United Producers Inc. (UPI), which operates livestock marketing facilities throughout the Midwest, has submitted written comments opposing a proposed rule by the USDA’s Grain Inspection, Packers and Stockyards Administration.
“We are extremely concerned about the proposed rule as it relates to regulations regarding livestock contracts, arbitration use in contracts, and establishing criteria for the Secretary to consider in determining whether an undue or unreasonable preference or advantage has occurred in violation of the Packers and Stockyards Act,” said Dennis Bolling, president and CEO, United Producers Inc.
UPI’s concerns about the proposed rule focus on regulations that would negatively impact its members and its operations. These concerns include:
If the definition of competitive injury is changed, the ensuing frivolous lawsuits would be devastating and result in a one‐price‐fits‐all bid from packers. This type of pricing does not recognize variation between animals.
If alternative marketing arrangements (AMAs) are restricted or eliminated, it will severely limit UPI’s members’ ability to manage risk, finance production and compete with one another to negotiate premiums. AMAs have allowed producers to get paid for the value they add. Even though the proposed rule doesn’t directly ban the use of AMAs, the unintended consequences of the rule will restrict or eliminate them.
Requiring written justification on pricing differences would create a huge recordkeeping burden for cooperatives such as UPI and its farmer members. The USDA’s scrutiny of individually negotiated, private transactions will have a chilling effect on existing and future specialized product categories that are beneficial to producers and consumers. UPI believes the justification requirement also will drive the livestock market to a one‐price‐fits‐all system. This will eliminate the competitive advantage members have for providing higher quality products.
If a dealer who operates as a “packer buyer” may only purchase livestock for the packer that identifies the dealer as its “packer buyer,” it will result in fewer options with fewer buyers at smaller livestock sales. In these cases, packers will likely not be able to send an
exclusive buyer to smaller sales such as those that many co‐ops hold and the result could actually be fewer buyers in the market – negatively impacting competition and our members’ bottom lines.
“These regulations are not what congress envisioned in the current farm bill,” Bolling said. “This rule would be very detrimental to farmers in the United States, and we are requesting that it be withdrawn.”