Although the National Pork Producers Council (NPPC) is not taking a position on USDA’s proposed “Transparency in Poultry Grower Contracting and Tournaments” rule that heightens disclosure requirements between poultry dealers and growers, NPPC submitted comments on the proposed rule on Aug. 8.
The proposed regulation, which is related to enforcement and interpretation of the Packers and Stockyards Act (PSA), allows growers to exchange specific contractual information with competing growers and other industry participants.
NPPC said that could lead to exchanges of “specific and competitively sensitive information between a wide range of actual and potential competitors” in its comments. Those exchanges without adequate safeguards could result in anticompetitive effects.
“This is not to say that information exchanges are inherently dangerous; indeed, they can be
procompetitive. In fact, the pork industry relies on a government-mandated information exchange as
its basis for price discovery,” NPPC wrote in its comments.
NPPC made note that courts have recognized carve-outs for information exchanges that contain safeguards such as aggregated data or information exchanged anonymously. It also cited the Livestock Mandatory Reporting (LMR) system, which requires meatpackers to report to USDA the prices they pay for cattle, hogs, and lambs and other information, as “the best framework … for information sharing that balances the need for information symmetry with confidentiality-driven protections from price signaling.”
NPPC cautioned that too much transparency — i.e., mandated information exchanges — could have a chilling effect on current livestock marketing schemes.
“Most significantly, increased transparency could lead to a dealer offering growers uniform contract
terms, which would diminish the competitive nature of the market and the bargaining power of
individual growers. If dealers are required to disclose certain performance metrics, inputs, and
terms across all growers and then face increased legal liability this may lead to uniform terms.
Ultimately, those terms and metrics may end up being the lowest common denominator,” NPPC wrote.
USDA is expected to issue two additional PSA regulations related to livestock transactions by the end of the year. One of the proposed rules was submitted on Aug. 16 to the White House Office of Management and Budget for review, but the text of it is not yet available, NPPC said in Capital Update.
“NPPC supports rules that recognize the right of producers to freely enter into contracts to sell and buy livestock and poultry,” the organization noted.
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