Hi, I'm Andy Green, Senior Advisor for Fair and Competitive Markets here at the
United States Department of Agriculture. It's a pleasure to be here today to host this webinar
on our proposed revisions to the regulations under the Packers and Stockyards Act of 1921,
which we are currently soliciting comments on.
I hope that during this webinar I can give you an easy to understand overview of our proposed rule
and answer some of the questions and concerns that you may have. Before we start let me say a couple
of quick things about the regulatory process. It's really not as intimidating as it seems. It's great
that you're already taking a few moments in this webinar to understand what USDA is proposing.
When we're done, think about it and then submit your own comment to USDA through regulations.gov.
If you search for transparency and poultry growing contracts and tournaments or ams-ftpp-21-0044-0001
on regulations.gov you'll find the proposed rule. Select the rule and click on the blue
comment button on the top and off you go. We truly read, consider and respond to comments
when we are writing the final rule that goes into effect about a month after we publish it
in the federal register. Once that happens it has the force of law.
Our final rule will be better because of what you tell us through comments in the proposed rule. usj
explains the rule in great detail offers some economic analyses and asks some questions. The
text, the regulation is, sorry, near the end of end of page 35021, but you could skip down there,
it's okay, it's only a few pages long, read it and then read the introduction, the preamble and
the other parts of it and you'll see exactly what we're proposing. Today's discussion is meant to
help you understand the regulation and understand some things we, USDA would like to know.
It's not a quiz. You're welcome to answer some of the questions we have asked in the proposal,
even just one of the questions or you don't need to even answer any specific question,
just tell us about poultry growing contracts and what you think about this rule.
Would it help you? Would it not? How could it be better? Why? We invite all members of the public
to submit comments on this rule and don't be shy about disagreeing with us or anyone else. We hope
to get this right and the only way we can do that is by hearing from you, so tell us what you think.
Now let's jump into the rule itself. USDA has proposed a rule, known as a regulation,
that would set certain requirements on live poultry dealers. Live poultry dealers are also
known as integrators. We intend the proposed rule to make poultry a more transparent business that
works better for everyone. The proposed rule, transparency in poultry growing contracting
and tournaments, is designed to increase transparency in the poultry tournament
system and poultry contracting system overall. Our objective is to provide poultry growers with the
information they need to make informed business decisions and prevent growers from being deceived.
The proposed rule has two main parts. Each part requires integrators to give information
to growers. The first part of the proposed rule would provide growers with information
about the entire poultry growing contract. The second part of the proposed rule would provide
information to growers about the inputs they receive under a poultry grower ranking system or
tournament. Currently, growers take on a large amount of financial risk when
contracting with live poultry dealers to raise chickens or other poultry.
Typically the revenues generated from these business agreements are critical for the grower,
so they can meet loan payments or other financial obligations necessary to to stay solvent. And also
currently integrators control the provision of inputs, such as chicks and feed, to most growers.
Unfortunately, concentration in the poultry sector has resulted in very few options
for most growers. Growers can only contract with a few poultry dealers near them. Many growers have
complained to USDA over the years that the lack of choice results in unfavorable contract terms for
growers when negotiating a contract. Growers lack the information they need, such as how many flocks
they'll get under a contract, the types or nature of the inputs they receive and how the inputs
can affect the outcomes of the tournament. By not having adequate information, growers are placed at
various risks and left at a disadvantage in the management of their farming operations. These
the type of problems our rule aims to address by establishing a higher level of transparency to
contracting. Transparency is not new to poultry. There already are some disclosures that are made.
We're proposing, however to revise and expand the list of mandatory disclosures
that live poultry dealers make to growers. The poultry transparency rule proposes two
main things. First, the proposed rule would require a live poultry dealer disclosure document
that would give growers key information about their poultry contract. How would it work,
what they can reasonably expect to earn before making important contracting decisions such as
agreeing to start a poultry growing arrangement or agreeing to additional capital investments.
The information in this poultry disclosure document would include the minimum number
of bird placements per year in stocking density payments realized by other growers in prior years
and compared to other complexes broken out into quintiles or five groupings of performance ranges
so that growers can see exactly the full range of expected outcomes. Additionally,
the document would provide information about an integrator's bankruptcy and litigation history,
sale of farm policies, and contact information for the Packers and Stockyards Division, including
our hotline phone number, contact information for local USDA extension and other external resources.
When live poultry dealers provide the poultry disclosure document to growers,
the disclosures would have to be honest. Live poultry dealers would have to keep records and
have their principal executive officer confirm the accuracy and honesty of the disclosure process.
Poultry growers would also be able to discuss the information with others, including
key advisors and business partners. The proposed rule would require live poultry dealers to provide
a poultry disclosure document to the grower with any poultry growing contract and any upgrade.
It would not be limited to the use of the tournament system because growers need to
know the financial risks and opportunities they are entering into regardless of payment system.
Small live poultry dealers - those harvesting less than 2 million live pounds of poultry
weekly - would be proposed to be exempt from these contracting disclosure requirements.
Second, the proposed rule would require tournament specific disclosures to poultry growers who are
paid using a poultry grower ranking system. That is where payment is based on the growers being
grouped, ranked or compared to each other - also known as a tournament. Specifically,
growers would receive critical information about the type or nature of the inputs at two times:
at placement and at settlement. When growers receive a placement, they get information on
stocking density of the placement, the ratio of breeds of the poultry delivered,
if the live poultry dealer has determined the sex of the birds and the ratio of male and
female poultry delivered, the breeder facility the chicks come from, the breeder flocks age,
any known health impairment to the chicks and adjustments if any that the live poultry dealer
may make to the calculation of the grower's pay based on the inputs
at settlement. The rule would also require disclosures that show the distribution
of the inputs, the housing specification and any feed disruption for all the growers in
the tournament, names excluded. USDA designed these proposed settlement disclosures and input
disclosures to prevent deception and give growers the chance to understand the relative importance
of inputs and housing investments and skills. And growers can use disclosures to plan and improve
their ability to compete and deliver positive outcomes. That's it, that's what it does. We
hope you'll take a few moments to comment on it, whoever you may be - poultry grower,
an integrator, big or small, member of the community or any member of the public.
Let me now also share a few questions we've received.
We've received several questions around the nature of the obligations and duties
placed on live poultry dealers. So our answer would be, we encourage you to share your views
on the obligations and duties placed on live poultry dealers. Do they make sense to you? Do
they do enough to benefit growers, the public or yield other benefits? So another question,
some have asked about what types of contracts are tournament contracts? So our answer would be,
let me underscore that the proposed rule includes a definition of poultry grower ranking system,
which means, in the rule, a system where the contract between the live poultry dealer and
the poultry grower provides payment to the poultry grower based upon a grouping
ranking or comparison of poultry growers delivering poultry during a specified period.
We encourage anyone who has views on that definition to share their views in the comments.
What do they think the definition should be? What do you think the definition should be?
Recognize that this is important because the input disclosures are tied to payment under a tournament
system, so when are the input disclosures most useful? When are they not useful? In conclusion,
the Packers and Stockyards Act is crucial for protecting farmers and ranchers from
excessive concentration and unfair and deceptive practices in the poultry, hog and cattle markets.
Much has changed in the hundred years since the passage of the Packers and Stockyards Act of 1921.
Changes to the agricultural industry over the years have resulted in increased concentration,
decreased competition and have threatened the resiliency of our food systems. To address
problems created by the evolution of of this sector, USDA must evolve as well.
We must modernize to meet the needs of today's farmers and ranchers and guarantee consumers have
uninterrupted access to a nutritious food supply. USDA's recent announcements and rulemaking actions
show our commitment to do just that. Increased transparency is the starting point for
modernizing our rules protecting producers and countering the damaging effects of concentration
by ensuring that growers have access to the information they need to make informed contract
decisions. We also are improving their chances of success, ensuring more vibrant rural communities.
We hope this webinar was informative and helpful to those who were able to join.
We will post a recording of this webinar and encourage you to share it with anyone you think
may benefit from learning more about our efforts to create a more even playing field for farmers
and ranchers, and in doing so, create a more secure, resilient food supply for all Americans.
The comment period is not over and we encourage you to submit comments. Again, comments must be
submitted through the federal e-rulemaking portal at www.regulations.gov or www.federalregister.gov,
and they should reference the document number and date and page number of the federal register.
All comments submitted in response to this proposed rule will be included in the record.
It will be made available to the public, that includes the identity of individuals or entities
commenting. The Federal Register allows you to comment anonymously, but you will be filing a
document into an official record. Any personal information included in your submission to us
may be publicly viewable on the web. Lastly, if you have concerns regarding violations of
the Packers and Stockyards Act, please contact the Packers and Stockyards division at 1-833-dial PSD.
I want to thank you again for joining us today for our webinar
on the transparency in poultry grower contracting and tournaments rule. Have a wonderful day.