The new Grain Inspection, Packers and Stockyards Administration rule governing contracts between poultry processors and growers announced last week by U.S. Department of Agriculture Secretary Tom Vilsack may finally eliminate points of contention that have divided processors and growers for decades.
"We have said all along that many poultry growers have been faced with a take-it-or-leave-it deal in these contracts," American Farm Bureau Federation president Bob Stallman told MEATPOULTRY.com. "When the contracts were negotiated, unwritten promises would be made, but then the written contract didn’t have any of them."
Announcing the new rule, Vilsack said: "The Obama Administration is committed to ensuring that the marketplace for our farmers and ranchers is free from unfair and deceptive practices. This new rule will provide much-needed information and basic protections for poultry growers that will enable them to make better business decisions and safeguard their livelihood."
The new GIPSA rule, which becomes effective Jan. 4, 2010, requires processors (often called "integrators" when discussing poultry contracts) to provide growers with a "true" written copy of the contract and that the contract must include any and all information about any performance improvement plans and provisions for written termination notices, including "factors considered when placing a poultry grower on a performance improvement plan; …the guidance and support provided to a poultry grower while on a performance improvement plan; and … the factors considered to determine if and when a poultry grower is removed from the performance improvement plan and placed back in good standing, or when the poultry growing arrangement will be terminated."
The rule also allows growers to discuss the terms of the contract with certain individuals. "The point that has always been troublesome was the confidentiality agreement," Stallman said. "A grower couldn’t talk to anyone – not other growers, not his attorney, not even his banker. If a contract required you to make improvements yet you couldn’t talk to your banker about it, that really tied up a grower. It was just not fair."
Poultry-growing contracts have been a battleground for poultry farmers and certain processors dating back to the 1970s. By the mid-1990s the issue had heated up to the point that the National Contract Poultry Growers Association convened in Atlanta, Ga., in direct opposition to the International Poultry Exposition, also held in the southern city. In 1994 MEAT&POULTRY magazine reported: "Discontent among poultry growers in the U.S . . . is the most controversial and volatile issue in the poultry business today. The grower issue grows like an artery blockage in the very heart of the poultry industry’s phenomenal success of the past 20 years: competitive pricing against the other flesh proteins." GIPSA’s original announcement of proposed rulemaking to make poultry contracts more transparent was made in 1997. In 2000, the Farmer’s Legal Action Group proposed a "Producer Protection Act" that suggested several changes that appear, in somewhat modified form, in the new GIPSA rule.
The new rule’s significant impact on the way contracts had been written and fulfilled in much of the U.S. poultry industry also earned praise from the Organization for Competitive Markets, which often opposes the Farm Bureau when it comes to agricultural reform. In a statement, OCM called the new rule "a significant and badly needed step forward in reforming an industry that has a history of subjugating and otherwise dealing unjustly with contract poultry growers." Organization president Randy Stevenson commented: "This GIPSA rule is clear evidence that USDA and the other enforcement agencies are serious about market reform. We are very encouraged by this rule on poultry contracts and eagerly await the final rule on the Packers and Stockyards Act. We are hopeful that the rule will hold that packers owning livestock and having captive supplies is inherently discriminatory and constitutes undue and unreasonable preference."
Stallman said the new rule’s several points are each small in their way, "but put all of them together and it really increases the transparency."