Rule institutes fairness in poultry tournament systemRule institutes fairness in poultry tournament system

Final rule under PSA requires poultry processors to fairly and transparently pay broiler growers and limit excessively variable compensation.

Kristin Bakker, Digital Content Specialist

January 14, 2025

10 Min Read
white-feathered broiler chickens inside poultry facility
Baris Karadeniz/Getty Images

Agriculture Secretary Tom Vilsack announced the third installment in a series of regulatory reforms under the Packers & Stockyards Act (PSA) that, in combination with other updates finalized under the Biden Administration, is intended to level the playing field for farmers who raise chickens, turkeys, hogs, cattle and sheep under contract or for sale to meat and poultry processing companies.

Specifically, the rule announced Jan. 14 by the U.S. Department of Agriculture’s Agricultural Marketing Service (AMS) – Poultry Grower Payment Systems and Capital Improvement Systems – will give chicken farmers better insight into companies’ payment rates for their birds, will institute stability and fairness in what is commonly known as the “tournament system,” will provide farmers with key information on capital improvements the companies require farmers to make in order to keep or renew contracts and give farmers stronger leverage when companies do not adhere to the rules.

Poultry processors exercise substantial control over broiler chicken growers’ operations and possess detailed information about growers as part of the tournament system, an arrangement where processors pay growers based on their performance compared to others. This power imbalance prevents growers from making informed business decisions and from effectively bargaining with processors about compensation and other contractual terms, the announcement said.

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Because the poultry industry has become highly integrated in the last 40 years, AMS noted that most processors frequently own or control all segments of the production process except growout. To pay growers, most integrators use the tournament ranking system, essentially pitting poultry growers against one another to determine payment for their services. AMS said this means growers cannot reasonably avoid certain practices that cause them harm and lack access to certain information that would allow them to more meaningfully understand, negotiate and enforce their contract with processors, including as it pertains to requests to make capital investments.

This final AMS rule requires processors to fairly and transparently pay broiler growers and limit excessively variable compensation – i.e., when aggregate gross annual payments based on a grouping, ranking or comparison of growers exceed 25% of total gross payments to growers in a complex annually. The rule also requires processors to operate tournaments such that growers can be more confident that comparisons are fair and to provide growers with key information when the processors request that growers make upgrades.

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This rule takes effect on July 1, 2026, after publication in the Federal Register. A preview of the final rule, a summary and FAQs are available on the Poultry Grower Payment Systems and Capital Improvement Systems webpage.

Poultry industry reaction

The National Chicken Council (NCC) released a statement in response to finalization of the Poultry Grower Payment Systems and Capital Improvement Systems rule.

NCC president Harrison Kircher said, “The Biden Administration, with just six days remaining, is racing to impose the last pieces of its anti-business regulatory agenda. This rule – which Congress never asked for – will lead to rigid, one-size-fits-all requirements on chicken growing contracts that would stifle innovation, lead to higher costs for consumers, decrease competition and cost jobs by driving some of the best farmers out of the chicken business.

“The vast majority of chicken farmers in rural America are happy and prosper raising chickens in partnership with companies, and they don’t want the government meddling on their farms and telling them how they should run their businesses,” Kircher added.

NCC is the national trade association whose primary purpose is to serve as the advocate and voice for the U.S. broiler chicken industry in Washington, D.C.

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NCC had filed comments on the proposed rule during the comment period. Among the issues detailed in its comments, NCC said it was especially concerned about the following:

  • The proposed rule exceeded the authority granted to Congress in the PSA by prohibiting conduct without requiring a showing of injury to competition or even unfair or deceptive practices.

  • The proposal mischaracterized dynamics and efficiencies in the current poultry growing industry, rendering it arbitrary and capricious.

  • As written, the proposed rule was too vague to be considered constitutionally valid.

  • The rule was so prescriptive as to unduly impinge on grower and integrator freedom to contract.

  • USDA greatly underestimated costs associated with the rule and would require an extended implementation period of at least two years.

NCC member companies include chicken producer/processors that account for approximately 95% of the chickens produced in the U.S., poultry distributors and allied industry firms.

Enhanced PSA enforcement

USDA finalized two other rules during the Biden Administration to strengthen enforcement of the PSA and seek to create a fairer dynamic between integrated processing companies and the farmers who raise animals for them. These include:

  • Transparency in Poultry Grower Contracting & Tournaments.

  • Inclusive Competition & Market Integrity under the Packers & Stockyards Act.

The Transparency in Poultry Grower Contracting & Tournaments rule, finalized in November 2023, requires live poultry dealers – typically large processing companies – to give critical information about terms of their agreements to the poultry growers with whom they contract to raise birds. The final rule requires a “Live Poultry Dealer Disclosure Document” that provides growers with information they need to have a better understanding of realistic outcomes they can expect before making important financial decisions, such as capital-intensive facility improvements or taking out loans.

In particular, the rule requires that dealers disclose earnings for growers by quintile, establish minimum flock placements and explain variable costs growers may incur and how companies handle certain important circumstances such as sick flocks and natural disasters. It also establishes an accountability and governance framework that must be certified by the poultry company’s chief executive officer.

Inclusive Competition & Market Integrity under the Packers & Stockyards Act, finalized in March 2024, prohibits discrimination on the basis of certain other basic characteristics and bans companies from retaliating against farmers over basic activities like communicating with government agencies, joining producer or grower associations and asserting legal and contractual rights; it also offers protection against deceptive contracting that are false, misleading and result in harm to producers.

On June 28, 2024, AMS proposed the Fair & Competitive Livestock & Poultry Markets rule, which sought to define and add “unfair practices and devices” under section 202(a) of the PSA. USDA received more than 13,000 public comments on the proposal. Due to the complexity and length of time needed to finalize that regulation, USDA announced that it is withdrawing the proposal to preserve its ability to re-examine these important issues in the future and enable the agency to explore with stakeholders regarding how best to implement the requirements of the PSA.

Although this proposal is being withdrawn, AMS said it continues to support the intent and purpose of the proposed rule and is not withdrawing the rule based on a change in the agency’s interpretation of its authority of the PSA. The agency added that withdrawing the proposed rule does not affect its ongoing application of existing statutory and regulatory requirements or its responsibility to administer the PSA.

The official withdrawal notice will be published in the Federal Register.

Cattle industry response

In reaction, the National Cattlemen's Beef Association (NCBA) issued a statement welcoming withdrawal of the proposed rule. "This harmful regulation would have dismantled current cattle marketing agreements, reversed decades of innovation in the cattle industry and threatened producer profitability," said NCBA executive director of government affairs Tanner Beymer. “Under the ‘Bidenomics’ agenda, USDA pushed regulations like this one, which would have undermined the free market, harmed hardworking cattle producers and far exceeded the agency’s authority granted by Congress. We are pleased that USDA recognized their failed approach and withdrew this rule.

"NCBA will continue advocating for sound market principles, and we look forward to working with the next Administration on enhancing profitability opportunities for America’s cattle farmers and ranchers,” Beymer added.

Further initiatives to spur competition and fairness

USDA said it has worked closely with the U.S. Department of Justice to enforce the PSA in the poultry sector, which resulted in DOJ obtaining two consent decrees with large poultry integrators that increase protections for growers and decrease unfair, deceptive and anticompetitive conduct in poultry markets.

In November 2023, DOJ reached a consent decree with Koch foods holding the firm responsible for violating the PSA by imposing excessive termination fees on growers who attempted to contract with other integrators. These fees effectively served as unlawful non-compete clauses. As a result of this consent decree, growers were reimbursed for all termination penalties and out-of-pocket expenses incurred, and Koch foods agreed to refrain for such conduct moving forward.

Additionally, with the assistance of USDA, DOJ obtained a consent decree in July 2022 with Cargill, Sanderson and Wayne Farms around antitrust wage-fixing and violations of the PSA. In addition to securing $85 million to poultry workers to make up for suppressed wages and a court-imposed antitrust monitor, the consent decree barred Sanderson and Wayne Farms from deducting farmers’ base pay based on performance, imposed a 25% cap on tournament performance relative to total grower pay and required certain additional disclosures to growers consistent with USDA rules.

USDA said these actions under the PSA complement a range of other steps it has taken over the last four years to enhance competition, such as making landmark investments in meat and poultry processing and domestic sustainable fertilizer capacity, revising the “Product of USA” label and updating its animal-raising claims guidance, as well as establishing a Cattle Contract Library.

The agency noted it also has taken multiple steps to enhance competition and transparency in the seed sector and other input sectors, established the first partnership with more than 30 state attorneys general focused on fairness and competition enforcement and enhanced its enforcement relationship with DOJ through several high-impact cases and collaborations.

USDA additionally put forward possible strategies to enhance price discovery and fairness in the cattle industry and released an interim report that assesses competitive conditions in the meat retail industry, identifying hidden fees and unjust or anticompetitive pricing strategies present in the beef market, among other steps.

“During my time as secretary of agriculture, time and again USDA has been confronted with the stories of farmers who lost their life’s savings or went bankrupt because of an unfair system they entered into when they agreed to raise animals for a major meat conglomerate,” Vilsack said. “It is USDA’s job to advocate for farmers, and these regulatory improvements give us the strongest tools we’ve ever had to meet our obligations under the Packers & Stockyards Act.

“While there is still work to be done, I am immensely proud that the Biden-Harris Administration has taken historic action to level the playing field for farmers. This complements other ways we’ve worked to enhance competition across the agriculture sector, from investing in independent processing capacity to shoring up domestic fertilizer production [and] to promoting transparency around seed technology and markets. As the bedrock of so much that our society depends on and the pillar of rural economies, farmers deserve honesty, certainty and options when it comes to their hard work,” Vilsack added.

“This Administration’s landmark competition efforts show it’s possible to ensure that a little bit more of the food dollar stays with the farmers and ranchers who make America’s agricultural trading markets the envy of the world,” said senior advisor for fair and competitive markets Andy Green. “This final Packers & Stockyards rule builds on a historic record of partnership between USDA and the Department of Justice, including landmark cases to reform the tournament system and to put a stop to unfair and anticompetitive practices in the poultry industry, as well as the extraordinary whole-of-government achievements of the White House Competition Council.”

About the Author

Kristin Bakker

Digital Content Specialist, Farm Progress Livestock Group

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