Analysis Concludes GIPSA Competition Rule Would Have No Impact On U.S. Premium Beef's Marketing Arrangements

Billings, Mont. In response to recent concerns expressed by members of U.S. Premium Beef (USPB) regarding the proposed competition rule (Competition Rule) by the U.S. Department of Agriculture's (USDA's) Grain Inspectors, Packers and Stockyards Administration (GIPSA), R-CALF USA analyzed any potential negative impacts to USPB members and found there would be none.

The USPB members said they were told by representatives of the U.S. beef industry the proposed rule would limit, restrict, or otherwise harm the marketing program established between USPB and National Beef Packing Co. (National Beef), so R-CALFUSA submitted its findings to GIPSA Administrator J. Dudley Butler and requested that GIPSA evaluate whether the group's analysis is correct.

R-CALF USA found that according to the Competition Rule, USPB would not be subject to provisions within the rule because USPB is not a packer, stockyard owner, market agency or a dealer. Furthermore, USPB is neither on the USDA-GIPSA list of Bonded Packers in the United States, which is current as of Feb. 1, 2010, nor is it on USDA-GIPSA lists of registered and bonded market agencies and dealers.

Additionally, USPB markets its cattle to National Beef, a packer that would be subject to the provisions of the Competition Rule. However, pursuant to the Competition Rule, National Beef can justify differential pricing and deviation from standard price or contract terms for USPB members based on: 1) payments to USPB members' investment in USPB units, (which give each member the right to deliver a specified number of cattle based on the number of units owned or leased), and, 2) members' ability to meet certain quality based standards established by National Beef for USPB members.

National Beef also can continue to pay premiums and apply discounts to cattle marketed by USPB members as long as National Beef provides reasons for the premium paid and substantiates the revenue and cost justifications for such premiums and discounts.

Also in its analysis, R-CALFUSA found that according to the Competition Rule, the criteria for undue or unreasonable preferences that may be used by GIPSA include:

1. "Whether contract terms based on number, volume or other condition, or contracts with price determined in whole or in part by the volume of livestock sold are made available to all"livestock producers" who individually or collectively meet the conditions set by contract."
   2. "Whether price premiums based on standards for product quality, time of delivery and production methods are offered in a manner that does not discriminate against a producer or group of producers that can meet the same standards."
      3. "Whether information regarding acquiring, handling, processing, and quality livestock is disclosed to all producers when it is disclosed to one or more producers."

         Therefore, National Beef would not be in violation of the prohibition against giving any undue or unreasonable preference or advantage when it: 1) offers specific contract terms to all USPB members that may not be offered to non-members; 2) offers a premium and discount schedule to all USPB members that may be different than the schedule given to non-members; and, 3) discloses to USPB members information regarding the acquisition, handling, processing and quality of livestock for the USPB program that may not be disclosed to other non-member producers.

         "Our analysis of the provisions of the Competition Rule reveals there would be no limits, restrictions or other harms resulting from the marketing program between U.S. Premium Beef and National Beef," said R-CALFUSA CEO Bill Bullard.

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         R-CALF USA (Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America) is a national, non-profit organization dedicated to ensuring the continued profitability and viability of the U.S. cattle industry. R-CALFUSA represents thousands of U.S. cattle producers on trade and marketing issues. Members are located across 47 states and are primarily cow/calf operators, cattle backgrounders, and/or feedlot owners. R-CALFUSA directors and committee chairs are extremely active unpaid volunteers. R-CALFUSA has dozens of affiliate organizations and various main-street businesses are associate members. For more information, visit www.r-calfusa.com or, call 406-252-2516.