Source: MEATINGPLACE, 11/10/11
 

The U.S. Department of Agriculture is backing away from one of the most contentious provisions of its proposed “GIPSA Rule” on poultry production but keeping another provision designed to protect poultry farmers with older-style housing, according to a copy of an interim final rule obtained by Meatingplace.
The interim final rule is currently undergoing review at the White House Office of Management and Budget (OMB).

USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA) dropped its attempt to curtail so-called “tournament” compensation for farmers who grow poultry under contract with integrated producer-processors by banning the companies from paying farmers less than a “base” amount. In a tournament system, farmers are paid largely according to their success in meeting targets for feed utilization and bird weight as compared to other farmers who birds are collected during the same time period.

But GIPSA left in place a requirement that any company using a tournament system has to rank farmers in groups of those who raise birds “of the same breed’ and the same target weight. Farmers must also be grouped according to the types of production facility (a “growout house”) they have, “based upon comparable production technology utilized.” GIPSA discussion of the interim final rule makes it clear that a farmer with an old-fashioned “conventional” house, for example may not be grouped with a farmer who has an up-to-date, tunnel-ventilated house, which the companies call “premium” housing.

“GIPSA believes that . . . this interim rule will help promote a level playing field among poultry growers that are compensated by live poultry dealers ranking poultry growers in settlement groups in a tournament system,” the commentary in the rule said.

The agency said that allowing companies to group conventional and premium houses in one settlement group is an “apples vs. oranges” comparison that  “doesn’t allow an accurate comparison of the services they are providing.” The cost to the companies of making the change will be less than the value of the benefit to the farmers, the agency said.

“GIPSA also believes that this action will foster greater trust between poultry growers and live poultry dealers since live poultry dealers, by complying with the regulation, can assure the growers that they are being compensated equitably,” the agency’s commentary said. “Live poultry dealer” is government jargon for a poultry company.

The industry fought the agency’s proposal on settlement groups and base pay. The companies and their associations argued that they did not have a “base pay” but rather figured an average compensation per pound of meat produced, and then ranked and paid farmers according to certain criteria. They argued that ranking no farmer below the base, or average, meant that no one could be above average, either.

GIPSA said its analysis of the impact of the proposed rule was influenced by studies submitted by the National Chicken Council, National Meat Association, National Cattlemen’s Beef Association, and National Pork Producers Council. The studies, by Informa Economics and Thomas Elam, estimated that the proposed rule would cost hundreds of millions of dollars. The agency estimated the cost to industry of the interim final rule at $22.6 million. Here is some of the specific language in the interim final rule:

PROPOSED RULE
Section 201.214 Tournament systems.
(a)            If a live poultry dealer is paying growers on a tournament system, all growers raising the same type and kind of poultry must receive the same base pay. No live poultry dealer shall offer a poultry growing arrangement containing provisions that decrease or reduce grower compensation below the base pay amount.
(b)            Live poultry dealers must rank growers in settlement groups with other growers with like house types.

INTERIM FINAL RULE
Section 201.214 Tournament systems and compensation
(a)            Live poultry dealers who pay poultry growers on a tournament system must rank growers in settlement groups with other growers who raise and care for the same type and kind of poultry, and other growers with like house types based upon comparable production technology utilized.  Poultry will be considered to be of the same type and kind if it is of the same breed and shares the same target weight range.
The language in the interim final rule replaces original language in the proposed rule published in June 2010 that stated that all growers “raising the same type and kind of poultry” had to receive the same “base pay” and said the companies could not “decrease or reduce grower compensation below the base pay amount.”
 

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