Livestock industry voices opposition to GIPSA ruling

15-11-2010 | | |

The deadline (Nov. 22) is fast approaching for public comments to be submitted on the Obama administration’s proposed rule on buying and selling livestock and poultry, a regulation that industry organisations believe will fundamentally change the food-animal industry, leading to lost jobs and higher retail meat prices.

The US Department Agriculture’s Grain Inspection, Packers and Stockyards Administration in June unveiled the draft regulation, known as the GIPSA rule. The National Pork Producers Council outlined 7 reasons opposing the ruling.

1- The rule is based on the assumption that today’s livestock markets don’t function properly. In fact, current markets operate well for producers, packers and consumers alike. USDA’s own, peer-reviewed research confirms this. Neither a 1996 study on concentration in meat packing nor a 2007 meat marketing study found evidence of undue buyer or seller power in livestock markets. Meanwhile, food expenditures as a percentage of disposable income in this country are the lowest in the developed world – and have been declining steadily for decades.

2 – GIPSA says the rule simply fulfills a mandate under the 2008 Farm Bill. In fact, it goes way beyond the specific requirements in the Farm Bill. Ironically, it adopts through regulation what a small band of disgruntled producers couldn’t achieve through legislation. Several of the provisions were either specifically rejected by Congress or are counter to federal court rulings.

3 – Massive new regulatory requirements will translate into higher costs, which ultimately will be paid for by consumers in the form of higher retail meat prices.

4 – The rule requires written justification for premiums paid to producers for higher quality livestock. Rather than deal with that, packers are likely to pay just one price to all producers, regardless of quality. This will kill any incentive for innovation, such as better genetics to produce leaner meat. No longer will the most efficient or the most innovative producers be rewarded. As competition disappears, consumers will see fewer choices in the meat case.

5 -By discouraging long-term contracts with packers, the rule forces more producers into the cash market, where prices can fluctuate wildly and risks can be greater. That volatility also makes it harder to get from risk-averse bankers financing to run operations. Many producers will not survive in this more unpredictable environment. That will eliminate desperately needed rural jobs and concentrate power in the hands of the packers – the opposite of the rule’s purported intent.

6 -Because of new regulatory requirements for dealing with producers, packers likely will choose to raise more of their own livestock. That will put even more producers out of business and increase vertical integration in the meat-packing industry. That means fewer rural jobs, as livestock farms and the jobs that go with them disappear.

7 – An expanded definition of what constitutes a violation of livestock laws will turn ordinary contract disputes into federal court cases. The ultimate beneficiaries will be trial lawyers, who will find it easier to win lawsuits claiming “unfair” treatment. Even President Obama’s GIPSA administrator has called the expanded violation definition “a plaintiff lawyer’s dream.” And when trial lawyers win, everyone else loses.