In the waning hours of the previous Administration, Tom Vilsack, then Secretary of Agriculture, issued the Farmer Fair Practice Rules to be implemented under the prevailing Packers and Stockyards Act. The current Secretary of Agriculture Dr. Sonny Perdue suspended the rule on assuming office in 2017 and in October 2019 withdrew in entirety the Farmer’s Fair Practice Rules. In November 2019 the Grain Inspections Packers Stockyards Administration was restructured within the Fair Trade Practices Program of the Agricultural Marketing Service.
The USDA published a definition of reasonable and fair preference or advantage in the current Federal Register specifying four criteria to be considered in determining whether a violation of the Packers and Stockyards Act has occurred.
According to the USDA it is unlawful for a packer or integrator to make or give any undue or unreasonable preference or advantage to a seller or grower of livestock or poultry. What is significant is the definition of a preference or advantage. In accordance with the proposed rule the Secretary of Agriculture and his subordinates can review an action to determine whether it constitutes a preference or advantage. The criteria used to establish a violation would be whether the preference or advantage: -
- cannot be justified on the basis of a cost saving relating to different producers, sellers or growers
- cannot be justified on the basis of meeting a competitor’s price
- cannot be justified on the basis of meeting other terms offered by competitor
- cannot be justified as a reasonable business decision that would be customary in the industry
The 2016 Farmer’s Fair Practice Rules that evolved from a series of regional meetings organized jointly by the Department of Justice and the Department of Agriculture in the previous Administration would have eliminated the tournament system for broiler production and radically altered the relationship between contractors and integrators. In retrospect the Rule would have resulted in considerable harm to the broiler industry in the U.S. adversely affecting both integrators and contractors.
Various organizations purporting to represent contractors have opposed USDA-AMS rulings claiming that actions by packers and integrators are unfair, unjustly discriminatory or deceptive. The Organization for Competitive Markets (OCM) maintains that the USDA “leaves farmers, ranchers and poultry contract growers under the threat of retaliation for speaking out against any wrongdoing of the packer or processor”. The OCM also maintains “a particularly gross omission in the proposed rule is a restoration of the right of an individual producer to bring a claim without proving competitive harm to the entire sector.”
The proposed Farmers Fair Practice Rules would have opened the floodgates to frivolous lawsuits and severely disrupted the industry that has functioned effectively with benefits to both contractors and integrators for over seventy years. The fact that there are more contractors willing to erect houses or expand farms than can be accommodated by current marketing considerations is a testament to the fairness of the existing system.
The criteria relating to “undue and unreasonable preferences or advantages” will be subject to public comment for a sixty-day period. It is anticipated that proponents of back-to-19th century farming and those opposed to intensive livestock production will submit objections and use their legal resources and the social media to advance their cause.
The broiler production system based on the mutual benefits to contractor and integrator do not require government intervention and should follow the dictum that “if it ain't broken don't try and fix it”. The USDA under the leadership of Secretary Perdue is to be complemented on fairness, logic and making decisions that benefit integrators, contractors and ultimately consumers.