The deadline for submitting comments on the proposed Grain Inspection, Packers and Stockyards Administration regulations ends Nov. 22, 2010. The proposed regulations allow livestock growers to sue livestock dealers and packers for unfair practices without having to show harm to competition. The proposed regulations also establish rules that:

  • Require a packer, swine contractor, or live poultry dealer to maintain written records that provide justification for differential pricing or any deviation from standard price or contract terms offered to poultry growers, swine production contract growers or livestock producers; 
  • Prohibits a packer or swine contractor from offering 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 quality and it cannot provide a legitimate justification for the disparity; 
  • Bans packer to packer sales; 
  • Prohibits livestock purchasers from buying for more than one packer; 
  • Requires packers, swine contractors, and live poultry dealers to provide GIPSA with sample copies of contracts within 10 business days of entering into the agreement with a grower or producer to increase transparency in the use of contracts and allow producers to make more informed business decisions;
  • Requires live poultry dealers to pay the same base pay to growers who are raising the same type and kind of poultry; and
  • Set rules on suspension of delivery of birds, capital investment criteria, capital investment requirements, reasonable period of time to remedy a breach of contract, and arbitration.

Cost/benefits

The USDA estimated that the cost of paperwork required with regard to these new regulations would be about $500,000. In addition, their analysis showed that the benefits of the regulations are expected to exceed the costs by providing for more transparent, competitive markets.

The American Meat Institute’s (AMI) recently released a study of the economic impact of the rule came to the conclusion that the implementation of the GIPSA rule would cost about 104,000 jobs and reduce the U.S. Gross Domestic Product (GDP) by $14 billion and “cause a total of $1.36 billion in lost revenues to the Federal, state and local governments.”

On November 10, 2010, Informa Economics released a study conducted for the National Meat Association (NMA) in cooperation with the National Cattleman’s Beef Association, the National Pork Producers Council, and the National Turkey Federation that estimated the costs of complying with the new regulations to include a loss of 22,800 jobs, a reduction in annual GDP of $1.56 billion and a decline in tax revenues of $359 million (http://nppc.org/uploadedfiles/GipsaReport-Final2,2010-11-09.pdf.).

In their conclusion to their report, “An Estimate of the Economic Impact of GIPSA’s Proposed Rules,” Informa writes: “During the course of this study, it became clear to us that the provision in the rule that relieves plaintiffs from the burden of proving competitive injury is by far the most damaging. Simply removing that one provision could reduce the economic damage expected from the rule by nearly 75 percent. All of the expected efficiency losses and demand decline that forms the basis for the largest portion of the costs are tied back directly to the packer/processors’ fear of increased litigation and an increased likelihood that a very large financial judgment will be rendered against them. That is the factor that will drive the packers to sharply reduce their use of AMAs, [alternative marketing agreements] which in turn creates large costs in terms of efficiency and product quality.”