2009 Contract Fairness Rules
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Give farmers and ranchers fair contacts and a level playing field!
A handful of meatpackers and poultry companies dominate the livestock industry. This near-monopoly limits competition and makes it hard for farmers to get a fair deal or a fair price.
At the end of this year, the United States Department of Agriculture will propose new rules that will restore some fairness to the marketplace, put livestock farmers on a level playing field, and keep companies from forcing farmers to spend thousands of dollars on unnecessary equipment. The 2008 Farm Bill requires the USDA to write these rules.
The USDA needs to hear from consumers, poultry growers, cattle ranchers and hog producers during the public comment period for these rules. Farmers and ranchers lose money, and sometimes their farms, because of unfair treatment by processing companies. These rules can help farmers regain profitability.
Background on New USDA Rules
The UDSA will propose new rules this fall. The rule changes will address two major issues: unfair mandatory upgrades and undue and unreasonable preferences.
Unfair Mandatory Upgrades
Most poultry companies urge growers to build at least four poultry houses. These houses are built to the company’s specifications and cost about $300,000 each. After a farmer builds the houses and signs a contract, the company often requires farmers to add expensive upgrades to the buildings or equipment. These added costs deepen farmers’ debt, often without bringing in any additional income.
In the past, farmers have lost their contracts with little or no warning when they refused to pay for upgrades. The new rule should state that companies cannot require additional capital investment from farmers beyond the original poultry or hog house specifications unless those farmers are given fair compensation at the time of the upgrade.
Undue and Unreasonable Preference
The Packers and Stockyards Act forbids “undue or unreasonable preference or advantage” in the actions of packers, swine contractors and live poultry dealers. The 2008 Farm Bill requires the USDA to define what that means. We’re asking the USDA to interpret the term “undue and unreasonable preference” broadly, as the law intended.
The rule should not require an action to harm the market as a whole in order to be considered unlawful. We want the rule to highlight specific situations where undue or unreasonable preference may arise, such as in pricing, delivery locations and times, and more. Packers should not be allowed to give preference to large-volume livestock producers unless they can be justified by actual, verifiable quality differences or cost efficiencies, and any premiums offered for those differences should be available to all producers, regardless of the size of their operation. Packers should be required to offer all contracts in an open public manner that is accessible to the buyer, seller and other buyers.
The rule should not allow contract poultry growers to be penalized based on factors outside of their control and within the control of the poultry company, and growers should not be penalized for exercising their lawful rights. Finally, the rules should adjust over time as industry practices change.
Page Updated 10.1.09