The Grain Inspection, Packers and Stockyards Administration, or GIPSA, is taking a closer look at swine production contracts to ensure their compliance with the Farm Bill requirements. The 2008 Farm Bill established new requirements for swine contracts under the Packers and Stockyards Act.  These requirements went into effect on June 18, 2008, upon passage of the Farm Bill. 

The 2008 Farm Bill amended the Packers and Stockyard Act to require that swine contracts:

• Allow swine growers to cancel growing or production contracts for up to 3 days after signing, or any date specified in the contract or growing arrangement (the contract must disclose method and deadline for cancellation);
• Include a disclosure statement on the first page that clearly states that additional large capital investments may be required of the grower during the term of the contract; and
• Allow growers to opt out of arbitration provisions before entering a contract.

“These are the three items which must be contained in contracts,” says Jay Johnson, GIPSA Midwest Regional director.

A contractor’s omission of any of the three provisions will raise a red flag with GIPSA. “As with any contract, it would be our recommendation for each side in the contract to have their lawyer review the agreement before signing,” adds Johnson. “(GIPSA) would be willing to review contracts before they are enacted to confirm these three requirements are present.”

“The contractor can be the packer or a larger producer, for example, that contracts with others to grow hogs,” says Johnson. “We do not have jurisdiction over the grower side of the contract.”

The Agency is seeking civil penalties of up to $11,000 per violation when they find that swine contractors have not complied with the Farm Bill requirements.

GIPSA provides an online Swine Contract Library which is intended as an aid in the price discovery process and provides equal access to market information for all market participants.

Source: GIPSA