USDA funding to combat anti-competitive practices in poultry and meat farming

27 May 2022 --- The US Department of Agriculture (USDA) has rolled out a package of initiatives, which include strengthening rules and enforcement against anticompetitive practices to “make food prices fairer”. The government agency is also injecting new funds of up to US$200 million to support national meat production operations and workforce training programs.

“These actions combat market dominance by a small number of major meat and poultry processors in key markets, where excessive concentration and control has led to lower prices paid to producers and higher prices paid by consumers,” outlines the USDA.

“For too long, farmers and ranchers have seen the value and the opportunities they work so hard to create move away from the rural communities where they live and operate,” USDA Secretary Tom Vilsack remarks.

The overall target of the project is to “support economic systems where the wealth created in rural areas stays in rural areas”, he underscores.

A boost for fair competition
These actions tie into the Meat and Poultry Supply Chain Action Plan launched in January.

The USDA is opening an inquiry into whether some practices of processors in the tournament system are so unfair that they should be banned or otherwise regulated.The USDA announced a proposed rule under the Packers and Stockyards Act to protect poultry growers from abuse. It the first of three rulemakings that USDA will issue under the Packers and Stockyards Act under the President’s Executive Order on Promoting Competition in the American Economy in order to “stop unfair, deceptive, discriminatory and anticompetitive practices in the meat and poultry industry”.

Currently, poultry processors exert control over much of the process of raising chickens through take-it-or-leave-it contracts with growers, flags the USDA. Under these contracts, processors provide inputs like chickens and feed to poultry growers.

“Poultry growers, who often take on debt to build poultry growhouses, have limited visibility into the real range of outcomes and risks they face under these contracts. Moreover, once in the contracts, the processors then determine the payments that poultry growers receive for their services by weighing the chickens and ranking farmers based on how much the chickens grew.”

Pay is generally determined based on how a farmer compares to other farmers, but farmers currently have little insight into this comparison, the USDA highlights. “For far too long, growers have complained that the ‘tournament’ system is ripe for abuse,” it concedes.

Mandating transparency
The new rulemaking will require poultry processors to provide key information to poultry growers at several critical steps – increasing transparency and accountability in the poultry growing system. For example, processors would be required to disclose details of the inputs they provided to each farmer and information about the input differences among farmers being ranked.

Furthermore, disclosures would cover the level of control and discretion exercised by the poultry processor and what financial returns the farmer can expect from the relationship based on the range of real experiences of other growers.

Contracts would also be required to contain guaranteed annual flock placements and density, the USDA states. Poultry processor CEOs would be required to sign off on the compliance process for disclosure accuracy.

Simultaneously with issuing the proposed transparency rule, the USDA is opening an inquiry into whether some practices of processors in the tournament system are so unfair that they should be banned or otherwise regulated.

The USDA is injecting funds of up to US$200 million to support national meat production operations and workforce training programs.The government body is currently seeking input from stakeholders to determine whether the current tournament-style system in poultry growing could be restricted or modernized to create a fairer, more inclusive marketplace.

Investing in expanded capacity
The USDA is making available US$200 million under the new Meat and Poultry Intermediary Lending Program (MPILP) to provide financing for independent meat and poultry processors in rural communities to start up and expand operations.

“By introducing competition at this key bottleneck point in the supply chain, these investments will help raise earnings for farmers and lower prices for consumers,” states the USDA.

The MPILP will provide grants of up to US$15 million to nonprofit lenders, including private nonprofits, cooperatives, public agencies and tribal entities. 

These intermediaries will use this funding to establish a revolving loan fund to finance a variety of activities related to meat and poultry processing. For example, businesses may use the loans to acquire land, build or expand facilities and modernize equipment.

Training up workforce
The USDA will also put forward US$25 million in investments for workforce training programs for meat and poultry processing workers with American Rescue Plan Act Section 1001 funding.

The targeted funding through new and existing National Institute of Food and Agriculture (NIFA) programs is designed to bolster the meatpacking industry by attracting and retaining employees.

An investment of US$5 million will be split equally between Extension Risk Management Education and Sustainable Agriculture Research Education programs by NIFA. Work in these programs will support development of meat and poultry processing training and educational materials for place-based needs, particularly relevant to small- or medium-sized farmers and ranchers. 

Additionally, training local and/or regional meat and poultry workers presents a unique opportunity to address the demand from niche markets, like mobile processing units fulfilling market demand from fresh markets, on-site processing, farm-to-fork (restaurateurs), boutique grocers and others.

Meanwhile, US$20 million will be made available to qualified community colleges to support meat and poultry processing workforce development programs. The AWT program helps develop a workforce ready for the field as well as industry jobs in the food and agricultural sectors. 

Edited by Benjamin Ferrer