USDA Proposes New Rules for Packers, Stockyards to Clarify Unfair Practices

Continuing its efforts on competition issues in the livestock industry, the USDA has proposed a new rule to the Packers and Stockyards Act aimed at determining how “competitive harms” should be interpreted in lawsuits brought by producers against packagers.

This issue has been a long-standing challenge for livestock and poultry producers who file complaints against meatpackers. The USDA has also proposed similar rules in the past – often late in an administration’s term – and has subsequently seen those proposals shelved.

The proposed rule, “Fair and Competitive Livestock and Poultry Markets,” would clarify the interpretation of the term “unfair” under the P&S Act and further specify the conduct prohibited by the law. USDA said the rule would help ensure that livestock and poultry producers receive full value for their products and services.

More specifically, the rule would clarify the notion of “competitive harm” or “harm to competition.” Over the years, federal courts have interpreted competitive harm to mean that a packer’s actions against a producer not only harm the latter, but also lessen competition by harming other producers, e.g. example by affecting general market conditions. The USDA maintains that the law on packers and stockyards should include harm not only to the market, but also to individual producers.

The proposed rule has drawn praise from groups including Farm Action, the Organization for Competitive Markets, the Alabama Contract Poultry Growers Association and the National Farmers Union. The NFU, for its part, helped push the Biden administration with its “Fairness for Farmers” campaign.

“We applaud Secretary Vilsack and the Biden-Harris Administration for their continued progress in issuing important updates to the P&S Act,” said NFU President Rob Larew. “Family farmers and ranchers continue to face unfair practices from monopolistic meatpackers, and they need P&S Act rules that are clear, durable, and enforceable. The NFU looks forward to fully reviewing the rule to ensure it protects farmers from market abuses.”

On the other hand, the Meat Institute, which represents the meatpacking industry, said the USDA is “trying to set meat production back decades” with this proposal.

“Unfortunately for the Biden administration, Secretary Vilsack has tried these changes before,” said Julie Anna Potts, president and CEO of the Meat Institute. “They have failed in court, conflict with congressional intent, and are a blatant attempt to pick winners and losers in the marketplace. Under these proposed rules, everyone loses: the cattle producer, the packer, and ultimately, the consumer.”

The Meat Institute added that while the rule is “portrayed as an effort to increase competition, this government interference comes as fed cattle prices have been at record highs through most of 2023, surpassing previous records from 2014-2015, and now through 2024.” Cattle prices remain at record highs.

Potts noted: “What is the Biden administration trying to fix?”

Ethan Lane, vice president of government affairs for the National Cattlemen’s Beef Association, said the USDA proposal would ultimately hurt producers and their ability to profit from producing higher quality beef.

“The USDA’s proposed new rule is a direct attack on the profitability of livestock producers. By creating criteria that effectively consider any innovation or differentiation in the marketplace as inappropriate, the USDA is sending a clear message that cattle producers should not benefit from the free market but rather be paid a low price regardless quality, all in the name of this objective. -called equity.

In the final days of the Obama administration in 2016, Agriculture Secretary Tom Vilsack pushed to finalize the “Farmer Fair Practice Rules,” which included similar language. The USDA had been stuck for years implementing the rule because of clauses in funding bills that prevented it from trying to finalize the rule. The Trump administration then froze the rule and rewrote it, which also restarted the regulatory process. The Trump rules went into effect in December 2020 and were later withdrawn when the Biden administration took office and Vilsack regained his Cabinet position.

On Tuesday, Mr. Vilsack spoke about the proposal at a forum on farm competition hosted by the Center for American Progress in Washington. The secretary of state said the rule would translate unfair practices into “individual harm” to a specific farm.

“Today we are providing an application tool that I believe will allow for greater balance in the relationship between the farmer and the integrator,” Vilsack said.

The secretary said there too often remains an imbalance between growers who contract with packers and who can end up with significant liabilities over their operations.

“That’s essentially what Packers & Stockyards was designed to do: create balance in the relationship,” Vilsack said.

The secretary’s event also featured Jonathan Kanter, U.S. assistant attorney general for antitrust. Vilsack and Kanter discussed how the two departments have worked together in the Biden administration to pursue lawsuits against packers and processors, as well as draft rules. Vilsack said the collaboration helps protect USDA from potential litigation if the rule becomes final.

“We know that at the end of the day, people might very well challenge what we’re proposing, so it’s important for us to get it right,” Vilsack said. He added: “The rule we proposed today was difficult. This is a question that has been challenging people for some time. With the help of the Department of Justice, we have developed a way to see a road map for how an individual producer can benefit from the protections of the Packers & Stockyards (Act).

Kanter also announced at the CAP event that the Justice Department is increasing its focus on agricultural competition issues by hiring more “Midwest-based” attorneys and staff who will take a closer look at competition issues and potentially bring more P&S cases with the help of the USDA.

Asked about the review of livestock marketing contracts, Vilsack also said: “The next thing we’re going to look at is a livestock discovery rule.”

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DTN/USDA