultry industry are no longer functioning in a fair and competitive manner and that the requirement to prove competitive injury may be preventing the [P&S] Act from serving its primary purposes in that sector.”

Farm Bureau also urged changes that would “clarify the rule and allay some of the fears of the packer community” that it would eliminate marketing arrangements for fear of litigation. It recommended adjustments that would give packers “the comfort they need to continue utilizing these arrangements” and retain the benefits for producers who like marketing arrangements.

USDA also should spell out that different types of poultry houses will be considered a legitimate justification for pricing differentials in grower contracts, AFBF said. “Banks have simply been unwilling to loan the large sums of money necessary to build new poultry houses without a higher base pay in the production contracts,” it pointed out. Any “perceived regulatory mandate to eliminate this difference in pricing could put many of our poultry producers with newer houses and large loans in disastrous financial situations.”

Farm Bureau said the rule should recognize criteria that are acceptable for giving preference in contracts. “For example, having a prior-existing relationship with a packer and a proven track record of delivering the necessary product in a timely and efficient manner is a reasonable reason to give one grower a contract over another, unknown grower,” it said. Who wouldn’t choose the doctor they’ve gone to for 20 years over a doctor who practices the same type of medicine but whom they don’t know? Surely preferring to go to the doctor you’ve known for 20 years wouldn’t be deemed unreasonable.”

The AFBF comment challenged poultry processors’ claims that the rule would eliminate their ability to provide incentive pay to growers. “We do not believe this rule in any way eliminates the ability of integrators to offer incentive pay, but if USDA chooses to keep this provision in the rule, we urge the department to spell out that incentive pay is still allowed,” Farm Bureau said.

Saying that “suspending the delivery of birds can cause profound financial harm to poultry growers and our members have experienced this tactic as a means of retaliation by integrators,” AFBF endorsed, with changes, a provision that it hoped would “eliminate this retaliatory practice and provide poultry growers with the ability to better manage their farm finances.”

The organization strongly advocated a provision of the rule designed to prevent integrators from retaliating against growers. “One of the most common grievances of poultry growers is that they are asked to make constant and unnecessary upgrades to their buildings or equipment without any financial incentive to do so,” Farm Bureau said. “In fact, it is difficult to talk to any poultry producer who won’t tell you privately (for the fear of retribution is severe) that they themselves have been asked to make unnecessary, frivolous upgrades and have done so specifically because they were concerned about losing their contract or being otherwise punished through the tournament pricing system or through the inputs they receive if they did not make the upgrades.”

It said some requests for upgrades have been absurd. “We have grower members who have been asked to install a specific computer system in their poultry house only to have the integrator come back the very next year and ask them to install a different computer system at significant expense to the grower. We have grower members who have built new poultry houses to the specifications of the integrators only to be told two years later that they need to install a new fan system or a new feeding and watering system.” Although processor trade groups argue that these are “rare cases and nothing more than spotty anecdotal evidence, nothing could be farther from the truth,” AFBF said. “These sorts of unreasonable demands are . . . a fact of life for poultry growers for many years, and the integrators have refused to address the concerns of growers regarding additional capital investment. It is clear that the industry is not willing to implement reasonable standards on its own, and additional oversight from USDA is necessary.”

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