The proposed rule, characterised by Agriculture Secretary Tom Vilsack as “aggressive,” was mandated by the 2008 Farm Bill.

The proposed rule includes several new provisions:

• A producer would not be required to prove a harm to competition when bringing a claim about an alleged anti-competitive practice;
• Criteria would be established for what constitutes undue preferences or unreasonable advantages;
• Dealers who operate as packer buyers would only be permitted to purchase livestock for the packer that identifies that dealer as its packer buyer;
• Packers would be prohibited from purchasing, acquiring or receiving livestock from other packers;
• Producers required to provide capital upgrades to their facilities would have to be given the opportunity to recoup 80 per cent of the cost of a required capital investment;
• A “clear and conspicuous print” requirement in contracts to ensure producers are provided the option to decline the use of arbitration to settle a dispute; and
• Packers, swine contractors and live poultry dealers would be required to provide sample copies of contracts to the Grain Inspection, Packers and Stockyards Administration (GIPSA) within 10 business days and these contracts would be made available on GIPSA’s website for review.

AMI expressed strong concern about the potential impact of these changes.

“USDA is attempting to turn the clock back on the livestock and meat marketing practices that have made the US meat production system the envy of the world and that have delivered the most abundant and affordable meat products available to the American consumer,” said AMI Senior Vice President of Regulatory Affairs and General Counsel Mark Dopp. “Courts have affirmed that our industry is dynamic and competitive and have rejected USDA’s arguments repeatedly. Now, in the face of repeated judicial rejection of their arguments, USDA is engaging in a regulatory end-run and attempting to change the law through administrative fiat. This is not an appropriate role for the Department to play and could potentially cause harm and enormous disruption.”

In an outline of the rule, USDA wrote that a number of US circuit courts of appeals have not given “deference” to USDA’s interpretation of various sections of the Packers & Stockyards Act. USDA asserts that the proposed regulations would constitute “a material change in circumstances that would warrant judicial reexamination of this issue.” The outline ignores, however, the fact that USDA has presented these same arguments to several federal appellate courts and they have been repeatedly rejected, including rulings as recently as December 2009 and again in May 2010.

Changes Commended by AFBF

The American Farm Bureau Federation (AFBF) is pleased with the proposed rule issued by the USDA's Department’s Grain Inspection, Packers and Stockyards Administration (GIPSA) dealing with competition in the livestock and poultry industries.

Bob Stallman, AFBF President, said, "For too long producers have had to bear the financial hardship of being at the whim of production contractors, resulting in inequality in production practices, increasing losses and decreasing profitability."

Mr Stallman expects that the GIPSA proposed rule would level the playing field.

"Farm Bureau is particularly supportive of the sections on capital investment, which would reduce requirements for new investments in modifications of farm buildings. These continuous modifications keep producers in debt and minimise their ability to negotiate reasonable contracts. Farm Bureau believes the contracting companies should justify the mandatory modification of facilities and this proposed rule would require for that justification," Mr Stallman said.

NCC Finds Rule One-Sided and Unrealistic

NCC will review the draft regulation carefully and make appropriate comments. However, the regulation appears to be one-sided, unrealistic, and not in accordance with court rulings. The likely result will be years of litigation and uncertainty as companies, growers and the government try to sort out the impact on what has been an efficient system for producing an agricultural commodity.

• USDA’s statement that the average chicken company "makes $3.23 a bird" is grossly misleading since that figure is an approximate wholesale value and not the profit, which is only a small percentage of that amount.
• The regulation was clearly drafted to satisfy a small number of activist growers and will do nothing to enhance the business of the great majority of broiler producers who are satisfied with the current system.
• Eight different US circuit courts of appeal have ruled that the Packers and Stockyard Act requires a showing of harm to competition. USDA’s outline of the new rule specifically welcomes yet more litigation by calling for "judicial reexamination of this issue."

This proposed regulation is not in the best interests of poultry producers, companies, or consumers.