The U.S. Department of Agriculture (USDA) in July released a proposed rule that would revise regulations that apply to poultry growing contracts and the use of tournament ranking systems in the poultry industry. Alongside the release of this rule, USDA also announced an “Advanced Notice of Proposed Rulemaking” asking for further feedback from growers, advocates, and the public about whether additional industry practices, including the use of tournament ranking systems, should be designated as unfair practices under the Packers and Stockyards Act.
On September 27, we supported Farm Action in submitting two comments in response to USDA’s advanced notice of proposed rulemaking.
The first comment (“Transparency”) discusses the history of the rulemaking, including past failed attempts at preventing abusive practices. The second explains how the tournament system is unfair and in violation of the Packers and Stockyards Act (“PSA”); supports the provisions of the proposed Transparency Rule; and explains why transparency alone will not solve the underlying power imbalance.
Poultry growers have long endured deceptive, unfair, and abusive practices by vertically integrated poultry processors, also referred to as “dealers” or “integrators.” Frequently, that deception begins even before poultry growers sign their contracts. It is a common story for growers to be attracted by unrealistic financial models and integrators’ promises of support. Once the contracts are signed, though, growers find themselves on the short end of a massive power imbalance. Poultry integrators control almost every aspect of a grower’s production, putting growers at the mercy of integrators’ decisions, no matter how arbitrary. Because they have little bargaining power, growers are often forced either to accept unfavorable terms or to lose their livelihoods.
No element of the relationship between poultry integrators and growers demonstrates that power imbalance more than the tournament system. The tournament system is a ranking system under which poultry growers’ compensation is determined by comparing a grower’s performance against the performances of other growers. The first comment underscores that all the transparency in the world cannot cure the tournament system’s unfairness, because that unfairness is not the product of a lack of transparency. The unfairness of the tournament system is its central function. Until growers are guaranteed a fixed base price, that unfairness will continue.
The second comment details how the tournament system’s unfairness – in violation of the PSA – would be ameliorated substantially by a requirement that integrators implement a base pay guarantee into payment systems.