CHICAGO, Ill. (Reuters) – The U.S. livestock and meat industry could face more than $1 billion in annual losses and a drop in production if proposed rules for the industry are implemented.
The U.S. Department of Agriculture’s Grain Inspection, Packers and Stockyards Administration proposed rules earlier this year designed to help all livestock and poultry producers compete and assist the agency in prosecuting violators.
The rules would require meat plants and commercial buyers to maintain written records to justify variations in pricing and would prohibit offering higher prices to producers who can provide larger volumes.
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The proposals have divided the livestock industry, with larger producers and meat companies claiming they will drive up costs and reduce marketing options.
Smaller producers favour the rules, claiming they will help them command the premium prices paid to larger rivals.
A new study funded by big livestock producers estimated that the U.S. meat industry’s indirect losses from the proposed rules could total $1.34 billion annually, including one-time costs of $136 million and annual costs of $169 million.
It also claimed the rules would over time decrease beef production by 0.6 percent, pork by 1.9 percent and poultry by 0.6 percent, and could lead to 22,800 job losses.
Many of these costs and changes would occur over two to three years, with lingering economic impacts lasting 10 years or more, the study said.
The USDA called the rules a starting point. The department said input it is receiving will help it decide if and how changes should be made.
“We want a workable, feasible and common sense rule,” a USDA spokesperson said.
Both sides in the debate are wondering if the new Republican majority in the House of Representatives could prompt changes in the rules.
“I’m hopeful that there will be a positive outcome from the election that will spill over onto the rules and hopefully we can have some serious debate about them,” said Bill Donald, president-elect of the National Cattlemen’s Beef Association.
The study supported many of the sponsors’ arguments, including that current marketing cont racts between producers and meat companies would leave the meat companies vulnerable to lawsuits.
“The natural response is to reduce the amount of contracting,” said Rob Murphy, vice-president of Informa, which conducted the study.
“It is largely in response to the competitive industry clause and the fear of litigation.”
Grassroots groups such as R-CALF USA and the National Farmers Union said the rules are needed to give smaller producers access to top prices and lessen the influence meat packers have in setting prices.
They also said marketing agreements can continue and while there may be some initial lawsuits, there should not be an increase in litigation.
“The rule does not in any way limit, restrict or prohibit any of the various marketing procurement contracts that currently are practiced in the industry,” said R-CALF chief executive officer Bill Bullard.
Key proposals in the U.S. government’s livestock competition rule:
•Require meat plants and commercial buyers of livestock and poultry to maintain written records that justify variations in prices offered to producers.
•Make it a violation to offer better prices to big producers who can provide larger volumes of livestock than to smaller producers who, collectively, can provide the same number and quality of livestock.
•Define unfair and anti-competitive practices so violators can be punished in court. An example would be using inaccurate scales to weigh poultry.
•Require commercial livestock buyers to work with only one packer.
•Prevent a meat packer from buying livestock from another packer. This would prevent collusion and open the market to more participants, the USDA said.
