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

USDA Proposes Rule On Contractor-Integrator Interaction

05/29/2022

For more than six decades, the mutually beneficial relationship between broiler integrators and contract growers has led to expansion of the industry. Increased efficiency and hence, sustainability has provided consumers with inexpensive highly nutritious protein.  A recent study conducted by Dr. Thomas Elam confirmed that broiler contract growers enjoyed a higher income than independent row crop and livestock farmers and the survey commissioned by the NCC demonstrated long tenure of growers with their integrators. This is contrary to the assertions made by Secretary of Agriculture, Tom Vilsack, during his previous tenure as Secretary of Agriculture and who has since refined and directed his action against the U.S broiler industry regarded as the most efficient among world animal protein industries.

 

In testimony before the Senate Agriculture Committee, Secretary Vilsack characterized the proposed rule as, “promoting transparency” with the intention of promoting competition, reducing consolidation and fighting inflation. Cervantes’ Don Quixote would concur with the objectives.

 

The rule would require integrators to provide prospective and existing growers with a disclosure document.  This would quantify the minimum number of placements annually and stock intensities with potential impact on grower income.  Growers would have to be provided information on past litigation and historical payments.  It is recognized that integrators bear the risk of market fluctuation, price of feed and as owners of flocks the possible impact of weather extremes, catastrophic and erosive diseases.  Contractors are absolved of these risks but are expected to use their best endeavors to achieve acceptable standards of growth, feed conversion and livability under the guidance of service persons serving us a link with the integrator.

 

The proposed rule would require integrators to provide growers with the identity of the broiler strain, gender, breeder age and health status of chicks placed and how their incomes could be changed by these factors.  Will a contractor be in a position to refuse a high-yield strain, given prospective mortality compared to a slower-growing strain?  Will a contractor be able to specify that a flock be harvested at a specific age or live weight to suit their personal needs, payment or prejudices?       

     

The proposed rule is at the least onerous for integrators and lacking in any benefits for contractors. In many situations the proposed rule would be unworkable. Many of the practical and relevant aspects of the proposed rule are incorporated in existing contracts establishing the relationship between integrators and their growers.  If they are exploited, there would not be a waiting list to grow for integrators or to expand farms. 

 

One of the requirements in the proposed rule would involve growers receiving detailed information on their ranking within the settlement cohort, including details on housing, chicks, feed and other inputs.

 

A disconcerting admission by Secretary Vilsack, in response to a question from Senator Cindy Hyde-Smith (R-MS), is that the contemplated Rule would in fact, be the first of three.  USDA intend implementing a rule providing for enforcement of unfair and deceptive practices, undue preferences and unjust prejudices.  A third rule would allow contractors to bring complaints and legal actions under the Packers and Stockyards Act without demonstrating harm with respect to competition, allowing an upsurge in frivolous litigation. 

 

The USDA has already notified the Office of Management and Budget of a pre-rule entitled, “Poultry growing tournament system: fairness and related concerns.”  that would effectively dismantle the tournament system.

 

The National Chicken Council issued a firmly worded statement against introducing new regulations and restrictions that would increase costs and inevitably be passed down to consumers in an inflationary environment.

 

The headlong program to create rules presumably to benefit contractors who have not expressed dissatisfaction with the current system, stems from joint Department of Justice and USDA regional meetings midway in the second Obama term. These staged events were intended to generate a groundswell for restrictive rules curbing what the then Administration considered to be an undesirable consolidation of power. The resulting “Farmer Fair Practices Rule” approved by Sec. Vilsack by on his last day of office was set aside by incoming Secretary of Agriculture Dr. Sonny Perdue.  It is evident that Comrade Vilsack has picked up where he left off and intends to force through his intention to change the relationship between integrators and growers without clearly understanding the implications for the parties involved and of greater importance to the effect on consumers.  As with the attempt by Sec Vilsack in 2017 to introduce the changes now proposed in 2022, we will look to voters and to Congress to curb his enthusiasm and restore rationality.  Attempting to fix nonexistent problems invariably leads to unintended consequences. Both growers and integrators will be adversely impacted by an ill-conceived attempt at social engineering and political grandstanding.


 
Copyright © 2022 Simon M. Shane