Slinde Nelson

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Slinde Nelson

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Slinde Nelson

Proposed rule could help small farmers negotiate better contracts

On Behalf of | Aug 13, 2022 | Contracts

The United States Department of Agriculture is currently soliciting comments on a potential rule based on the provisions of the Packers and Stockyards Act of 1921. The goal of the new rule is to reduce the power imbalance between meat processors and small farmers to aid farmers in negotiating better contracts.

The proposed change has the support of 10 attorneys general; however, there are questions about oversight.

Proposed rule change

The proposed rule requires poultry dealers to disclose information to farmers about how many chicks they may receive and what the dealers have paid to other farmers. Additionally, dealers who base farmer pay on performance must provide more specific information about the chicks so that farmers can better predict how much meat they can produce.

Reason for the rule change

Meat processors broker around 90% of all broiler chicken contracts. Because half the farmers in the United States work in regions where there are only one or two meat processors to buy from, the processors have most of the power in these contract negotiations. Farmers who attempt to negotiate better deals may face penalties from processors who have near-monopolies in their region.

The proposed rule would improve transparency in these transactions. However, the attorneys general have suggested the program needs external oversight to be effective. As currently proposed, the processors’ executive officers would be responsible for confirming the accuracy of the information provided to farmers.

If the new rule becomes law, it could improve the ability of small farmers to negotiate better-paying contracts in a market where a few large processors hold most of the power.