Last week, a number of agricultural groups including several from Iowa submitted comments with suggested changes to a proposed rule by USDA's Grain Inspection, Packers and Stockyards Administration on buying and selling livestock and poultry. The proposed rule is designed to assure a competitive marketplace for all producers. However, there are serious concerns regarding the possible unintended consequences that may negatively affect the marketing arrangements of Iowa's livestock producers.
Iowa Secretary of Agriculture Bill Northey also submitted written comments to USDA on the proposed rule saying he agrees with the changes requested by the Iowa Corn Growers Association and other ag groups. In his letter (see below) Northey outlines specific changes he would like to see made in the GIPSA rule. The comments sent to GIPSA were developed on behalf of and in cooperation with the Iowa Cattlemen's Association and the Iowa Pork Producers Association.
Iowa Cattlemen's Association wants changes in GIPSA proposal
If Iowa cattle producers use production methods that give added value to their cattle, they should be able to see that in the prices they negotiate with packers. That's just one message the Iowa Cattlemen's Association emphasized in comments submitted to USDA regarding the federal government's proposed GIPSA rule changes for livestock and poultry marketing.
If the rule is implemented as proposed, farmers won't see a benefit from making conscious production decisions to give consumers what they want, says ICA president Kent Pruismann, a cattle feeder from Rock Valley in northwest Iowa. "In an effort to level the playing field for small producers like myself, the proposal would require processors to pay the same price to everyone. Instead of the feeder or cow/calf producer seeing the benefit of production practices, the processor could do a 'cooler sort' to capture premiums for themselves," he says.
Proposed rule would remove competitive pricing opportunities
The proposed new rules were issued by GIPSA in June to gather public comment, and there are things in the GIPSA proposal that go beyond the scope of GIPSA's authority, says Pruismann. "While there are some reasonable suggestions in the proposal, many of the proposed rules overstep the statutory authority that Congress provides GIPSA," he adds.
Congress asked GIPSA to establish rules that could help farmers in arbitration of contract agreements. Instead, GIPSA has gone beyond that, says Pruismann. GIPSA's proposed rules would require that the contracts farmers make with processors to be posted on USDA's website…in essence, publicly revealing the work and effort some livestock farmers have done to increase the value of their livestock. Additionally, it would remove competitive pricing opportunities for farmers who raise livestock that consumers value more.
The proposed rules would add several new sections to the regulations under the Packers & Stockyards Act of 1921, as it has been amended and supplemented over the years. Deadline to submit public comment to USDA regarding this latest GIPSA proposal was Nov. 22, 2010.
Iowa Ag Secretary Bill Northey submitted the following comments
Iowa Agriculture Secretary Bill Northey's comments on the proposed GIPSA rule changes are contained in the following letter Northey sent to USDA:
To: Tess Butler, GIPSA
U.S. Department of Agriculture
1400 Independence Ave., S.W., Room 1643-S
Washington, DC 20250-3604
The livestock industry is vitally important to Iowa and the economic health of our state, so the proposed rules of the Grain Inspection and Packers and Stockyards Administration, 9 CFR Part 201, RIN 0580-AB07, are of critical importance.
As I've traveled around the state and visited with farmers I've heard concerns from producers that the final rules and implementation could significantly affect existing marketing arrangements that they already have in place. I appreciate USDA's need and desire to assure a competitive marketplace for all producers, but I do have concerns about unintended consequences of the current proposal and stress that it is very important that negative effects on farmers are avoided.
As a result, a broad coalition of agricultural groups from Iowa has submitted extensive comments on the proposed rule and I would ask that you give their suggested changes full consideration. I agree with the changes they propose and have attached their comments to my letter for your reference.
In addition, I want to highlight a few of their proposed changes that I believe are critically important and would greatly improve and strengthen the proposed rule.
First, there would be great benefit to separating or splitting of the current rule into species-specific language. The structure of each industry is so different that I believe in their current form the rules create unnecessary confusion. Creating different sections for each of the species would add needed clarity and allow the rules to be more specific in each area.
Second, the proposed rule goes into great detail about requirements and conditions whereby "Capitol Investment" or "Additional Capitol Investment" can be required and prescribes value thresholds. The rule could be simplified and clarified if it would only deal with the subject of "Additional Capitol Investment."
When farmers are making a "Capital Investment" they have significantly more options, including the ability to simply decline the contract as being unfair or otherwise unworkable. But, additional protections surrounding requirements for "Additional Capital Investment" after entering a contract are understandable and necessary.
Finally, I have concerns about the definition of a forward contract as a "fixed price or basis contract, oral or written, for the purchase of a specified quantity, or lot or lots of swine, where delivery will occur more than 14 days after the agreement is entered."
The 14 day period as is currently proposed is too short and the definition should be set for both beef and pork as "greater than 30 days prior to delivery." Few industry forward contracts are entered into with as little as 15 days for delivery and as a result changing it to 30 days would better serve the industry.
I believe with these changes and the others highlighted by the Iowa agricultural groups that have weighed in will allow these new rules to better protect both farmers and packers and benefit the entire livestock industry.
Iowa Secretary of Agriculture