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Working & the Economy

Frosh, fellow AG’s support new federal poultry rule but question oversight

Federal regulators say poultry producers are disadvantaged by the consolidation of meat processing. Photo by Stephen Ausmus/Agricultural Research Service, USDA.

The attorneys general of 10 states, including Maryland, are backing a proposed rule by the U.S. Department of Agriculture that is meant to get poultry growers fair agreements with meat processors, but they want stronger oversight.

“One of the many reasons it’s tough for small poultry farmers — and small farmers of all kinds — to afford their lives is because of imbalances of power, money and information between farmers and processors,” Minnesota Attorney General Keith Ellison (D) said Monday when he joined his counterparts in nine states to publicly comment on the USDA proposal. “These imbalances lead to unfair competition and bad outcomes not only for these farmers, but for their communities and way of life.”

The USDA is soliciting comments on its proposed rule for Transparency in Poultry Grower Contracting and Tournaments until Aug. 23. It is built on the provisions of the Packers and Stockyards Act of 1921 that was adopted to ensure fair competition and trade for farmers and ranchers.

The proposal would require poultry dealers to provide information to producers about the minimum number of chicks they might be given to raise and what the dealers have paid other producers, among other things.

Further, those dealers that pay producers based on how they perform compared with other producers — what is referred to as a “tournament-style system” — would be required to divulge more specifics about the chicks that they provide to help the producers predict how much meat might result from them.

In a statement, Maryland Attorney General Brian Frosh (D) said the proposed rule would create more transparency in the poultry industry.

“Maryland supports its poultry farmers,” he said. “This rule will bring them fairer prices and help stop anticompetitive conduct in the poultry industry.”

About 90% of broiler chickens — those that are raised for their meat — are brokered through contracts with meat processors, wrote Frosh, Ellison and the attorneys general of California, Delaware, Idaho, Illinois, Iowa, Nevada, North Carolina and Pennsylvania.

“Half of the chicken farmers in the United States work in regions that are dominated by one or two chicken processors,” they said. “The high buyer concentration in local markets allows poultry processors to respond punitively to any grower’s complaints about their contract. This leaves poultry growers no room to negotiate their contracts.”

So the attorneys general support expanding the disclosures processors make to producers, but here’s the rub: The proposal relies on the processors’ executive officers to affirm that the information is accurate. The AG’s have asked the USDA to implement some sort of external oversight of the process. The current proposal might “minimize the transparency” that can be achieved, they wrote.

The proposed rule coincides with efforts to ensure equity for other livestock producers, especially those who raise cattle. A bill in the U.S. Senate — the Cattle Price Discovery and Transparency Act — advanced out of committee in June but has yet to get a vote by the full Senate.

That bill is meant to address similar concerns about the concentration of beef processing to a handful of companies with high-volume facilities. The weaknesses of such a system were exposed in the early months of the coronavirus pandemic, when the temporary closure of some of those facilities because of worker infections led to abrupt reductions in the demand for cattle, which left producers scrambling to find ways to sell their livestock.

“Unfortunately, concentration in the poultry sector has resulted in very few options for most growers,” said Andy Green, a USDA senior adviser for fair and competitive markets, in a recent webinar about the new poultry proposal. “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.”

The USDA recently extended the comment period on the proposed rule to ensure adequate feedback. The previous deadline for comments was Monday.

“There is fear throughout the meat and poultry industry as we saw earlier this year at two separate congressional hearings where witnesses did not testify due to concerns of retaliation,” U.S. Secretary of Agriculture Tom Vilsack said Friday when the USDA announced the extension. “But it is still critical that we hear the full story, so we are highlighting the option for comments to be provided anonymously.”

Josh Kurtz contributed to this report.

Jared Strong is a senior reporter at the Iowa Capital Dispatch, where a version of this article first appeared.