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Chick-News.com Poultry Industry News, Comments and more by Simon M. Shane

USDA Final Rule on GIPSA "Unreasonable Preference" Under Scrutiny

02/21/2021

During mid-January 2021 the USDA published the final rule relating to "Unreasonable Preference" represented by section 202 (b) of the Packers and Stockyards Act of 1921.  The ‘unreasonable preference’ provision of the Act prevents integrators from granting "unwarranted advantages or disadvantages to growers who produce the same type and quality of livestock or poultry in the same relative geographic area". 

 

The 2008 Farm Bill incorporated provisions enjoining the USDA to make decisions concerning unreasonable preference more objective through specific criteria. Following a series of hearings organized jointly by the Department of Agriculture and the Department of Justice during the early years of the Obama Administration, the Farmer Fair Practices Rules were issued, but were revoked by the incoming Administration in 2017.

 

The current rule allows the Secretary of Agriculture to evaluate claims of unreasonable preference or advantage according to the following criteria

 

  • On the basis of a cost saving related to dealing with different producers, sellers or growers
  • On the basis of meeting a competitor's price
  • On the basis of meeting other terms offered by a competitor
  • Based on a reasonable business decision

 

The National Sustainable Agriculture Coalition representing 116 member groups maintains that the specified criteria provide undue protection for integrators at the expense of contracted producers.

 

Based on contracts currently in use by major broiler integrators, there does not appear to be evidence of unreasonable preference or advantage as evidenced by the very small number of lawsuits filed by contractors against broiler integrators over the past four years.  There are, however, evident areas of conflict in the hog and beef industries that are subject to inquiry.


 
Copyright © 2021 Simon M. Shane