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GIPSA Complaint Against Brazilian-Owned JBS Demonstrates Need for GIPSA Competition Rule

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Billings, Mont. On Sept. 30, 2010, the U.S. Department of Agriculture's (USDA's) Grain Inspection, Packers and Stockyards Administration (GIPSA) filed a formal complaint against Brazilian-owned meatpacker JBS USA, LLC (JBS) that alleges JBS purchased hogs on a carcass merit basis, provided inaccurate accounting to hog sellers, and substituted an arbitrary lean value for many of the hogs purchased, which, according to GIPSA, reduced payments to hog sellers who sold 16 lots of hogs within less than a year's time by an estimated $350,000.

"If the allegation proves correct, and if each of the 16 lots of hogs was separately owned by 16 independent hog producers, then the loss alleged in the complaint represents an average loss per hog producer of $21,875," said R-CALFUSA CEO Bill Bullard. "For a family sized hog operation, this amount of loss could well mean the end of their ability to stay in business."

"This official GIPSA complaint provides a perfect and timely example of why the proposed GIPSA competition rule is vitally important to prevent packers like JBS from exacting financial harm on individual U.S. livestock producers or small groups of U.S. livestock producers," said R-CALF USA Marketing Committee Chair Dennis Thornsberry.

The proposed GIPSA rule clarifies for the industry and the courts that a livestock producer subjected to an unfair or deceptive practice by a packer does not first have to show that the unfair or deceptive practice also harmed the competitiveness of the entire industry before the affected producer could seek relief under the Packers and Stockyards Act.

"The GIPSA rule would prevent packers from eliminating livestock producers one at a time," Thornsberry said.

Bullard said without the GIPSA rule's clarification even if GIPSA ultimately finds that JBS engaged in a deceptive practice that financially ruined several livestock producers those producers likely would have no recourse under the law because they likely could not prove that JBS' actions directly targeted at them also harmed all livestock producers. Obviously, he said, an action like this in which the packer has allegedly cheated a small group of producers out of money is not also an action that harmed the competitiveness of the entire industry it only harmed the producers who allegedly were cheated.

"In a case like this, placing the burden of having to first prove harm to overall competition before a livestock producer could ask a court to invoke the Packers and Stockyards Act to halt deceptive packer practices is an untenable burden and renders the Packers and Stockyards Act meaningless," Bullard added. "This GIPSA complaint is a compelling example of why the GIPSA rule is necessary to prevent packers from culling livestock producers. The proposed GIPSA rule will help curb the alarming exodus of independent livestock producers from the U.S. livestock industry, which is a principal reason why so many of our rural communities are being hollowed out.

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"It is clearly obvious why the packers and their closely aligned trade associations are vehemently opposed to the GIPSA rule because they want to continue profiting from these sordid, anticompetitive practices," he continued. "R-CALFUSA firmly believes this same type of cheating is widespread in the U.S. cattle industry, particularly under grade-and-yield type marketing arrangements where the packer applies discounts and premiums to carcasses without the producer being present. This is why many producers commonly refer to grade-and-yield type pricing as "grade and steal.' And, because of the monopoly structure of the U.S. packing industry, packers are able to actually force cattle producers to sell under a grade-and-yield arrangement if they want timely access to the marketplace.

"The GIPSA rule is a long-awaited effort to stop the deceptive practices of the monopolistic packing industry and restore competition for independent livestock producers," said Bullard.

The GIPSA rule clarifies that the Packers and Stockyards Act will prohibit situations where a packer "wrongfully depresses prices paid to a producer or grower below market value, or impairs a producer's or grower's ability to compete with other producers or growers or to impair a producer's or grower's ability to receive the reasonable expected full economic value from a transaction in the market channel or marketplace."

"The GIPSA rule is the first pro-competition rule that the U.S. livestock industry has received from GIPSA for decades, and every U.S. livestock producer and rural citizen should be lining up in support of it," Thornsberry concluded.

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R-CALF USA, Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America, represents thousands of U.S. cattle producers on domestic and international trade and marketing issues. R-CALF USA, a national, non-profit organization, is dedicated (more...)
 

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