NPR: The USDA Rolled Back Protections For Small Farmers. Now They’re Suing
James Dinklage, a cattle rancher from Nebraska, is one of the plaintiffs in a lawsuit filed Thursday. The suit accuses the USDA of “arbitrary and capricious” behavior in rolling back two Obama-era rules designed to protect small farmers who say they are being exploited by the meatpacking companies they supply.
Courtesy Dinklage Family/Organization for Competitive Markets
Nancy Matsumoto | December 14, 2017
An organization representing the interests of small farmers across rural America fired a legal salvo Thursday aimed at a Trump administration they feel has let them down.
The lawsuit, filed by the Organization for Competitive Markets, a small farmers’ think tank based in Lincoln, Neb., and three farmer plaintiffs, did not shake the halls of Congress. Nor will it go viral on social media. But to the 40,000 contract poultry farmers, 900,000 cattle ranchers, and 70,000 hog farmers in America’s heartland whose interests it seeks to represent, the lawsuit represents the tip of an iceberg of financial and emotional despair.
At issue is the Trump administration’s withdrawal of two Obama-era rules designed to protect small farmers who say they are being exploited by the meatpacking companies they supply.
The suit, filed on behalf of OCM by the Capitol Hill legal watchdog Democracy Forward, charges U.S. Department of Agriculture Secretary Sonny Perdue and his agency with “arbitrary and capricious” behavior in rolling back those two rules. One of them would have made it easier for individual farmers to sue for anti-competitive behavior.
Many of the farmers affected by the rollback supported Donald Trump for president, who promised to look after their interests. Now, the disillusionment is setting in.
West Virginia poultry farmer Mike Weaver voted for Trump, but says the feeling now among small farmers and ranchers is, “Where’s the support that you promised us? We voted for you because you were going to make things right, and it’s not happening.”
Thursday’s lawsuit is an attempt to put legal muscle behind the frustrations of farmers and ranchers over a highly consolidated meatpacking system.
“Four packers control 82 percent of the market,” explains Joe Maxwell, executive director of OCM, “and they’ve carved the country into regions and don’t compete with each other. Farmers feel threatened by packers because in their area, there’s only one choice.”
Weaver says contract poultry farmers like himself are wooed by slick sales pitches from meatpackers, then “have to put their home in hock” to raise the $1.5 to $2 million it takes to start a poultry operation. “Then you have to take what the companies give you,” he adds, “or take your chances on losing the farm. Companies abuse that, shamefully.”
The rolled back rules are known as GIPSA — short for the Grain Inspection, Packers and Stockyard Administration, the arm of the USDA tasked with promoting fair and competitive practices in the industry. Large meatpackers, represented by agribusiness lobby members such as the National Chicken Council, the National Pork Producers Council, and the National Cattlemen’s Beef Association, counter that adopting the rules would have lowered the bar for farmers to sue meatpackers for anti-competitive behavior, and invited frivolous and costly litigation, resulting in higher prices for consumers.
Tom Super, spokesperson for the National Chicken Council, says the rules would have “opened the floodgates for trial lawyers to sue companies,” and added well over a billion dollars in costs for the livestock and poultry industry.
Another rule the USDA withdrew would have helped define which actions are considered unfair, discriminatory or deceptive. Left intact was a third rule, clarifying the rules governing the “tournament system” of poultry producing — which pits producers against each other in a contest of who can produce the biggest chickens with the least amount of feed.
The 1921 Packers and Stockyards Act was originally drafted to offer small farmers protection from the predatory, retaliatory and non-transparent practices of large packers, says Barbara Patterson of the Washington, D.C.-based National Farmers Union. “Over time, though,” she says, “the courts have slowly eroded that original intent.”
The USDA, in response to a request for comment, issued a statement pointing out that it had based its decision in part on public comments, many of which had noted that “the purpose of the [Packers and Stockyards] Act is to protect competition, not individual competitors.” The statement also said the agency’s action was “consistent with President’s Trump’s Executive Order to reduce regulations and control regulatory costs.” USDA says it remains committed to protecting “fair trade practices” and competitive markets.
The case of Tennessee poultry farmer Alton Terry illustrates the type of abuses that small contract poultry farmers allege. Terry bought his poultry farm in 2001 and entered into a contract with Tyson Foods. Farmers are provided chicks, feed and Tyson’s technical expertise, and their pay is tied to the weight of the finished poultry. Critics say the system is unfair, because it lacks transparency and leaves farmers’ pay subject to factors they largely can’t control –- like the quality of chickens they receive.
After becoming active with a statewide farmers’ advocacy group, Terry alleged in a lawsuit against Tyson Farms, the meatpacker would not let him watch his birds being weighed. Farmers have charged packers with retaliating against perceived “troublemakers” by sending them poor feed or unhealthy chicks, and weighing poultry behind closed doors – which they say leaves them vulnerable to being cheated on price.
Terry made a complaint to GIPSA in 2005; the following year, Tyson declined to renew his contract. He was eventually forced to declare bankruptcy. In 2010 the U.S. Court of Appeals in Cincinnati sided with Tyson Farms, stating that the law required Terry prove that harm was done not just to him, but also to the entire industry.
At about the same time that trial was underway, the newly installed Obama administration launched an exhaustive eight-year negotiation process to beef up protections for small farmers. Faced with fierce resistance from Big Meat and its congressional allies, the USDA’s efforts at reform took a beating, in the end producing the three rules set to be implemented a month after Obama left office.
But that never happened. On Inauguration Day, the Trump White House issued a memorandum postponing the effective date of the rules by 60 days. Several more delays followed. Then in October, the USDA announced the complete withdrawal of two of those rules. The following month, Perdue announced that GIPSA’s functions would be folded into the USDA’s Agricultural Marketing Services (AMS) arm.
This move “basically gives GIPSA a demotion,” explains Sally Lee, associate director of the Rural Advancement Foundation International, which offers family farms expertise in long-term contract farming.
“Making it a sub-agency of AMS potentially has inherent conflicts of interests,” says Lee. The AMS — the very agency that helps large packers negotiate with brokers, fast food or grocery chains — would be tasked with policing those packers in their dealings with small contract farmers. Weaver calls the move tantamount to “having the fox guard the henhouse.”
One of the challenges in mounting the new suit, says OCM’s Maxwell, has been the difficulty of finding farmer plaintiffs — most are too afraid of retaliation to speak up.
“When you just have one buyer, you can’t go out and start talking about why the market is wrong when that buyer can walk away and bankrupt you,” Maxwell says. “It’s put a gag order on America’s family farmer and threatened their livelihood.”
Patterson of the National Farmers’ Union agrees. “The fear in the countryside on this is palpable,” she says.
Poultry farmer Weaver, who also serves as president of the Contract Poultry Growers of the Virginias, says he’s one of “the lucky few” who can speak freely. He came to poultry growing after a career as a special agent for the U.S. Fish and Wildlife Service and is not dependent on his farm income to survive.
Few of his fellow small contract poultry farmers — 71 percent of whom, he points, out, “live beneath the federal poverty level” — enjoy that luxury. “I’ve had guys in tears on the phone, telling me, ‘My farm has been in the family for five generations, and I’m about to lose it,’ ” Weaver says.
Weaver, who will turn 66 in January, says he’s told Pilgrim’s Pride, the company he is under contract with, that “I’m not going to pick up their dead chickens ’til I die.” He’s now trying to sell his farm.
In the case of Mr. Terry, the complex was being forced to change the type of poultry housing & the farmers were required to purchase substantial equipment whose value the integrator confiscated. The payment formula was rigged so that the older poultry houses were subsidizing the new houses even if the old houses were more efficient. The goal of the integrator was to get new housing at a cheaper price by forcing the older houses to pay for the new houses in the formula pay & to get everyone back in debt. Thus, the integrator was able to capture the value of the poultry farmer’s investments through the exercise of market power. These are exactly the type of deceptive devices & unfairness that the Packers & Stockyards Act prohibited. The Packers & Stockyards Act was enacted to prohibit the meat packers from using its market power to set up such a situation. The courts ruled that Mr. Terry had to prove “harm to competition” but by engaging in the prohibited practices, the integrator was by definition was harming the competition that they managed (the formula for pay, quality of inputs & weighing fraud). The harms to competition were listed in the case.