RAFI-USA
E-Bulletin #22
April 2004

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Fairness in Contracting Legislation Passes in GA
North Carolina Tobacco Farmers Begin Putting Cost-share Grants to Work
Freddie Mac, Fannie Mae Reject Forced Arbitration in Home Mortgages

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Fairness in Contracting Legislation Passes in GA: Despite Fierce Opposition from the GA Poultry Federation and Threats of Company Pull Outs

By Laura Klauke, RAFI-USA Program Director, Contract Ag Reform Project

Georgia House Bill 648, which provides for the regulation of poultry contracts and the enforcement of fair contract standards, passed the Georgia House of Representatives with an 111 to 62 vote in February and the Georgia Senate with an equally impressive 35 to 16 final floor vote this April. The bill is now awaiting Governor Sonny Perdue's signature.

The Georgia Poultry Federation adamantly opposed the bill and afterit passed the House hired 8 additional lobbyists to fight it. Pushing for a veto, the Georgia Poultry Federation is now arranging private meetings between company representatives and Governor Perdue.

Poultry growers and supporters are working the phones to let Governor Perdue know the broad base of support for fairness in contracting among farmers and voters in the state.

 

Though the bill was watered down somewhat through the political process, it still contains several critical standards for fairness in poultry contracts. In particular, House Bill 648 provides:

 

1. A grower must be afforded the opportunity to review a contract outside the business premises of the integrator with an attorney or adviser of the contract producer's choosing for at least three business days prior to execution,

2. A contract grower shall have a right to cancel a production contract up to three days after signing the contract without penalty.

3. Integrators shall provide to contract growers any statistical information and data used to determine compensation (other than a trade secret).

4. Any contract grower or grower designee shall have the right to be present at the weighing of poultry, present at the weighing of feed delivered by the integrator, and observe the weights and measures used to determine compensation.

 

Beyond the protections it wins for growers, the bill is also significant because it is the first such bill to pass in "chicken country." In 1995, the Georgia General Assembly declared Georgia the official Poultry Capital of the World. While per capita chicken consumption has doubled since 1978, Georgia's production has tripled. There are more than 12,000 chicken houses and more than 40 processing plants in the state. (University of Georgia, College of Agricultural and Environmental Sciences Poultry.)

Not surprisingly, right before a critical meeting of the Senate Agriculture Committee, rumors were circulated that an unnamed poultry company was considering expanding operations into Georgia but would pull out if the bill passed. Growers were quickly able to connect the rumor to Sanderson Farms, the sixth largest poultry processor in the nation.

Sanderson Farms is considering building an integrated poultry complex in southern Georgia and would contract with approximately 130 poultry farmers (including broiler, pullet and breeder operations). However, Sanderson Farms had begun holding public meetings after the bill had passed the House and the passage in Senate has had no effect on their public recruitment efforts.

Community support, sufficient farmer interest, and available financing will ultimately be the determining factors for Sanderson Farm's expansion into Georgia. One indication of the challenge of getting past these barriers is the fact Sanderson has promised a fifteen year contract - a significantly higher difference from the industry norm. (There has been no legal review of the contract to analyze the real strength of any time commitment.)

Activists in the state credit this win for contract fairness to many things - a core of dedicated of legislative champions in both the House and Senate, including the Chair of the Georgia House Agriculture Committee; a broad base of organizational support for the bill including the United Poultry Growers Association, the Georgia Poultry Justice Alliance, and the Georgia Farm Bureau; and the ability to find workable compromises through the political process.

But legislators and activists alike noted that the most important element of the success was the willingness of Georgia poultry farmers to make calls and visits. Ultimately, it was the voice of hundreds of farmers educating legislators about the realities of the current contract relationship and demanding fair treatment that made the difference.

For more info:

United Poultry Growers Association www.unitdpoultrygrowers.com Fax: (229) 883-8881 email: upga@unitedpoultrygrowers.com

or
Georgia Poultry Justice Alliance Rosalyn Evans, Executive Director gpja501@hotmail.com.

To see the full text of the bill: http://www.legis.state.ga.us/legis/2003_04/versions/hb648_HB_648_AP_8.htm

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North Carolina Tobacco Farmers Begin Putting Cost-share Grants to Work

By Jason Roehrig, RAFI-USA Program Director, Tobacco Community Reinvestment Fund

RAFI-USA recently announced the award winners for the 2004-5 Tobacco Communities Reinvestment Fund Producer and Community Grants. The Reinvestment Fund is supported by the Tobacco Trust Fund Commission and was created to help farmers develop new enterprises which demonstrate innovative ways to replace lost tobacco income. Even though it is still early in the growing season, the demonstration grant recipients are off to promising starts on their projects.

Kay and Michael Winn of Rich Square in Northampton County received a grant to develop alternative value-added markets for their flock of grass-fed hair sheep. The Winns began building their flock of hair sheep a few years ago as a complement to their growing hay operation. Unlike traditional wool varieties, hair sheep don't require shearing, reducing production costs for the farmer. They are also hardier than wool varieties, produce high quality meat, and follow more favorable breeding cycles.

In order to reduce their dependence on a single market and increase the value they are getting for their animals, the Winns decided to diversify their marketing efforts. They have been selling the animals live at local livestock auctions, but are now pursuing butchers, restaurants, and direct sales to individuals at farmers markets. The grant from the Tobacco Communities Reinvestment Fund is helping with the purchase of a refrigerated trailer, so that the fresh lamb can be safely transported between the processor and various markets around the state.

So far, the Winn's idea has been working out. They donated a lamb to a benefit dinner held in March at Panzanella in Carrboro. The lamb met with rave reviews from both diners and restaurant staff and may become a regular feature on the Panzanella menu. They hope to identify other Triangle establishments interested in purchasing their lamb as well. Later this summer, they will be testing out customer demand at the Roanoke-Chowan Farm and Garden Market.

The Winns look forward to hosting field days on their farm. They are planning to try out some innovative pasture management techniques to better maintain the health of their flock without chemicals and antibiotics. The Winns see a lot of potential for increase in hair sheep production in North Carolina and are excited to share their experiences with other farmers.

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Recognition of the Potential for Misuse of Mandatory Arbitration Clause Grows: Freddie Mac, Fannie Mae Reject Forced Arbitration in Home Mortgages

By Laura Klauke, RAFI-USA Program Director, Contract Ag Reform Project

In December, Freddie Mac announced that as of August 2004 it would no longer invest in subprime mortgages containing mandatory arbitration clauses. This policy is aligned with the corporation's existing prohibition on the use of mandatory arbitration for prime market mortgage investments. In February, Fannie Mae adopted the same stance on subprime mortgages with mandatory arbitration clauses. Fannie Mae and Freddie Mac are the two largest U.S. buyers of home mortgages.

In comments praising Freddie Mac's decision, Martin Eakes, CEO of the Center for Responsible Lending noted, "In recent years, the inclusion of mandatory arbitration language in a mortgage contract has become increasingly common, especially in the subprime mortgage market. Each day, many Americans unknowingly sign loan contracts that prevent them from protecting their homes against predatory lending. These clauses deny access to justice for homeowners by raising the cost of asserting their rights, stripping them of their day in court in front of a jury of their peers, and tilting the scales to favor lenders."

The Department of Housing and Urban Development, the Department of the Treasury and the Federal Trade Commission have recommended prohibiting mandatory arbitration agreements in the Home Ownership and Equity Protection Act (HOEPA) or for high-cost home loans. Moreover, Congress has recently chosen to prohibit the use of mandatory arbitration clauses in other commercial contexts, specifically in contracts between car manufactures and dealers.

In an effort to prevent abusive forced arbitration in agricultural contracts, Senators Grassley (R- IA) and Feingold (D-WI) have introduced a bill that would keep arbitration voluntary in livestock and poultry contracts, the Fair Contracts for Growers Act (S. 91). The bill would simply require both parties to a livestock or poultry contract to agree in writing to pursue arbitration after a dispute arises. This assures that both parties agree to pursue arbitration voluntarily, instead of allowing one party to be forced to waive their legal protections under duress, leaving themselves open to future fraud and abuse.

Currently, the Campaign for Contract Agriculture Reform is spearheading grassroots efforts to enhance the list of cosponsors and pursue opportunities to move the fair contracts legislation through congress.

For more information on the Fair Contracts for Growers Act (S. 91) contact Laura Klauke of the RAFI-USA Contract Agriculture Reform Program (919-845-4615) or visit the RAFI-USA Contract Agriculture Reform Program web page.

For more information on the decisions of Freddie Mac and Frannie Mae:
http://www.predatorylending.org/news_headlines/fanniemae020404.cfm
.
http://www.freddiemac.com/news/archives/afford_housing/2003/consumer_120403.htm

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Bulletin produced by Rural Advancement Foundation -USA
Edited by Susan Jelinek (919) 696-2579; Susan_Jelinek@ncsu.edu

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