FOLLOW US

The U.S. Department of Agriculture proposed a rule Monday to make changes to the way poultry farmers are compensated, as the agency looks to address alleged abuses by the large processing companies that also supply the chickens.

The USDA said in a statement that the proposed rule would prohibit chicken companies from reducing the base price they agreed to pay contract growers and would require the processors to use a ranking system that allows for fair comparisons between growers.

The agency said the rule, called the Poultry Grower Payment Systems and Capital Improvement Systems, is intended to address abuses in the current grower ranking system, known as the tournament system, where farmers see their compensation reduced if their production levels fall below average.

Agriculture Secretary Tom Vilsack said in the statement Monday the new rule is in line with an executive order issued by President Joe Biden in 2021 calling for a whole-government approach to address competition issues across the economy to help drive down prices and raise wages. It's the third rule issued by the USDA as part of that effort under the Packers and Stockyards Act.

"Under the direction of President Biden, USDA has sought to utilize every tool at its disposal to uphold fair competition, protect producers, lower costs for consumers, and combat unfair, deceptive, and discriminatory practices," Vilsack said. "With these actions, USDA is holding steadfast to this commitment, and is building ever more momentum towards delivering the fairer markets that those who raise America's livestock and poultry deserve."

The rule permits awarding bonuses for grower performance while barring deductions from the base price in grower contracts. The proposed rule said that in theory, the tournament system is supposed to protect farmers from fluctuations in the cost of feed and other supplies and to encourage better performance. But in practice, the rule said the system has many problems, including that processors treat growers differently by providing different quality inputs.

Processors will have to implement a fair ranking system under the rule that includes policies and procedures that address the selection and distribution of inputs, such as feed, as well as target weights and other factors that can impact a farmer's performance.

The rule also includes new disclosure requirements when the chicken companies demand that growers make capital investments, including upgrades to chicken barns.

The rule requires the companies to provide information about the purpose of the investment, construction schedules and an analysis of projected financial impacts.