NTF Comments on GIPSA Proposed Rule

The National Turkey Federation (NTF) told USDA its proposed regulation governing poultry and livestock contracts and marketing could wind up hurting the very producers the department claims it is trying to protect.

In formal comments to USDA’s Grain Inspection Packers and Stockyards Administration (GIPSA), NTF said the agency failed to conduct a thorough economic analysis before proposing the rule and that the rule contains vague and ill-considered language that will create regulatory and legal uncertainty for all segments of the turkey industry.

“To fail to fully grasp, or even contemplate, the long-term economic implications of the rule does a grave disservice to the very growers the agency aims to assist,” NTF President Joel Brandenberger said in the comments.

NTF’s comments pointed out that the current production model in the turkey industry was developed to allow processors to meet the exacting product quality and price demands of the industry’s customers while at the same time protecting growers from market volatility.

“Since early 2006 . . . as feed costs began their steepest climb, and then as the general economy faltered in 2008 and 2009, the market for turkey products and their resulting prices plunged dramatically.  Yet, because of the production contract model, growers were largely sheltered from this volatility,” the comments said.

The comments also pointed out that in 2008, when turkey processors saw a steep drop in net returns from 2007, turkey growers actually experienced a price increase.

About 80 percent of all turkeys in the United States are raised via a production contract in which a processor/integrator owns the turkeys throughout their life and contracts with family farmers to raise the birds.  Another 10 percent are raised on marketing contracts, in which the farmer owns the turkeys being raised for the processor and assumes some market risks, especially in relation to feed costs.  The remaining 10 percent are raised on company-owned farms where the processor hires employees to raise the turkeys.
NTF’s comments said the current production model has preserved a role for the family farmer in turkey production and cautioned that this regulation could create regulatory and legal uncertainty that might lead to a reexamination of that model.

In discussing the various provisions of the rule itself, NTF focused on several key weaknesses, including:
•Provisions that seek to redefine key legal terms and make it easier to sue processors;
•Provisions that would make it more difficult for processors to offer unique contracts to individual growers and restrict other systems used for determining grower compensation, moves that could result in lower payments for a significant percentage of turkey growers;
•Requirements that unique contracts be posted on GIPSA’s website; and
•A requirement that processors virtually guarantee a grower can recoup at least 80 percent of any required capital investment in their grow-out facilities.

The Washington, D.C.-based NTF is the national advocate for all segments of the $8 billion turkey industry, providing services and conducting activities that increase demand for its members' products by protecting and enhancing their ability to profitably provide wholesome, high-quality, nutritious products. For more information, visit www.EatTurkey.com.

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