GIPSA Rules Ross Pruitt, Department of Agricultural Economics and Agribusiness Louisiana State University AgCenter
There has been much buzz about the apparent finalization of the GIPSA rule after nearly a year and a half of discussion since the rule was initially released. The exact form the rule will take has not been released by USDA or the Office of Management and Budget as of yet, but initial implications suggest it will have little initial impact on the markets. This owes to the fact that the majority of provisions related to the beef cattle industry have been postponed, if not all together scrapped. As directed by the 2008 Farm Bill, it appears that the final rules that will be published will focus on the poultry and pork sectors. The final rules will focus on timely delivery of poultry to contract growers, capital investment requirements and payback period, contract growers remedying a breach of contract, and mandatory arbitration language in the contract. A separate interim rule regarding poultry tournament compensation systems will be published and open to public comment.
As these final and interim rules have not been released, it’s hard to fully understand their impacts on the markets. For cattle producers, the withdrawing of proposed rules for that industry will mean that business will likely go on as normal. However, definitions of “unfair practices,” “undue preferences,” “unlawful discrimination,” and “competitive injury” are still be considered and likely eventually reproposed. In the short run, prices and profit potential are still there. The impacts of rules to be released for the poultry and pork sectors will be easier to understand once released in their entirety, likely by the end of the year. In the short run, these interim and final rules will do nothing to erase the red ink poultry companies have been in for much of this year. In the longer run, the GIPSA rules will alter the behavior of poultry firms & the impact upon contract growers remains to be seen.