Business

What will the USDA’s new rules mean for small farms?

The USDA has proposed removing the burden of proof from farmers who wish to sue meat packers for unfair practices. Farmers and trade groups disagree on whether the proposed rule changes could harm or help small farmers. 

A farm worker collects eggs in an old-fashioned chicken house at Hilliker Egg Ranch, on Nov. 6, 2014 in Lakeside, California. Owner Frank Hilliker is in the process of converting to a cage-free system for all his chickens. The USDA has proposed removing the burden of proof from farmers who wish to sue meat packers for unfair practices.
Melanie Stetson Freeman/Staff/File | Caption

With just weeks left in the Obama administration, the United States Department of Agriculture has proposed a set of three highly controversial rules the agency says will defend family farmers, but that some industry representatives say would do exactly the opposite.

The new rules, which have been under discussion for the entirety of President Obama’s presidency, address the way in which disputes between meat farmers and meat packers are negotiated under the Packers and Stockyard Act. Ostensibly, these rules are targeted at helping small farmers advocate for themselves in a world where meat packing firms wield influence over prices, stoke competition among producers, and manipulate other factors that cut into farmers' profits.

Although thousands of small farmers have supported the rule changes over the past eight years, industry trade groups say that the proposed changes could actually hurt small farmers by incentivizing greater meat packer control over growing practices as packing companies seek to avoid lawsuits.

"Farmers need to look at what the consequences of this rule will be. This is simple – meat packing companies are not going to open themselves up to exposure like this," National Pork Producers Council spokesman Dave Warner tells The Christian Science Monitor in a phone interview. "The little guy may have a hard time, and it could have the opposite effect than they think it is going to have."

The new regulations, collectively known as the Grain Inspection, Packers and Stockyards Administration (GIPSA) rules, consist of three separate stipulations. The first rule, known as the interim final rule, would open up meat packers to lawsuits in federal courts by farmers who allege that the meat packers are treating them unfairly. Previously, farmers and meat producers were required to prove that an unfair practice had market-wide repercussions in order to sue in federal court. 

Industry trade groups such as the Pork Producers Council and the National Chicken Council say they are most concerned about this rule, as it could incentivize greater vertical integration in the meat industry and encourage litigiousness among farmers. Greater vertical integration in the meat industry would mean that fewer farmers would actually own the animals they sell to meat companies – instead, the packing companies would provide farmers with animals and supplies, while farmers would contribute the facilities and expertise.

The poultry industry is already highly vertically integrated, however, which is one of the reasons that the existing Packers and Stockyards Act initially came under scrutiny in 2008.

Departing Agriculture Secretary Tom Vilsack says that under the current laws, meat packers can operate with impunity because of the unnecessarily heavy burden of proof laid on farmers who hope to sue for unfair practices. 

"For years, American farmers have been calling for protections against the most damaging unfair and deceptive practices confronting family farms across the country," said Secretary Vilsack in a USDA press release. "Poultry growers in particular are vulnerable to market risks and concentration in the processor market. All too often, processors and packers wield the power, and farmers carry the risk. Today, USDA is taking a big step toward providing the protections that farmers deserve and need."

Comments by approximately 60,000 small farmers provided the impetus for changing this rule, the USDA says. Without some sort of change, the agency says, the amount of control that meat packers have in the industry could lead to retaliatory measures against farmers who attempt to advocate for themselves, such as if packers deliberately supply farmers with poor feed or sickly animals with high mortality rates in order to justifying paying less for the final product. 

According to the Pork Producers Council’s Mr. Warner, making it easier for small farmers to sue the meat packers who supply them could actually have negative results, with more packers deciding to own the animals themselves in order to reduce the risk of a lawsuit. A study by the Pork Producers Council in 2010, and updated for this year’s data, found that complying with the USDA’s proposed rule changes could cost the industry up to $420 million each year.

“These rules, however, could lead to rigid, one-size-fits-all requirements on chicken growing contracts that would stifle innovation, lead to higher costs for consumers, and cost jobs by forcing the best farmers out of the chicken business,” wrote National Chicken Council President Mike Brown in a statement. “The interim final rule on competitive injury would open the floodgates to frivolous lawsuits.” 

Although Warner tells the Monitor that the less vertically integrated pork industry could suffer from such changes, Cornell University’s Harvest New York Livestock Processing and Meat Marketing specialist MacKenzie Waro says that most meat sold commercially already comes from packer-owned animals.

"It is difficult for small farms to get into larger markets such as grocery chains and restaurants. This practice gives small farmers the market to do freezer trade or farmers markets, but keeps them out of the majority of meat sales," says Professor Waro.

"These rules could be beneficial for smaller farms, because they would give farmers more of a voice."

According to procedure, the proposed rule changes will be published in register next week. There will then be a 60-day comment period, in which lawmakers and concerned individuals can comment on the rules. 

The changing of the guard in the White House could significantly influence whether or not these rules are adopted, with experts like Waro and Warner telling the Monitor that a Trump administration would likely table any rule changes.