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Livestock groups testify on harm of GIPSA rule

Beef and pork producers say if GIPSA rule advances, it could end marketing arrangements they currently use.

On Tuesday, livestock groups testified on key issues before the House agriculture subcommittee on livestock and foreign agriculture. One common thread among beef and pork producers was the assertion by Agriculture Secretary Tom Vilsack that he would reinstate the proposed Grain Inspection, Packers & Stockyards Administration (GIPSA) marketing rule that resulted from language included in the 2008 farm bill.

David Herring, vice president of Hog Slat Inc. who testified on behalf of the National Pork Producers Council (NPPC), said NPPC has “grave” concerns that if the U.S. Department of Agriculture finalizes the GIPSA rule, it will repeat what was proposed in 2010.

Herring testified that U.S. pork producers were stunned in June 2010 when USDA proposed a rule that not only went well beyond the five issues Congress asked the agency to address but included provisions considered and rejected by congressional lawmakers during the 2008 farm bill debate.

One provision included in the GIPSA rule, for example, would have required meat packers to justify and document — including with revenue and cost analyses — price differences paid for livestock, making it difficult for producers to negotiate premiums based on certain production practices or accept lower prices for livestock of lesser quality. Such a “justification” provision was considered and rejected by the Senate.

“The rule would have had a devastating impact on livestock producers,” Herring said. According to an analysis of the regulation conducted by Informa Economics, it would have cost the U.S. pork industry more than $350 million annually.

“Industry analysis of the rule concluded that it likely would have had a chilling effect on innovation and flexibility, leading to a race toward mediocrity. It would have created legal uncertainty, driving costs higher and causing an increase in vertical integration in the livestock sector, forcing producers out of business and possibly affecting meat supplies,” he said.

In response to questioning, Herring noted that the GIPSA rules are very concerning because they are so vague and become a “trial lawyer's playground.”

All of those effects would have harmed the U.S. pork industry’s international competitiveness, costing on-farm and pork processing jobs as well as negatively affecting the U.S. balance of trade.

While there was overwhelming opposition to the GIPSA rule, including more than 16,000 public comments from pork producers, it took yearly action by Congress to prevent its implementation. Unfortunately, no such action – in the form of language in USDA’s annual appropriation – was forthcoming for fiscal 2016.

At a March meeting of the National Farmers Union, a group that supported the 2010 GIPSA rule, Vilsack indicated that his agency was moving forward with implementing the regulation, and NPPC confirmed last week that several of the regulations are with the White House Office of Information & Regulatory Affairs — the last step before rules are proposed final or become final.

“Pork producers again are very concerned that USDA’s GIPSA rule will be too expansive, limiting farmers’ ability to sell animals, dictating the terms of private contracts, making it harder to get farm financing, raising consumer prices and reducing choices, stifling innovation and leading to more vertical integration in the livestock industry,” he said.

The U.S. pork industry opposes any legislation or regulation that restricts marketing opportunities and interventions into hog markets unless such actions address a clear, unequivocal instance of market failure or abuse of market power. To date, USDA has not presented any evidence that either is taking place.

Tracy Brunner, president of the National Cattlemen’s Beef Assn., said through value-based marketing arrangements, many have been able to improve overall quality and demand. He said he relies on these types of arragements with the packer-processor and, by doing so, consistently achieves premiums of $30-50 over the cash market.

“We have worked for years to find new and innovative ways to market cattle,” Brunner noted. “Alternative marketing arrangements have been studied by USDA and independent groups, and the results show that these alternatives benefit producers and consumers alike. The proposed GIPSA marketing rule would have made USDA the ultimate arbiter of how cattle are marketed and taken away our ability, as cattle producers, to market cattle the way we want. That is why bipartisan appropriations language defunded any additional work on, or implementation of, the proposed GIPSA marketing rule. We do not need USDA dictating how we can or cannot market our cattle.”

The House agriculture appropriations bill again included a rider to prevent USDA from moving forward with its rule. The Senate’s version, which passed out of committee last week, did not include any amendment to prevent USDA from using resources to advance the rule.

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