USDA has finalized the “Transparency in Poultry Grower Contracting and Tournaments” rule under the Packers and Stockyards Act.
The rule aims to help contract poultry growers compete more effectively and better understand the terms of their agreements with major processing companies.
The rule requires large processing companies to give critical information about terms of their agreements to the poultry growers with whom they contract to raise birds.
The final rule requires a “Live Poultry Dealer Disclosure Document” that provides growers with information they need to have a better understanding of realistic outcomes they can expect before making important financial decisions, such as capital-intensive facility improvements or taking out loans.
In particular, the rule requires that processing companies disclose earnings for growers by quintile, establish minimum flock placements, and explain variable costs growers may incur and how companies handle certain important circumstances such as sick flocks and natural disasters. It also establishes an accountability and governance framework that must be certified by the poultry company’s CEO.
“It’s high time that poultry growers get the benefit of robust transparency — upfront and ongoing — to clean up the broiler chicken market of deceptive practices,” says Andy Green, USDA senior advisor for fair and competitive markets.
The rule also requires processing companies to provide tournament-specific disclosures of inputs to poultry growers who are paid using a poultry-grower ranking system and requires that companies also show the distribution of inputs, housing specifications, and any feed disruptions for all the growers in the tournament, at the time of payment. The names of the growers will not be disclosed to protect their privacy.
The Campaign for Contract Agriculture Reform (CCAR) applauded the USDA ruling.
“The opaqueness of the contract poultry production system is at the heart of the economic abuse and deception inherent in the model,” says Steve Etka, CCAR policy director.
“By requiring poultry companies to be more honest and business-like with prospective and existing poultry growers, this rule helps to deter that deception and give farmers the information they need to make wise investment decisions.”
While Etka thinks “a full-scale reform” of the poultry-payment system is still needed “this rule is a very important and welcomed step toward that goal.”
According to CCAR, large poultry companies require contract poultry growers to go deep into debt and take on heavy liabilities to supply our nation with chicken.
“Contract growers receive no guarantee of return on their investment, no clarity on how they will be paid for their services, and no transparency about the quality of inputs the company provides to them to do their jobs,” according to a CCAR news release.
Contract poultry growers are paid using a “tournament system” that bases payments on a grower’s success in putting weight on the birds they are raising during the 6- to 8-week growout period, relative to other growers.
However, the main factors that determine the grower’s ability to put weight on the birds are inputs provided and controlled by the poultry company, which are totally out of the control of the grower. These inputs can vary greatly in quality, leading to extreme variability in a grower’s income from flock to flock, through no fault of their own, CCAR says.
“The lack of transparency for prospective contract growers about what to expect if they sign a contract to grow chickens for a poultry company has unfairly encouraged many farmers to go deep into debt to build specialized chicken houses on their farms, based on inflated income expectations,” Etka says.
“For existing growers who have already signed a contract, the lack of transparency about the quality of the inputs supplied to them relative to other growers, and how those inputs will dictate their pay, enables companies to quietly shift their economic risks onto growers’ spreadsheets and retaliate against unfavored growers.”
This rule is the first of several Packers and Stockyards Act rules put forward by USDA to promote transparency, address deception and discrimination, and support market competition and fairness in the livestock and poultry sectors.