Source:  Rita Jane Gabbett, MEATINGPLACE.COM, 10/21/10

Changes in livestock marketing rules proposed by USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA) in June would cost $14 billion in GDP, $1.36 billion in lost tax revenue and 104,000 U.S. jobs, according to an economic analysis by John Dunham and Associates commissioned by the American Meat Institute.

The forecasts contrast sharply with GIPSA’s analysis that the proposed rules would cost less than $100 million, which is below the threshold that would have mandated USDA conduct a further economic impact study.

The disparity comes from the GIPSA analysis considering administrative, analysis and adjustment costs of the rule, while the AMI study considered broader ramifications, explained AMI Senior Vice President for Regulatory Affairs Mark Dopp on a media teleconference.

The AMI study included the assumption that the wide use of producer/packer marketing agreements would significantly decline under the new rules, impacting industry suppliers, service providers, distributors and retailers as well as meat processors.

Because the GIPSA rules would lower the burden of proof for producers claiming economic damage from packer pricing differences, marketing agreements would become too risky legally to continue, according to AMI.

AMI President and CEO J. Patrick Boyle argued on the teleconference that those marketing agreements have allowed packers to pay premiums for unique products consumers want and have facilitated an increase in store brands and producer-branded products, all of which has been good for the meat industry in general.     

AMI, other meat industry groups and more than 100 legislators have called on USDA to further study the GIPSA rule impacts.

The AMI study also projected retail meat prices would rise 3.33 percent, pushing consumer demand down by 1.68 percent if the rule were implemented, assuming market disruption and inefficiencies that would potentially lower quality meat and poultry products.

The study further suggested livestock producers would be especially affected by the implementation of this rule, losing up to 21,274 jobs, many in rural America.

The complete study, a methodology report and frequently asked questions and answers can be found at www.MeatFuelsAmerica.com/GIPSA.

USDA response
“We know there are strong feelings on both sides of this issue, and once all comments have been received, we will try to come up with as good a rule as we can,” said USDA spokesman Caleb Weaver in an email to Meatingplace. “USDA has a responsibility to look out for all of our farmers and make sure that the playing field is as level as it can possibly be so that farmers and ranchers of all sizes get a fair shake, which is what the proposed rules are all about.”

He went on to say, “We will take all of the comments we receive very seriously, which is why GIPSA extended the comment period to a total of 150 days. We are in the middle of that extended comment period where we have encouraged comments from all interested parties on costs and benefits and whether all impacts have been considered.”

Other groups weigh in
“This is a very bad time for the government to impose unnecessary and expensive burdens on poultry and livestock operations,” said Bill Roenigk, senior vice president and chief economist for the National Chicken Council. “We remain confident that the USDA could address specific issues as directed by Congress without threatening the productivity of the poultry and meat industries and the livelihoods of thousands of farmers and ranchers,” he added.

National Cattlemen’s Beef Association President (NCBA) Steve Foglesong said the proposed rule goes beyond the intent of Congress and serves as another example of government overreach into private business.

“Why wouldn’t USDA want to do an economic analysis? Why wouldn’t the proponents of this rule want an analysis to build their case? This doesn’t make any sense,” said Foglesong in a statement.

USDA maintains that the proposed rule, including its economic analysis, was thoroughly reviewed within USDA and by an Office of Management and Budget coordinated federal review which included a review by the Small Business Administration before it was published.  

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