USDA moves to protect chicken farmers from unfair corporate practices, amid “anti-business” criticisms

The US Department of Agriculture (USDA) has announced the third installment in a series of regulatory reforms to provide more transparency for chicken farmers who hold contracts with large poultry processing companies. Trade associations have criticized the government’s plans for being “too vague” and “anti-business.”

The USDA’s latest announcement aims to give chicken farmers better insight into companies’ payment rates for their birds through the “tournament system,” which provides farmers with key information on capital improvements that companies require to make to keep or renew contracts.

The Biden administration, which has passed the legislation in its final days, hopes the regulation will provide better leverage for farmers when companies do not adhere to contract stipulations. The Act also covers producers who raise chickens, turkeys, hogs, cattle and sheep.

“During my time as secretary of agriculture, time and again, USDA has been confronted with the stories of farmers who lost their life’s savings or went bankrupt because of an unfair system they entered into when they agreed to raise animals for a major meat conglomerate,” says agriculture secretary Tom Vilsack.

“It is USDA’s job to advocate for farmers and these regulatory improvements give us the strongest tools we’ve ever had to meet our obligations under the Packers & Stockyards (P&S) Act.”

Giving farmers better insight

P&S rules are a new suite of policies aimed at giving farmers better insight into key aspects of the agricultural system, from genetic components and seed pricing to livestock market rates, so that they can achieve fairer returns.

But the National Chicken Council (NCC) has denounced the plans for their lack of clarity and says the associated costs have been “greatly underestimated.”

“The Biden administration, with just days remaining, is racing to impose the last pieces of its anti-business regulatory agenda. This rule — which Congress never asked for — will lead to rigid, one-size-fits-all requirements on chicken growing contracts that would stifle innovation, lead to higher costs for consumers, decrease competition and cost jobs by driving some of the best farmers out of the chicken business,” says Harrison Kircher, NCC president.

“The vast majority of chicken farmers in rural America are happy and prosper raising chickens in partnership with companies and they don’t want the government meddling on their farms and telling them how they should run their businesses.”

In 2022, the Department of Justice proposed a consent decree over antitrust violations by big hitters Cargill, Sanderson and Wayne Farms concerning wage-fixing and deceptive practices that included sharing “competitively sensitive information.”

The settlement required the companies to pay a collective restitution fee of US$84 million to affected poultry plant workers. The case is considered an influential factor in the government’s rollout of P&S rules.

Enhancing profits

Under the Biden-Harris administration, the USDA finalized two other rules under the Act. This includes the “Transparency in Poultry Grower Contracting and Tournaments,” which was completed in November 2023 and requires live poultry dealers — typically large processing companies — to give critical information about terms of agreements to the poultry growers they have contacts with.

It also finalized the “Inclusive Competition and Market Integrity under the Packers and Stockyards Act” in March 2024, which bans companies from retaliating against farmers over basic activities like communicating with government agencies or joining producer or grower associations.

As part of its latest announcement, the USDA revealed that it has withdrawn another proposed regulation to define unfair practices in the sector due to its “complexity.” The agency received more than 13,000 public comments on the proposal.

The National Cattlemen’s Beef Association (NCBA) welcomed the withdrawal, arguing that it would have “undermined the free market” and “harmed hard-working cattle producers.”

Tanner Beymer, NCBA executive director of government affairs, says: “We are pleased that the USDA recognized their failed approach and withdrew this rule. NCBA will continue advocating for sound market principles, and we look forward to working with the next administration to enhance profitability opportunities for America’s cattle farmers and ranchers.”