WASHINGTON, January 14, 2025 — Agriculture Secretary Tom Vilsack today announced the third installment in a series of regulatory reforms under the Packers and Stockyards Act that, in combination with other updates finalized under the Biden-Harris Administration, is intended to level the playing field for farmers who raise chicken, turkeys, hogs, cattle, and sheep under contract or for sale to meat and poultry processing companies.
Specifically, the rule announced today will give chicken farmers better insight into companies’ payment rates for their birds, will institute stability and fairness in what is commonly known as the ‘tournament system,’ will provide farmers with key information on capital improvements the companies require farmers to make in order to keep or renew contracts, and give farmers stronger leverage when companies do not adhere to the rules.
“During my time as Secretary of Agriculture, time and again USDA has been confronted with the stories of farmers who lost their life’s savings or went bankrupt because of an unfair system they entered into when they agreed to raise animals for a major meat conglomerate. It is USDA’s job to advocate for farmers, and these regulatory improvements give us the strongest tools we’ve ever had to meet our obligations under the Packers & Stockyards Act,” said Agriculture Secretary Tom Vilsack. “While there is still work to be done, I am immensely proud that the Biden-Harris Administration has taken historic action to level the playing field for farmers. This complements other ways we’ve worked to enhance competition across the agriculture sector, from investing in independent processing capacity, to shoring up domestic fertilizer production, to promoting transparency around seed technology and markets. As the bedrock of so much that our society depends on, and the pillar of rural economies, farmers deserve honesty, certainty and options when it comes to their hard work.”
Over the course of the Biden-Harris Administration, the U.S. Department of Agriculture (USDA) has finalized two other rules that strengthen enforcement of the Packers & Stockyards Act and seek to create a fairer dynamic between integrated processing companies and the farmers who raise animals for them. These include:
- Transparency in Poultry Grower Contracting and Tournaments, finalized in November 2023, which requires Live Poultry Dealers —typically large processing companies — to give critical information about terms of their agreements to the poultry growers with whom they contract to raise birds. The final rule requires a “Live Poultry Dealer Disclosure Document” that provides growers with information they need to have a better understanding of realistic outcomes they can expect before making important financial decisions, such as capital-intensive facility improvements or taking out loans. In particular, the rule requires that dealers disclose earnings for growers by quintile, establish minimum flock placements, and explain variable costs growers may incur and how companies handle certain important circumstances such as sick flocks and natural disasters. It also establishes an accountability and governance framework that must be certified by the poultry company’s CEO.
- Inclusive Competition and Market Integrity under the Packers and Stockyards Act, finalized March 2024, which prohibits discrimination on the basis of certain other basic characteristics and bans companies from retaliating against farmers over basic activities like communicating with government agencies, joining producer or grower associations, and asserting legal and contractual rights; it also offers protection against deceptive contracting that are false, misleading, and result in harm to producers.
In June 2024, USDA proposed Fair and Competitive Livestock and Poultry Markets, which sought to define unfair practices under the Packers & Stockyards Act. USDA received more than 13,000 public comments on the proposal. Due to the complexity and length of time needed to finalize that regulation, USDA is withdrawing the proposal to preserve its ability to re-examine these important issues in the future and enable the Agency to explore with stakeholders regarding how best to implement the requirements of the Packers and Stockyards Act.
“This Administration’s landmark competition efforts show it’s possible to ensure that a little bit more of the food dollar stays with the farmers and ranchers who make America’s agricultural trading markets the envy of the world,” said Senior Advisor for Fair and Competitive Markets Andy Green. “This final Packers & Stockyards rule builds on a historic record of partnership between USDA and the Department of Justice, including landmark cases to reform the tournament system and to put a stop to unfair and anticompetitive practices in the poultry industry, as well as the extraordinary whole-of-government achievements of the White House Competition Council.”
Enhanced Enforcement of the Packers & Stockyards Act
USDA has worked closely with DOJ to enforce the Packers & Stockyards Act in the poultry sector. As a result of this close partnership, DOJ has obtained two consent decrees with large poultry integrators that increase protections for growers and decrease unfair, deceptive, and anticompetitive conduct in poultry markets.
In November of 2023 DOJ reached a consent decree with Koch foods holding the firm responsible for violating the Packers & Stockyards Act for imposing excessive termination fees on growers who attempted to contract with other integrators. These fees effectively served as unlawful non-compete clauses. As a result of this consent decree, growers were reimbursed for all termination penalties and out-of-pocket expenses incurred, and Koch foods agreed to refrain for such conduct moving forward.
Additionally, with the assistance of USDA, in July of 2022 DOJ obtained a consent decree with Cargill, Sanderson, and Wayne Farms around antitrust wage-fixing and violations of the Packers & Stockyard Act. In addition to the $85 million to poultry workers to make up for suppressed wages and a court-imposed antitrust monitor, the consent decree barred Sanderson and Wayne Farms from deducting farmers’ base pay based on performance, imposed a 25% cap on tournament performance relative to total grower pay, and required certain additional disclosures to growers consistent with USDA rules.
Other Initiatives to Spur Competition and Fairness for Farmers
These actions under the Packers & Stockyards Act complement a range of other steps USDA has taken over the last four years to enhance competition. USDA has made landmark investments in meat and poultry processing capacity and domestic, sustainable fertilizer capacity, revised the “Product of USA” label and updated its animal-raising claims guidance, and established a Cattle Contract Library. USDA has taken multiple steps to enhance competition and transparency in the seeds and other inputs sectors, established a first-ever partnership with more than 30 bipartisan state attorney generals focused on fairness and competition enforcement, and enhanced its enforcement relationship with the Department of Justice through several high-impact cases and collaborations. And, USDA put forward possible strategies to enhance price discovery and fairness in the cattle industry and released an interim report that assesses competitive conditions in the meat retail industry, identifying hidden fees and unjust or anticompetitive pricing strategies present in the beef market, among other steps.
More about the final rule Poultry Grower Payment Systems and Capital Improvement Systems
Poultry processors exercise substantial control over broiler chicken growers’ operations and possess detailed information about growers as part of the tournament system, an arrangement where processors pay growers based on their performance compared to others. This power imbalance prevents growers from making informed business decisions and from effectively bargaining with processors about compensation and other contractual terms. This final rule requires processors to fairly and transparently pay broiler growers and limit excessively variable compensation, to operate tournaments such that growers can be more confident that comparisons are fair, and to provide growers with key information when they request growers make upgrades.
This rule takes effect on July 1, 2026, following publication in the Federal Register. A preview of the final rule, and a summary and FAQ are available on the Poultry Grower Payment Systems and Capital Improvement Systems webpage.
More about the proposed rule Fair and Competitive Livestock and Poultry Markets
On June 28, 2024, AMS issued the proposed rule Fair and Competitive Livestock and Poultry Markets, which sought to specify general practices that are unfair and in violation of section 202(a) of the Packers and Stockyards Act, 1921 (“P&S Act”). The proposed rule defined unfair conduct to encompass the spectrum of conduct that harms market participants and harms the market.
Although this proposal is being withdrawn, AMS continues to support the intent and purpose of the proposed rule, and the Department is not withdrawing this proposed rule based upon a change in agency interpretation of its authority of the P&S Act. This withdrawal action does not affect AMS’ ongoing application of existing statutory and regulatory requirements or its responsibility to faithfully administer the P&S Act.
A preview of the withdrawal notice is available on the Fair and Competitive Livestock and Poultry Markets webpage. The official withdrawal notice will be published in the Federal Register.
Comments