GIPSA rule
would reset poultry contracts
Attorney says proposed rule is likely to increase litigation, curtail use of tournament-style
grower pay and increase processor ownership of poultry farms. BY TERRENCE O’KEEFE
GIPSA was required to makes rules to determine:
The 2008 Farm Bill charged the
USDA Grain Inspection, Packers and
Stockyards Administration (GIPSA)
with revising regulations dealing with
the contractual relationships between
livestock and poultry processors
and livestock farmers and poultry
growers.
GIPSA held three public meetings
in October 2008 to gather comments
and then held joint competition work-
shops with the department of justice.
According to attorney Brett
Schwemer, who spoke at the National
Turkey Federation Leadership Conference,
the most signi;cant provision of the proposed
rule is the elimination of the requirement to
demonstrate competitive injury or likelihood
of competitive injury to prove violations
❯❯
✔If the arbitration process in the contract
provides meaningful opportunity for full
participation of the grower
✔If undue or unreasonable or advantage
has occurred
✔Whether reasonable notice has
been provided to growers on suspension of delivery of birds
✔Whether additional capital investment
requirements are in violation of Packers
and Stockyards Act
✔Whether the integrator has given a
grower reasonable time to remedy
breach of contract
turkeys in the U.S. utilize a “tournament
system” where the live cost per pound of
raising birds on a grower’s farm are compared to some sort of rolling average for
competing farms over a given time period.
How the farm’s costs
deviate from the average is used as a factor
in calculating the cost
per pound the grower
receives as payment
for raising the ;ock.
In many cases the deviation from average
cost becomes a deduction or addition to the
base rate of pay.
Under GIPSA’s proposed rule, all growers raising the same type and kind of poultry
must receive the same base pay.
USDA/DOJ field hearing is reported on in the article,
“Ag Secretary, Attorney General hear grower complaints,” at
www.WATTAgNet.com/16166.html
a
➚
it intends to reduce or end operations within
12 months of requiring capital investments.
The rule also says that any required capital
investment must be accompanied by contract duration of a suf;cient period of time
for the poultry grower to recoup 80% of the
cost of the required investment. Schwemer
said that these provisions are ambiguous
and subject the processor to more risk.
of sections 202a and b of the Packers and
Stockyards Act.
Schwemer noted that removing the need
to prove competitive harm would lead to more
lawsuits between growers and processors,
and fear of litigation would lead processors
to have more standardized contracts with
growers and possibly to ownership of growing operations.
Tournament with no losers?
Many contracts for growing broilers and
Capital investment requirements
GIPSA’s proposed rule says that the
grower must have discretion to decide
against a required capital investment. It says
that the processor must notify the grower if
90 days notice
A written notice is required 90 days
prior to the suspension of delivery of birds
to growers under the proposed GISPA
rule. GIPSA is required by the Farm Bill
to establish a reasonable period of notice,
but Schwemer questioned whether 90 days
is the right amount of time.
Growers and processors are invited to
comment on the proposed rule; the comment period ends November 22, 2010. Read
the proposed GIPSA rule online: http://
archive.gipsa.usda.gov/psp/Farm_bill_
rule_outline.pdf. ■
