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The USDA is seeking comments on a proposed rule entitled “Transparency in Poultry Growing Contracts and Tournaments.” On May 26, 2022, the USDA’s Agricultural Marketing Service announced the proposed rule under the Packers and Stockyards Act. This is the first of three rulemakings that the USDA intends to issue under the Packers and Stockyards Act pursuant to the President’s Executive Order on Promoting Competition in the American Economy. Keep reading to learn more about the new proposed rule and how to submit your comments.
Why Is It Called A Tournament?
Most contract poultry growers don’t own the chickens they raise. Instead, the chicks are provided to the grower by the poultry processing company, called the “integrator,” with which the grower contacts. Generally, under the terms of the contract, the integrator also controls the feed and medicines used in raising the chickens. Once the flock is fully grown, the growers return the chickens to the integrator for processing. At that time, the integrator analyzes the feed-to-meat conversion performance of each grower in that week’s “tournament group.” It then averages the conversion rate. Growers with below average conversion rates are docked while growers with above-average conversion rates are given bonuses.
The “tournament” system puts growers in competition with one another to continually improve their conversion ratio. Growers have, however, pointed out that some of the most important determinants of the conversion rate—like the health and quality of the chicks, the quality of the feed, the medicines administered, and even the time of day when flocks are picked up by the integrator for processing—are all controlled by the integrator.
The Proposed Rule
The proposed rule is scheduled to be published tomorrow, June 8, 2022, in the Federal Register, so we don’t yet have the official version of the proposed rule. But, the USDA has published a draft of the proposed rule. The new rule will require integrators to provide important information to poultry growers. For example, the proposed rule will:
require integrators to disclose the number of flocks and minimum flock stocking density that they will contractually guarantee annually, as well as any “sale of farm” policies,
require integrators, when finalizing a new contract, to disclose to prospective growers the income range of current growers in the prospective grower’s region,
require integrators to disclose information about the quality of the inputs they provided, and any relevant feed discrepancies, to growers, both when inputs are delivered and also on settlement sheets, when growers receive their pay,
require integrators to provide each grower anonymized information about the quality of the inputs provided to every other grower in their “tournament group,"
require integrators to disclose how their tournament system formulas account for input quality variability, and
require integrator CEO’s to sign agreements that require the implementation of internal controls frameworks necessary to provide accurate disclosures, and compliance with USDA audits of disclosed data.
How to Submit Your Comments
USDA is seeking public comments on the proposed rule within 60 days from the date it’s published in the Federal Register. If it’s published tomorrow on June 8, 2022, that means comments should be accepted through August 8, 2022. Comments must be submitted through the Federal e-rulemaking portal at https://www.regulations.gov, and should reference the document number and the date and page number of the issue of the Federal Register. All comments submitted in response to the proposed rule will be included in the record and will be made available to the public. Be aware that the identity of individuals or entities submitting comments will be made public on the Internet at the address provided above.
Additionally, the USDA is “opening an inquiry into whether some practices of integrators in the tournament system are so unfair that they should be banned or otherwise regulated,” through an additional advanced notice of public rulemaking comment period.
For questions, contact S. Brett Offutt, Chief Legal Officer/Policy Advisor, Packers and Stockyards Division, USDA AMS Fair Trade Practices Program, 1400 Independence Ave. SW, Washington, DC 20250; Phone: (202) 690-4355; or email: s.brett.offutt@usda.gov.