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DTN – Wednesday – Aug. 11, 2010 – 6:37 a.m. CDT (quotes R-CALF USA CEO Bill Bullard) GIPSA Rule Defenders Gather Advocates See Rule as Maligned by Opponents By Chris Clayton, DTN Ag Policy Editor OMAHA (DTN) -- Advocates for livestock cash markets see this week's Organization for Competitive Markets meeting as preparation for a livestock industry gathering later this month in Colorado that is being built up as the most critical government meeting in the history of fairness and competition in livestock marketing.
USDA's Grain Inspection, Packers and Stockyards Administration proposed a rule in June with several provisions addressing perceived unfair and uncompetitive practices by packers, arbitration provisions and market transparency on the pricing preferences of livestock. Originally, the rule would have gone into effect later this month, but industry uproar prompted a 90-day extension of the public comment period. The OCM meeting in downtown Omaha, which drew about 100 people Tuesday, was filled with experts who have long argued for better fairness in the relationship between packers and producers. The group's main speakers on the GIPSA rule resoundingly defended USDA's authority to issue the rule and the need for better market protections. Neil Harl, a retired agricultural law professor from Iowa State University, said GIPSA is within its authority to address the lack of protections producers now have under court interpretations of the 1921 Packers & Stockyards Act. Defending GIPSA, Harl also added he felt a "sense of anger, a sense of frustration and fear over the recent mauling" of USDA officials who came under harsh criticism at a House Agriculture Subcommittee hearing last month. Harl said he had not found anything in the new rule beyond the scope of the Packers & Stockyard Act, but added, "The rule is counter to what the most powerful players thought they had settled years ago." Robert Taylor, an agricultural economics professor at Auburn University, said the GIPSA rule would require packers to justify why producers with the same quality of cattle get different prices. Taylor has looked at recent pricing data that shows producers with a marketing agreement receive $21 more a head than producers selling the same quality of cattle on the cash market. Producers with forward contracts are getting an average $47 a head more. "Those selling on the cash market even with a grid are not getting as much," Taylor said. Daryll Ray, an agricultural economics professor at the University of Tennessee, criticized what he sees as fear mongering on the rule. "It's really important that we try to offset some of that on a one-on-one basis," he said. Bill Bullard, CEO of R-CALF USA, said implementing the GIPSA rule would be the first step for re-establishing some balance between packers and producers. "Anticompetitive practices have been ongoing and have become institutionalized to where people now view them as being normal." Another step, Bullard said, would be for people who support the rule and want reforms in the packer-producer relationship to show up at the USDA-Department of Justice meeting on livestock competition practices on Aug. 27 in Fort Collins, Colo. Livestock groups with a variety of perspectives are pushing their members to show up at the Fort Collins meeting. Some are even organizing bus trips for the event. "When 25,000 people show up in Fort Collins it will be mind-boggling and have the impact of allowing for facilitating a fundamental change in the direction of rural America," Bullard said. Bullard said packers have enticed producers into contract agreements by narrowing the window available to producers to sell on the cash market. Yet contract prices are still based on the cash market that has lower live volume to set prices, Bullard said. Increased reliance on contracts could eventually move cattle into the same type of production contracts used for hogs and poultry, in which there is little or no live market left to provide price discovery. There is one obvious reason why packers are resisting more transparency in price discovery, he said. "They realize they will continue to make more money under current conditions than if they have to fully comply with the 1921 Packers & Stockyards Act," Bullard said. One provision in the rule would prevent multiple packers from hiring a single order buyer who would buy for multiple entities. Some small auction barns worry no one would be buying cattle. Bullard said R-CALF has filed recent complaints with GIPSA in the past because packers have multiple order-buyers at sale barns. Bullard called it a form of collusion. "The packers eliminated competition by joining together to hire one buyer to buy all the cows and bulls," Bullard said. He added R-CALF backs that provision in the rule. "It's ridiculous what opponents are saying that it would eliminate competition." Cindy Johnson, a Georgia attorney, said she began defending poultry producers in the early 1990s because she saw inequities in the way poultry integrators paid producers, terminated contracts and demanded building or equipment changes for producers to keep their contracts. "Things have not gotten any better, they have gotten worse," she said. When Johnson began taking cases for poultry growers, the integrators often would settle claims with lawyers, acknowledging unjust practices even before a case was filed. She also won cases even as attorneys for integrators began arguing that a producer had not shown harm to overall competition by the packer's actions. Then Johnson lost a case in which the 11th Circuit Court of Appeals cited the need to show harm to competition. Johnson said rights for producers against unfair practices under the Packers & Stockyards Act pretty much fell by the wayside after that. Johnson was attorney for Tennessee producer Alton Terry, who lost a Sixth Circuit Court of Appeals case in May. "They said you could not under any circumstances show harm to competition in an individual claim like that," Johnson said. "The reality today is poultry producers absolutely have no rights." © Copyright 2010 DTN/The Progressive Farmer, A Telvent Brand. All rights reserved. NOTE:
In accordance with Title 17 U.S.C. section 107, any copyrighted material herein
is distributed without profit or payment to those who have expressed a prior
interest in receiving this information for non-profit research and educational
purposes only. For more information go to: More information on the GIPSA rule can be found at http://www.gipsa.usda.gov/… (CZ)
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