For Immediate Release: September 28, 2022
Contact: Beth Hauptle, Communications Manager, [email protected]
Aaron Johnson, Challenging Corporate Power Program Manager, [email protected]
Pittsboro, NC – On September 26, 2022, the Rural Advancement Foundation International – USA (RAFI-USA) submitted comments in response to a request from the Agricultural Marketing Service (AMS) of the U.S. Department of Agriculture (USDA) regarding “Poultry Growing Tournament Systems: Fairness and Related Concerns.” RAFI-USA has a thirty-year history of advocating for contract growers, and in addition to that long institutional knowledge of the system, conducted research in the summer of 2022 with 105 former and current poultry contract growers to inform its comments.
Background
On June 8, 2022, AMS requested comments and information to inform policy development and future rulemaking proposals regarding the use of poultry grower ranking systems commonly known as tournaments in contract poultry production. According to AMS, it “ is seeking this input in response to numerous complaints from poultry growers about the use of tournament systems.” AMS is looking for comments to help it tailor further rulemaking in addition to that already planned and underway to address specific industry practices in relation to tournament systems.
RAFI-USA submitted the attached comment to AMS on September 26, 2022.
Highlights from RAFI-USA’s Comment
RAFI-USA’s comment clarifies the tournament system’s true purpose — to maximize poultry corporations’ (“integrators”) ability to externalize costs and exert control over their contract growers. The comment also situates the tournament system within its wider anti-competitive context and then describes the rules that contract growers need to secure fair future markets. In preparation for submitting its comment, RAFI-USA conducted an anonymous contract grower survey which received responses from 105 current and former contract poultry growers from 17 states. “Our comment is directly informed by these growers’ narration of their own experiences to us, and it is our hope that it will serve to channel their feedback directly to USDA about what the department should do to secure fairness on their behalf,” said Aaron Johnson, Challenging Corporate Power Program Manager at RAFI-USA. Only three grower respondents agreed that tournament systems “are generally fair and foster healthy competition,” while 94% of grower respondents expressed at least one of the following sentiments regarding tournament systems:
- Tournament systems are generally unfair and pit growers against each other (75%)
- Tournament systems are too often used to retaliate or discriminate against growers (70%)
- Tournament systems often negatively impact grower income (68%)
The most popular proposed rule provisions amongst those growers we surveyed were new requirements for contract length guarantees to match the length of capital investment loans (89%) and for contracts to provide minimum guarantees for annual flock placements and flock stocking density (83%). Regarding the tournament system itself, when combined, 90% of growers favored either prohibition of the tournament system (70%) or a mandate that formulas dynamically account for variable input quality (67%).
RAFI-USA’s comment argues that the tournament system is an illegal course of business under the Packers and Stockyards Act, and includes detailed recommendations for future USDA rulemaking to protect growers from the abusive exercise of market power and ensure that growers are paid and incentivized for what is in their control. These recommendations include:
- A regulatory framework for production contracts that would 1) require integrators to pay independent contract growers for what they actually control (most likely through square footage contracts), or be willing to negotiate with grower cooperatives or associations on contracts that tie base price to integrator-owned animal performance fairly, and 2) guarantee minimum prices while complying with new, stricter guardrails on performance-based incentive formulas in contracts.
- Prohibit integrators from coercing, intimidating, or breaking contract with a contract producer based on their unwillingness to implement integrator desired upgrades to their on-farm infrastructure, provided that their infrastructure is in good working order, and compliant with state and federal law.
- Reform lending standards to animal agriculture operations basing income dependability on production contracts, to ensure that such contracts provide reliable income guarantees.