Why USDA Needs to Finish the Fair Farm Rules

What is the problem?

Our food system is not working for most Americans. Most supermarket aisles do not offer good, nutritious foods as feasible shopping options. What you will find is an abundance of cheap, processed foods that are generally unhealthy, or meat from factory farms produced with antibiotics and artificial hormones and vegetables raised with pesticides that are often produced halfway around the world.

At the same time, small and medium sized farmers across the U.S. have been driven out of business or are barely making ends meet. We are losing our farming backbone because bigger companies set unfair prices for livestock and crops, cheating small and medium farmers out of money they need to cover their costs. The companies get away with it because farmers often don’t have anywhere else to sell their products.

A few large companies dominate the meat and poultry industries. Their control over these markets allows them to use oppressive contracts to squeeze both small producers and consumers. For example, nearly all producers of broiler chickens (those chickens raised for eating) operate under take it or leave it contracts. Chicken processing companies regularly require growers to make costly equipment upgrades, sometimes for little or no reason and often pay growers less for the chickens than what they cost to raise. Companies have retaliated against growers that complain. Growers put up with it because in many parts of the country, there is only one processing company for chickens.

The 2008 Farm Bill included some new reforms to protect small and medium-sized farmers who raise cattle, hogs, and chickens. The bill required the U.S. Department of Agriculture to enforce a law called the Packers and Stockyards Act by enacting new Fair Farm Rules, also known as the GIPSA rules (named for the branch of the USDA that would oversee the rules, the Grain Inspection, Packers and Stockyard Administration). The Packers and Stockyards Act has been on the books since 1921, but the Department of Agriculture has never enforced its prohibition on unfair contracts and discriminatory practices against farmers and ranchers.

What do the proposed rules do?

The new rules prevent meatpackers from giving “undue preference” to large producers, like factory farms, that put small independent producers at an economic disadvantage. Many of the changes are technical, but very meaningful to small and midsized farmers and ranchers. The new rules would:

• Stop price premiums and secret preferential contracts granted to cattle and hog factory farms.

• Prevent one buyer from representing multiple meatpackers at an auction. This practice effectively eliminates competitive bidding on livestock, which hurts small-scale producers.

• Prohibits retaliation against poultry growers who speak out about abuses.

• Protects poultry growers who make expensive upgrades and investments and prevents companies from requiring growers to make expensive upgrades to their facilities if they are in working order.

How will this impact small farmers?

New rules to make contracts more fair will make it easier for small farmers to get their product to market and make a fair price that will let them stay in business.

Who is working against the fair farm rules?

Big processing companies that profit off exploiting small farmers and ranchers like Tyson, Cargill, and Swift. And trade associations like the American Meat Institute and the National Chicken Council.

Didn’t the current system develop because it is more efficient?

The current system only benefits meatpackers and poultry processors, who pay farmers less and less for their livestock and force them into unfair contracts. The companies have efficiently eliminated independent farmers, but consumers don’t even get the benefit of this so-called efficiency, since food price inflation has risen sharply over the past few years. Also, large-scale production leads to greater public health and environmental problems, which impact everyone.

Doesn’t the current system lead to lower prices for consumers?

No – consumers see no benefit from the current system, as savings by processors from these oppressive contracts are not passed onto consumers. When so few companies control the market, they don’t have much reason to pass savings on to consumers. And consumers lose out as small and midsized farmers are pushed out of business. We’re left with fewer healthy sustainable choices and more antibiotic and artificial hormone ridden meat and poultry in the grocery store.