2011 GIPSA Rule Summary
A new rule issued but the USDA Grain Inspectors, Packers and Stockyards Administration offers new protections for contract poultry growers. Here's a summary of what the rule says and what growers can expect. Read the full rule from USDA.
The GIPSA rule
sets forth new criteria that the USDA will consider when determining if companies are acting in violation of the law when a poultry company suspends delivery of birds to a farmer, requires the farmer to make significant capital investments in upgrading equipment or facilities, takes action against the farmer for breach of contract, or includes provisions in their contracts with farmers that require disputes to be resolved through arbitration.
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Suspension of Delivery of Birds
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Poultry companies’ suspension of delivery of birds can cause severe financial harm to the farmers. Farmers’ income and ability to make payments on loans to build and operate their poultry facilities are based on the number of flocks they receive each year.
The rules say that USDA will consider whether a poultry company gave the farmer an adequate written notice 90 days before the suspension when determining whether the suspension was unlawful. With 90 days notice, farmers can expect to have time to plan for the financial impact of suspended delivery of birds.
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Additional Capital Investments
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If a poultry company requires farmers to make costly upgrades in equipment or facilities, it can have a severe impact on the profitability of the farmers’ operations.
The rules say that USDA may consider several criteria when determining whether the company’s requirement that farmers make costly upgrades is unlawful. These criteria include whether the company intends to or does close their processing facility within 12 months of the upgrade, if other farmers with similar facilities are required to make similar upgrades, if farmers were coerced or threatened with retaliation in order to get them to make the upgrades, or if farmers can reasonably expect to recoup their investment. Under these rules farmer may have more choice in when and how to invest additional money in upgrading their equipment and facilities.
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Notice of Breach of Contract
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When poultry companies terminate a farmer’s contract or take other adverse action due to an alleged breach of the contract the farmer’s operation can be devastated.
The rules say that USDA may consider several criteria when determining whether the company provided the farmer with a reasonable period of time to remedy a breach. These criteria include whether the company gave the farmer a written notice explaining what the breach was and how it could be cured and whether the company provided a reasonable time to cure that breach or to rebut the allegation that there was a breach.
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Arbitration Clauses
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Resolving contract disputes through arbitration can be costly for farmers and may fail to provide them with the full benefits of a court resolution. By establishing specific language that must be used to allow farmers to chose whether to be by bound by an arbitration clause the rules provide a clear way for farmers to choose to keep their right to be heard in court without facing retaliation. Congress gave growers this right in 2008, but confusing contracts and complicated processes have made it hard for farmers to opt out of binding mandatory arbitration.
Related content >> 2011 GIPSA Rule: New Protections for Farmers
Page Updated 12.08.2011