Today the U.S. Department of Agriculture’s (USDA) Agricultural Marketing Service released its proposed third rule to strengthen the Packers and Stockyards Act (P&S Act): the Poultry Grower Payment Systems and Capital Improvement Systems rule to protect poultry growers from the largest abusive poultry companies that own, process, and market the birds (known as integrators).
This rule would help establish fairer contract terms between poultry growers and poultry integrators by addressing unfair and deceptive practices in grower payment and capital improvement systems:
- The rule establishes a firm base price for poultry growers by prohibiting payment schemes that reduce a grower’s base pay for claimed low-performance.
- Critically, this rule does not prevent integrators from providing performance bonuses that reward innovation. In order to ensure bonuses are paid based on performance — and not used arbitrarily to control growers in an anticompetitive fashion — this rule requires integrators to adopt transparent policies that justify any bonus payments growers may receive under grower payment systems.
- The rule would also require integrators to provide detailed justifications for capital investment requirements of growers, such as poultry housing improvements.
In response, Farm Action issued the following statement, which can be attributed to Sarah Carden, Farm Action’s Research and Policy Development Director.
“For too long, the largest poultry companies have utilized abusive tools, like the tournament system, to control and unfairly target individual poultry growers. This rule frees growers from a decades-long corporate stranglehold.”
“We applaud USDA for this effort to strengthen critical P&S Act protections for producers across the country.”
The broiler poultry industry is highly consolidated, with the four-firm concentration ratio (CR4) increasing to 60% following Cargill-Continental’s acquisition of Sanderson Farms, creating market conditions that are rife with abuse. The top four firms are currently Tyson, JBS subsidiary Pilgrim’s Pride, Perdue, and Sanderson-Wayne Farms.
In August 2022, Farm Action issued a public comment to the USDA on the proposed rulemaking Transparency in Poultry Grower Contracting and Tournaments, and again in September 2022 on the Advanced Notice of Proposed Rulemaking Poultry Growing Tournament System: Fairness and Related Concerns. In both comments, Farm Action urged USDA to ban payment systems that lacked a fixed base price, noting that it was by definition unfair and thus in violation of the P&S Act.
In November 2022, Farm Action issued a public comment in support of the Department of Justice’s Consent Decree in the Wayne-Sanderson Merger. This consent decree similarly established a firm base price for poultry growers by prohibiting Sanderson and Wayne farms from reducing the base compensation made to any grower.
More information about the contract poultry growing system can be found here, and a video explainer of the poultry tournament payment system can be found here.
