pennings policy


∆ Contact Dr. Daryll E. Ray at the UTʼs Agricultural Policy Analysis Center by calling (865) 974-7407,faxing (865) 974-7298, or emailing dray@utk.edu. For more info, visit: www.agpolicy.org


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GIPSA Rules Designed To Encourage Transparency And Discourage Arbitrary And Non-Uniform Requirements Of Producers


O


n June 22, 2010, the US Department of Agriculture (USDA), Grain Inspec- tion, Packers, and Stockyards Ad-


ministration (GIPSA), published a proposed rule describing and clarifying conduct that violates the Packers and Stockyards Act, 1929 (PSA) in the Federal Register


(http://archive.


gipsa.usda.gov/rulemaking/fr10/06-22- 10.pdf). These proposed regulations were put forth as required by the 2008 Farm Bill. The goal of the regulations is to pro- vide for a fairer market place for produc- ers of poultry, beef and pork. Two weeks ago, we examined a regula-


tion that clarified an area where the USDA believes that the courts have misinter- preted a section of the PSA. Last week we looked at areas where the policy recom- mendations made by Taylor and Domina in their testimony on competition over- lapped with regulations in the proposed rule. In this column we look at new regula-


tions in the proposed rule that were not specifically on Taylor and Domina’s list. The proposed regulation on “records re-


tention” would require a packer, swine contractor, or live poultry dealer to main- tain written records that provide justifica- tion for differential pricing or any deviation from standard price or contract terms of- fered to poultry growers, swine production contract growers or livestock producers. The goal of this regulation is ensure that preference is not shown to some produc- ers, as compared to others, when it comes to the price paid them for the animals that they raise. This issue of preference is specifically


dealt with in a section on “undue or un- reasonable preferences or advantages; undue or unreasonable prejudice or dis- advantages.” These regulations establish criteria the Secretary may consider in de- termining if an undue or unreasonable preference or advantage, or an undue or unreasonable prejudice or disadvantage has occurred under the Act. For example, it could be a violation of the Act when a packer or swine contractor to offer better price terms to producers who can provide larger volumes of livestock than to a group of producers who collectively can provide the same volume of livestock of equal qual- ity and it cannot provide a legitimate justi- fication for the disparity. The regulations on “livestock purchasing


practices’ are designed to prevent packers from engaging in practices by which they can communicate to their competitors in- formation about the price that they will pay producers. These provisions would open the market to other buyers, increase participation in the cow/bull slaughter market and would prevent collusion be- tween multiple packers. The section on “tournament systems”


would require live poultry dealers to pay the same base pay to growers that are rais- ing the same type and kind of poultry. Live poultry dealers would be prohibited from paying growers in growing arrangements


below the base pay amount. Live poultry dealers would also be required to rank growers in settlement groups with other growers with like house types. The issue of the “suspension of delivery


of birds” has been a problem that poultry growers have complained about. This sec- tion spells out the criteria the Secretary may consider when determining whether or not reasonable notice has been given for suspension of delivery of birds. In particu- lar, failure of a live poultry dealer to pro- vide notice of any suspension of delivery of birds at least 90 days prior to the suspen- sion taking place may be considered un- reasonable. This 90-day period would be important to allow the poultry grower time to consider options for utilizing his or her poultry houses and for keeping up with any loan payments, some of which are gov- ernment guaranteed loans. Another section, “capital investment cri-


teria,” includes the criteria the Secretary may consider when determining whether a requirement that a poultry grower or swine production contract grower make additional capital investments over the life of a production contract or growing


arrangement constitutes an unfair practice in violation of the Act. For ex- ample, if a pro- ducer made a large capital investment in a poultry house, in most


in-


DR. DARYLL E. RAY Agricultural Economist University of Tennessee


stances he or she should not soon thereafter be required to make another capital invest- ment to improve his/her facilities. Another example could be when a producer or grower is required to make an additional capital investment but no other similarly situated grower was required to make ad- ditional capital investments. Finally, one section provides criteria that


DR. HARWOOD D. SCHAFFER


Research Assistant Professor at APAC, University of Tennessee


the Secretary can use to determine whether or not growers have been pro- vided a “reasonable period of time to


CONTINUED ON PAGE 19


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