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Ag Organizations React to USDA Announcement on Competition in Agriculture [1]
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Date: 2023-11-09 14:47:05+00:00
USDA finalized the first in a series of rules under the Packers and Stockyards Act, which is aimed at helping contract poultry growers compete more effectively and better understand the terms of their agreements with major processing companies. (Photo: U.S. Department of Agriculture, Public domain)
WASHINGTON — Editor’s note: The following agricultural organizations have released statements concerning the USDA’s actions to address several competition issues in agricultural markets. More information about these actions can be found in the USDA release here. Click on the organization to jump to its statement.
National Farmers Union
Farm Action
Campaign for Contract Agriculture Reform
RAFI (Rural Advancement Foundation International – USA)
National Farmers Union
NFU Statement on Finalized USDA Poultry Transparency Rule
Today, National Farmers Union (NFU) President Rob Larew issued the following statement in support of the finalized “Transparency in Poultry Grower Contracting and Tournaments” rule from the United States Department of Agriculture (USDA) under the Packers & Stockyards Act (P&S Act):
“For far too long, monopolies across agriculture have put the squeeze on farmers and consumers. Poultry growers face an especially unfair contracting system that is opaque and secretive, and today’s finalized rule will require poultry companies to be more honest in their dealings with growers. This is good news for family farmers and will bring sorely needed transparency to livestock producers. We thank Secretary Vilsack for working to strengthen the Packers & Stockyards Act.”
The final poultry transparency rule released today is the first of several updates to the P&S Act being sought by USDA. Strong rules are needed to modernize the P&S Act to ensure family livestock producers are protected in the marketplace. In addition to issuing the final rule, USDA announced efforts to increase competition and innovation in seeds, improvements to USDA meat procurement requirements, and the establishment of a new Chief Competition Officer position at USDA.
NFU’s Fairness for Farmers campaign has brought the devastating impact of monopolies on family agriculture into the national spotlight. Campaign priorities include addressing issues such as increased enforcement of competition laws, excessive costs for fertilizer, supply chain vulnerabilities, and increased farm equipment costs.
Farm Action
USDA Competition Announcement Shows Movement but No Victory Yet, Says Farm Action
The clock is ticking to finalize all five Packers and Stockyards Rules and rein in monopoly power
Today the USDA announced a series of measures taken to improve competition in agriculture, including some efforts toward completing the Department’s directives from President Biden’s executive order on competition.
In response, Farm Action President Angela Huffman issued the following statement:
“Today’s actions are steps in the right direction, but on the whole, the USDA has not yet made it over the finish line on behalf of America’s farmers and ranchers. With time running out to complete the USDA’s competition directives, the Department must act much more aggressively to rein in monopoly power in the food system.
“The Final Rule on Transparency in Poultry Grower Contracting and Tournaments exemplifies this point. Providing contract growers with additional information about flock sizes and how much they can expect to make is helpful. However, the tournament system is still exploitative, merely offering farmers a take-it-or-leave-it deal. This rule simply shows farmers the terms of their exploitation. The USDA should follow DOJ’s lead and ban the abusive tournament system outright.
“We applaud today’s Competition and Innovation in Seeds announcement, and hope other measures can progress with such swiftness.
“Having urged the USDA for years to strengthen its rules around “Product of USA” labeling and domestic procurement, we are encouraged by the Updated Domestic Origin Requirements for USDA Purchases of Meat Products, which clarifies that meat products must be from animals that are born, raised, and slaughtered in the U.S. to meet the domestic origin requirements for purposes of USDA purchasing. It will have the most impact in the beef sector in which the dominant corporations do not differentiate their imported cattle from domestic, making them ineligible to meet the criteria. This will give American ranchers and independent domestic beef processors a window of advantage when the USDA issues bids for beef. To strengthen the impact of its domestic procurement, the USDA must maximize efforts like the Procurement Forecast tool, which assists independent producers in identifying potential opportunities for selling their products and services to USDA, and finalize its “Product of USA” rule.
“Establishing a Chief Competition Officer at USDA’s Agricultural Marketing Service (AMS) is a step toward elevating competition issues in the Department. However, AMS’s mission is not competition, it is marketing, and this change does nothing to lift the Grain Inspection, Packers and Stockyards Administration(GIPSA) up from where it was relegated by the previous administration, deep in the bowels of AMS. Only restoring GIPSA to an undersecretary level in the USDA will give our farmers and ranchers adequate protection against the abuses of the meatpacking monopoly.
“Our advice to the USDA is this: If the Department sincerely wishes to deliver a victory for farmers and ranchers, they must finalize the remaining four new rules to strengthen the P&S Act. Farmers must be given back their right to sue meatpacking corporations, and the USDA must end the abusive poultry tournament system.
To protect future rules from being overturned by Congress, USDA needs to finalize them prior to the deadline set by the Congressional Review Act, which could come as early as May 22nd, 2024. Rules that have not been finalized could be overturned by the next administration or by Congress.
“This is of course the exact same travesty against competition that happened during the Obama administration on Secretary Vilsack’s watch, and the Biden administration should take heed: In the absence of swift action, history could easily repeat itself.”
Campaign for Contract Agriculture Reform
CCAR Applauds New Rule Bringing Transparency to Contract Poultry Industry
Rule marks an important first step toward broader fairness for our nation’s poultry growers
The Campaign for Contract Agriculture Reform (CCAR) applauds the finalization of the “Transparency in Poultry Grower Contracting and Tournaments” rule under the authority of the Packers and Stockyards Act. The poultry transparency rule announced today is the first of several rule changes Secretary of Agriculture Tom Vilsack has put forward to strengthen enforcement of the Packers and Stockyards Act.
“The opaqueness of the contract poultry production system is at the heart of the economic abuse and deception inherent in the model,” said Steve Etka, CCAR Policy Director. “By requiring poultry companies to be more honest and business-like with prospective and existing poultry growers, this rule helps to deter that deception and give farmers the information they need to make wise investment decisions. Without a doubt, a full-scale reform of the poultry payment system is needed, but this rule is a very important and welcomed step toward that goal.”
Large poultry companies require contract poultry growers to go deep into debt and take on heavy liabilities to supply our nation with chicken. Contract growers receive no guarantee of return on their investment, no clarity on how they will be paid for their services, and no transparency about the quality of inputs the company provides to them to do their jobs.
Contract poultry growers are paid using a “tournament system” that bases payments on a grower’s success in putting weight on the birds they are raising during the 6-to-8-week growout period, relative to other growers. But the main factors that determine the grower’s ability to put weight on the birds are inputs provided and controlled by the poultry company, which are totally out of the control of the grower. These inputs can vary greatly in quality, leading to extreme variability in a grower’s income from flock to flock, through no fault of their own.
Since its inception in 1999, CCAR has sounded the alarm about how the combined effects of agribusiness consolidation and vertical integration have diminished farmers’ opportunities in the marketplace and endangered the economic vitality of rural communities. The contract poultry production model is one of the first examples of vertical integration in agriculture. CCAR has worked to combat the economic abuses faced by poultry growers and to alert all farmers about the dangers of relinquishing their independence through contract production.
“The lack of transparency for prospective contract growers about what to expect if they sign a contract to grow chickens for a poultry company has unfairly encouraged many farmers to go deep into debt to build specialized chicken houses on their farms, based on inflated income expectations,” said Etka. “For existing growers who have already signed a contract, the lack of transparency about the quality of the inputs supplied to them relative to other growers, and how those inputs will dictate their pay, enables companies to quietly shift their economic risks onto growers’ spreadsheets and retaliate against unfavored growers.”
This rule is the first of several Packers and Stockyards Act rules put forward by USDA to promote transparency, address deception and discrimination, and support market competition and fairness in the livestock and poultry sectors.
The Campaign for Contract Agriculture Reform (CCAR) is a national alliance of organizations working to provide a voice for farmers and ranchers involved in contract agriculture, as well as the communities in which they live. CCAR advocates for bringing equity to the contract negotiating process and against the exploitation of farmers, ranchers, and poultry growers in the meat and poultry industry. (contractagreform.org)
RAFI (Rural Advancement Foundation International – USA)
Finalized USDA Rule Would Increase Transparency in Poultry Industry
Reforms Would Require Poultry Companies to Disclose New Information on Earning Potential, Input Quality, and Tournament Groups and Formulas
Today Secretary of Agriculture Tom Vilsack announced the finalization of the USDA’s “Transparency in Poultry Growing Contracts and Tournaments” rule, issued under the authority of the Packers and Stockyards Act. RAFI (Rural Advancement Foundation International – USA) applauds Secretary Vilsack for taking this important step, and looks forward to the finalization of USDA’s “Inclusive Competition and Market Integrity Under the Packers and Stockyards Act” rule and the proposal of additional rules addressing unfairness and market power abuse in livestock and poultry sectors. RAFI also welcomes USDA’s announcement of a new “Chief Competition Officer” position at USDA, intended to more firmly establish a focus on fair competition within the Agricultural Marketing Service as an institution.
“The finalization of this first Packers and Stockyards Act rule is a major and even historic achievement, especially in light of the interference that these efforts have faced from corporate interests and their allies in Congress. We are glad to see some of our recommended improvements included in the final rule, and if correctly enforced, we think this rule will provide contract poultry growers with badly needed transparency regarding how fairly their integrators are dealing with them,” says Aaron Johnson, Senior Program Manager of RAFI’s Challenging Corporate Power program. “At the same time, it is critical that USDA not take its foot off the gas, as additional badly needed reforms — that have been called for by ranchers and growers for decades — remain to be proposed. USDA must finish what it has started today.”
The proposed “Transparency in Poultry Growing Contracts and Tournaments” rule will make some needed improvements to the poultry payment system by:
Requiring poultry companies to disclose the number of flocks and minimum flock stocking density that they will contractually guarantee annually, as well as any “sale of farm” policies.
Requiring poultry companies, when finalizing a new contract, to disclose to prospective growers the income range, broken down by quintiles, of current growers in a prospective grower’s region.
Requiring poultry companies to disclose information about the quality of the inputs they provided, — and any relevant feed discrepancies — to growers both when inputs are delivered and on settlement sheets, when growers receive their pay.
Requiring poultry companies to provide each grower anonymized information about the quality of the inputs provided to every other grower in their “tournament group” on settlement sheets.
Requiring poultry companies to disclose how their tournament system formulas account for input quality variability.
Requiring poultry company CEO’s to sign agreements that require the implementation of internal controls frameworks necessary to provide accurate disclosures, and compliance with USDA audits of disclosed data.
Contract poultry growers do not own the chickens they raise, nor do they choose the feed or medicine they use to raise them — these are all provided by the poultry corporation, or “integrator,” that they contract with. When these growers return flocks of fully grown chickens to their integrator for processing, the corporation does a detailed analysis of the feed conversion performance of each grower in that week’s “tournament group.” It then averages these statistics, docks the pay of the growers whose flocks were found to be below average, and transfers that money to growers of above-average flocks as bonuses. Poultry corporations cast this system as encouraging healthy competition, but in reality, the outcome of this competition is never in the control of growers.
The most decisive variables that lead to a flock performing above or below average, like the health and quality of chicks, feed, and medicine or the timing of when flocks are picked up for processing, are all controlled by the integrator. Furthermore, the fact that these production factors are inherently variable results in fluctuating extra costs within the overall enterprise of growing poultry. Herein lies the perverse utility of the tournament system: instead of sharing these inherent costs equitably, integrators pit their growers against each other and extract these costs from whomever happens to fall below the arbitrary tournament average. Thus, instead of a legitimate competition, the tournament system functions as a way for poultry companies to transfer the risk and cost of any problems with the chicks, feed, or medicine they provide onto the growers they contract with.
RAFI-USA has advocated for decades for USDA to rule that any tournament system or formula payment arrangement that bases grower compensation on factors outside their control to be an unfair practice. While this rule stops short of that standard, if finalized, it takes many important steps toward giving contract poultry growers the information they need to better advocate for themselves, while significantly increasing transparency in the industry.
RAFI (Rural Advancement Foundation International – USA) is a nonprofit organization challenging the root causes of unjust food systems, supporting and advocating for economically, racially, and ecologically just farm communities. (www.rafiusa.org)
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https://www.morningagclips.com/ag-organizations-react-to-usda-announcement-on-competition-in-agriculture/
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