Wall Street Journal: USDA Issues New Rules Aimed at Protecting Farmers


· Wall Street Journal

USDA Issues New Rules Aimed at Protecting Farmers

Move ends six-year battle between livestock, poultry producers and meatpacking companies



Dec. 14, 2016 4:49 p.m. ET

The U.S. Department of Agriculture set new rules to protect farmers from anticompetitive business practices, ending a six-year battle between livestock and poultry producers and meatpacking companies that buy their products.

Under one rule issued Wednesday, farmers can ask the USDA to intervene when they believe meatpackers have underpaid or treated them unfairly. Previously, farmers had to prove a meatpacker’s tactics hurt the entire market. Two more rules the USDA proposed would protect farmers from retaliation for speaking out against deceptive terms or inadequate pay and would define such unfair practices more clearly.

Farm groups have tussled over the regulations since Congress proposed them as part of the 2008 Farm Bill, in part because they pit farmers against big meat companies. The USDA first proposed a similar set of rules in 2010, but progress was stymied after lawmakers blocked funding.

The rules affect nearly one million chicken, cattle and hog producers in the U.S. as well as food giants like Tyson Foods Inc., Sanderson Farms Inc. and JBS SA that buy their livestock. Many farmers have direct contracts with a processor that could now be deemed discriminatory, some industry groups fear.

“This kind of overregulation is bad for farmers, food companies and consumers, and we’ll be working with others in the livestock and meat business to address it,” said a spokesman for Tyson Foods Inc., the largest U.S. meatpacker by sales.

Spokesmen for Hormel Foods Corp. and Sanderson Farms Inc. declined to comment. A spokesman for Pilgrim’s Pride Corp. didn’t respond to a request for comment.

“All too often, processors and packers wield the power, and farmers carry the risk,” said Agriculture Secretary Tom Vilsack.

Nearly all chickens in the U.S. are owned by companies like Tyson, JBS-owned Pilgrim’s Pride and Perdue Farms Inc., and lent out to contract growers who raise the birds for a fee.

Critics say that system, which ranks producers against each other, gives poultry companies too much control over the quality of the feed farmers use, the birds they produce and the pay they receive.

The National Farmers Union said the new Farmer Fair Practices Rules will help “level the playing field” for farmers and protect them from “discriminatory contract practices.”

A large share of hog production relies on similar contracts, with farmers assuming financial responsibility for barns that house a company’s pigs. Fewer cattle are raised according to such arrangements, but beef industry groups say the new rules could have unintended consequences on other agreements that cattle ranchers strike with meatpackers.

“This rule making will drastically limit the way our producers can market cattle,” said Tracy Brunner, president of the National Cattlemen’s Beef Association, an industry group that represents ranchers and beef packers like Tyson and Cargill Inc.

The National Chicken Council said “all options are on the table” for the poultry trade body to fight regulations that it said would lead to “frivolous lawsuits” that make chicken more expensive.

On a call with reporters, Mr. Vilsack called such predictions “absurd.”

“This rule has everything to do with what’s fair to producers. As long as I’m secretary, this department is going to be on the side of producers,” he said.

The rules are subject to a 60-day comment period, by which time a new agriculture secretary could be in place under President-elect Donald Trump.

The National Pork Producers Council said it would “work with the Trump administration and the new Congress” to repeal the rules.

Many farmers said they hope the Trump administration will stand with smaller farmers and keep the new rules.

“A lot of common folks like us farmers came out and voted for Donald Trump because they heard his message of empowering the average American,” said Genell Pridgen, an independent poultry grower who previously raised chickens for Case Farms. “It’s now up to him and his administration to make sure those family farmers don’t get left behind.”

—Jacob Bunge contributed to this article.

Write toKelsey Gee at kelsey.gee