Analysis finds GIPSA rule's costs 'substantial'
November 10, 2010
by Meat&Poultry Staff
KANSAS CITY, Mo. – A study released Nov. 10 by Informa Economics Inc. on behalf of the National Cattlemen’s Beef Association, the National Meat Association, the National Pork Producers Council and the National Turkey Federation Confirms what food-animal producers have suspected about a proposed federal rule on buying and selling livestock and poultry. This comprehensive economic analysis of the US Department of Agriculture’s proposed regulation found it would be bad for farmers and ranchers, consumers and for rural America.
Research shows the rule would result in job losses of more than 22,800, with an annual drop in gross domestic product by as much as $1.56 billion and an annual loss in tax revenues of $359 million.
However, the impact will not be immediate, said Rob Murphy, senior vice president at Informa Economics. He said it may take two to three years to reach the levels projected in the study.
“Effects will have a very long tail,” Murphy said. “The affected industries will still be feeling an impact a decade or more into the future. All signs point to detrimental outcomes for small producers, the very ones the rule is designed to help.”
According to the food-animal groups, USDA’s regulation – which would be administered by the Grain Inspection, Packers and Stockyards Administration and is known as the GIPSA rule – would restrict marketing agreements between producers and meat packers, dictate the terms of production contracts, require additional paperwork, create legal uncertainty and limit producers’ ability to negotiate better prices for the animals they sell, among other things.
“Well, we are talking about nearly $1 billion in direct and indirect annual new costs for the beef industry,” said Bill Donald, NCBA president-elect and a third-generation Montana rancher. “And if this study is correct that 82% of these costs will fall on US cattle producers like me, then we will see a lot for sale signs in rural America. If the beef industry losses 494,000 head as this study suggests, we will see higher prices for food and a slow and painful death to the American rancher. I’ve spent my entire life working on my family’s operation. I’m not going to stand by and allow this administration to advance a rule that could put my family’s operation out of business.”
The rule would result in “ongoing and indirect” costs to the livestock and poultry industries – eventually borne by producers and consumers – of more than $1.64 billion, including nearly $880 million to the beef industry, more than $401 million to the pork industry and almost $362 million to the poultry industry, the Informa study found.
“The GIPSA rule is very vague and ill-defined, will create considerable uncertainty among producers and packers alike and will have a detrimental effect particularly on small producers,” said Doug Wolf, NPPC president-elect and a pork producer from Lancaster, Wis. “The bottom line is that the rule will add to the costs of buying and selling hogs, increase the risk of litigation and lead to more vertical integration in the pork industry, all of which means lost jobs and higher meat prices.”