The U.S. Department of Agriculture’s (USDA) Agricultural Marketing Service (AMS) today published a proposed rule on performance-based poultry grower compensation.

USDA characterized the proposed rule as promoting transparency in the tournament system used in many poultry growing contracts and positioned the proposal as part of the Biden Administration’s efforts to promote competition, reduce consolidation, and fight inflation. USDA’s press release can be found here.

The proposal is aimed at requiring certain pieces of information be disclosed to poultry growers through the contract process, at flock placement, and at settlement, rather than directly prohibiting or requiring certain contract provisions. The proposal would also require integrators to implement executive-led auditing and oversight programs and to include attestations as to the accuracy of information provided to growers.

Broadly, the proposed rule would require the following:

  • In conjunction with poultry growing contracts, integrators would have to provide a “Live Poultry Dealer Disclosure Document” that would include:
    • Information about the minimum number of placements annually and minimum stocking densities, as well as mandatory disclosures indicating that a grower’s income could vary based on factors that integrators may control;
    • Information about past litigation with growers;
    • Historical payment information to growers; and
    • In some cases projected payment information.
  • Integrators would have to implement “governance frameworks” to oversee the accuracy of information provided to growers, and these frameworks would have to be overseen by a senior executive.
  • Growers could not be prohibited from sharing with advisors information about the minimum placements and minimum stocking density.
  • Integrators would have to provide certain information to growers when flocks are delivered, including information about the breed, sex (if known), breeder facility, breeder age, and health of the chicks, and how payments could be affected by these variables.
  • At settlement, integrators would be required to provide detailed information about how each grower ranks within the settlement pool, as well as detailed information about the housing specifications and inputs (e.g., chicks and feed) in the pool.

“It’s my understanding that today’s [proposed] rule is the first of three?” Senator Cindy Hyde-Smith (R-MS) asked Agriculture Secretary Tom Vilsack in a Senate Agriculture Committee hearing today.

“That’s correct,” Secretary Vilsack said, referring to USDA’s announcement from June 2021 that the department intends to propose three rules, including “a new rule that will provide greater clarity to strengthen enforcement of unfair and deceptive practices, undue preferences, and unjust prejudices” as well as “a rule to clarify that parties do not need to demonstrate harm to competition in order to bring an action under section 202 (a) and 202(b) of the Packers and Stockyards Act.”

In the exchange with Senator Hyde-Smith, Secretary Vilsack also referenced a “pre-rule” that USDA sent to the Office of Management and Budget (OMB) last week. A pre-rule is an action federal agencies take to solicit public comments on a future proposed rule. The notification to OMB for the pre-rule, titled, “Poultry Growing Tournament Systems: Fairness and Related Concerns,” can be found here. The full text of the rule must undergo review at OMB prior to its publication in the Federal Register, which is the start of the regulatory process.

“This is a solution in search of a problem,” said NCC President Mike Brown. “The last thing the Biden administration should be doing is pushing increased regulations, red tape and costs onto businesses at a time of record inflation and input costs, threatening food security and potentially raising grocery bills even further for Americans. There is a huge misunderstanding in this administration of how businesses operate. Everything this administration has touched has led to increased prices for consumers – whether its gas, home heating bills or infant formula. Chicken seems to be next.

A copy of NCC’s full statement can be found here.