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USDA Announces New Actions in Poultry Market
USAgNet - 05/27/2022

USDA announced a proposed rule under the Packers and Stockyards Act to protect poultry growers from abuse. The move is the first of three rulemakings that USDA will issue under the Packers and Stockyards Act under the President's Executive Order on Promoting Competition in the American Economy in order to stop unfair, deceptive, discriminatory, and anticompetitive practices in the meat and poultry industry.

Currently, poultry processors exert control over much of the process of raising chickens through take-it-or-leave-it contracts with growers. Under these contracts, processors provide inputs like chickens and feed to poultry growers. Poultry growers, who often take on debt to build poultry growhouses, have limited visibility into the real range of outcomes and risks they face under these contracts.

Moreover, once in the contracts, the processors then determine the payments that poultry growers receive for their services by weighing the chickens and ranking farmers based on how much the chickens grew. Pay is generally determined based on how a farmer compares to other farmers, but farmers currently have little insight into this comparison. For far too long, growers have complained that the "tournament" system is ripe for abuse.

The new rulemaking will require poultry processors to provide key information to poultry growers at several critical steps-increasing transparency and accountability in the poultry growing system. For example, processors would be required to disclose details of the inputs they provided to each farmer and information about the input differences among farmers being ranked.

Furthermore, disclosures would cover the level of control and discretion exercised by the poultry processor and what financial returns the farmer can expect from the relationship based on the range of real experiences of other growers. Contracts would also be required to contain guaranteed annual flock placements and density. Poultry processor CEOs would be required to sign off on the compliance process for disclosure accuracy.


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