The USDA took an important step last month to bring more fairness to the livestock industry. The impact of three introduced “Farmer Fair Practice Rules” will be significant across the nation, creating much-needed protections for farmers.
Much of the livestock industry is vertically integrated; meat processors enter into contract agreements with farmers to grow livestock. The processor owns the feed and animals, and sells them to the farmer at a set price.
This arrangement is especially prevalent in the poultry industry, where 51 percent of the broiler market and 57 percent of the turkey market is controlled by just four processors. More than half of all growers live in a region with two or fewer processors to choose from.
If a farmer does something the processor doesn’t like, such as file a complaint about contract terms or seek a contract with a different company, the processor might cancel the contract or provide inferior stock.
The contractor has the power to put the farmer out of business.
USDA’s long-awaited action implements a key provision of the 2008 Farm Bill. The first rule addresses the tournament system where growers compete for poultry contracts. The second gives growers the power to file complaints if meat companies treat them unfairly. The interim final rule confirms that a farmer is not required to demonstrate injury to the entire sector in order to receive compensation from having been victim to anti-competitive practices.
A 60-day comment period ends Feb. 21.
Established in 1973, the Center for Rural Affairs is a private, non-profit organization working to strengthen small businesses, family farms and ranches, and rural communities through action oriented programs addressing social, economic, and environmental issues.