Clarifying the GIPSA rule implementation

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It’s been one week since USDA filed the final version of the GIPSA rule and there remains some confusion regarding what lies ahead. With the rule being published in the Dec. 5 Federal Register it will go into effect 60 days later.

Now, there’s the issue of whether there’s funding to move forward. While the House and Senate Ag Appropriations Committees limited funding for the GIPSA rule in Fiscal Year 2012, there is money to accommodate the provisions that Congress originally outlined in the 2008 Farm Bill. “Funding is limited to regulations that would cost the livestock and poultry industries not more than $100 million a year,” said Dave Warner, communications director for the National Pork Producers Council, in an AgriTalk interview. “This rule would cost about $95 million.” That, of course, applies through Sept. 30, 2012, when the fiscal year expires.

Anything else that USDA might want to propose or adjust would have to wait until after that timeline.  “Congress has limited the amount of work we’re (USDA) able to do in this area, but we were able to promulgate a portion of the rule, and it should have a positive impact,” says USDA Secretary Tom Vilsack. “We know there were poultry producers who faced unreasonable issues. These rules are more balanced and offer a fairer marketplace.”

He says “these are not rules per se, they are more of a guidance that will direct decision making. Provide greater clarity for integrators to know what the rules of the game are likely to be and how they can avoid difficulty in their contract relationships.”

But all is not likely to be done. Proposed GIPSA changes could surface as the farm bill debate gets underway in the next congressional session.

“There are certain issues that surface repeatedly—competitive injury, packer ownership and buying/selling. It’s safe to say we’ll see them again in the farm bill discussions,” says Michael Kelsey, executive vice president of the Nebraska Cattlemen’s Association.

Essentially, Congress’ funding move limited the final GIPSA rule to only those areas it originally included in the 2008 Farm Bill. In the end, four out of five of Congress’ goals, those being guidelines regarding:

  • The suspension of delivery of birds (a poultry industry issue).
  • Capital investment requirements (a production contract issue).
  • Breach of contract issues (a production contract issue).
  • Arbitration protocols to settle disputes.

The fifth area, which was not included in the final rule, involves defining what is undue preference or advantage given to a producer in a contract arrangement. That’s largely focused on marketing contracts but could come into play in production contracts. “Congress could ask USDA to go back and address No. 5,” Warner notes.

In the end, no one got everything they wanted, which means, no one is completely happy with the final outcome. “We like this rule a whole lot better than the original rule,” Warner notes. The pork industry submitted 16,000 comments of the 66,000 that USDA received on the proposed rule. “It would have triggered fundamental change in how produces bought and sold their pigs—for the worse; not for the better,” Warner adds. “We would have seen a lot of smaller producers go out of business.”

In an interview with AgriTalk, Vilsack indicated that while USDA was “respective of the comments received” on the proposed rule, the reason why certain “provisions were not included in the final rule was because Congress essentially interceded and prevented us from implementing them.” That may be a signal that those topics will find a way to get back on the table.  

 


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