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GIPSA rule

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Bill

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It won't be positive and what impacts the American market also affects Canada.

GIPSA rule to take a $1.5 billion toll on GDP: study

By Tom Johnston on 11/10/2010



A meat industry-commissioned economic analysis of proposed livestock marketing rules in the Packers & Stockyards Act estimated a $1.5 billion reduction in the nation’s annual gross domestic product, prompting trade groups to urge USDA to withdraw the regulation.
The study, prepared for the National Meat Association and other industry groups by Informa Economics, also projected a loss of nearly 23,000 jobs and $359 million in tax revenues, largely based on assumed reductions in marketing agreements that generate premiums and related declines in demand for beef, pork and poultry.
Last month the American Meat Institute commissioned a similar study, which projected the proposed GIPSA rules would cost $14 billion in GDP, $1.36 billion in lost tax revenue and 104,000 U.S. jobs.
The results of both studies contrast sharply with GIPSA’s analysis that the proposed rules would cost less than $100 million, which is below the threshold that would have mandated USDA conduct a further economic impact study.
The Informa study broke out costs – mainly to producers -- among specific species, and accounted for direct and indirect one-time and ongoing costs that could result if the GIPSA rule were implemented.
Rob Murphy, senior vice president for Informa, said at a news conference today that the indirect costs, such as lost efficiencies and damage to demand, are where the “real punch” hits – to the tune of $800 million annually in beef, $335 million per year in pork and $341 million per year in poultry (chicken, turkey).
eef will suffer the most in terms of what we like to describe as demand destruction as packers pull back on use of alternative marketing agreements,” Murphy said, noting that the costs for all species will be ongoing for at least 10 years, peaking in about the third or fourth year following implementation.
Based on interviews with dozens of stakeholders among all species and throughout each one’s supply chain, Informa made several predictions. Among them was packers will reduce marketing agreements to avoid the potential legal liability presented by a provision in the rule that makes it easier for contractors to sue packers for paying different prices to different contractors.
Negative impact
Bill Donald, a Montana rancher and president-elect of the National Cattlemen’s Beef Association, said at the news conference that a reduction in premiums paid to producers for better product will result in either the producer taking less money or the consumer paying more for product.
“If you look at the impact of lowering costs paid to producers and/or raising prices consumers pay, you can only [conclude] this is going to have a negative impact,” he said.
Donald and representatives of NMA, National Pork Producers Council and National Turkey Federation called on USDA to withdraw the proposed rule and re-start the process.
Donald said the study will be sent to the federal Office of Management and Budget, which can then consider whether to conduct its own economic analysis.
The comment period for the proposed rule ends Nov. 22. Colin Woodall, NCBA’s executive director of legislative affairs, said USDA could publish an interim final rule or final rule by mid-December, but based on the volume of comments that the agency has received a more likely time would be late 2011.
 

Bill

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So what is your take Sandhusker?

Leave the packer bias aside and give us the details as you know them.

Thanks
 

Sandhusker

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Bill said:
So what is your take Sandhusker?

Leave the packer bias aside and give us the details as you know them.

Thanks

My take is that GIPSA should be enforced as it was intended.
 

Big Muddy rancher

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Sandhusker said:
Bill said:
So what is your take Sandhusker?

Leave the packer bias aside and give us the details as you know them.

Thanks

My take is that GIPSA should be enforced as it was intended.

As far as I have read the new rule isn't the old rule. And after reading Ben's book the old rule never found the packers guilty.
 

Bill

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Sandhusker said:
Bill said:
So what is your take Sandhusker?

Leave the packer bias aside and give us the details as you know them.

Thanks

My take is that GIPSA should be enforced as it was intended.

That is the details as you know them?

:roll: enough said.
 

Bill

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http://www.agweb.com/article/gipsa_rules_costs_substantial_analysis_finds/

GIPSA Rule's Costs Substantial, Analysis Finds
November 10, 2010
By: States News Service, States News Service
Confirming what food-animal producers have suspected about a proposed federal rule on buying and selling livestock and poultry, a comprehensive economic analysis of the U.S. Department of Agriculture's proposed regulation found it would be bad for farmers and ranchers, bad for consumers and bad for rural America.

The study, released today and conducted by Informa Economics Inc. on behalf of the National Cattlemen's Beef Association (NCBA), the National Meat Association (NMA), the National Pork Producers Council (NPPC) and the National Turkey Federation (NTF), showed that the rule would result in job losses of more than 22,800, with an annual drop in gross domestic product by as much as $1.56 billion and an annual loss in tax revenues of $359 million.

Rob Murphy, senior vice president at Informa Economics, said the impact will not be immediate. In fact, he said it may take two to three years to reach the levels projected in the study.

"Effects will have a very long tail. The affected industries will still be feeling an impact a decade or more into the future," said Murphy. "All signs point to detrimental outcomes for small producers, the very ones the rule is designed to help."

USDA's regulation, which would be administered by the Grain Inspection, Packers and Stockyards Administration and is known as the GIPSA rule, would restrict marketing agreements between producers and meat packers, dictate the terms of production contracts, require additional paperwork, create legal uncertainty and limit producers' ability to negotiate better prices for the animals they sell, among other things, according to the food-animal groups.

"Well, we are talking about nearly $1 billion in direct and indirect annual new costs for the beef industry. And if this study is correct that 82 percent of these costs will fall on U.S. cattle producers like me, then we will see a lot for sale signs in rural America," said NCBA President-Elect Bill Donald, a third generation Montana rancher. "If the beef industry loses 494,000 head as this study suggests, we will see higher prices for food and a slow and painful death to the American rancher. I've spent my entire life working on my family's operation. I'm not going to stand by and allow this administration to advance a rule that could put my family's operation out of business."

The Informa study found that the rule would result in "ongoing and indirect" costs to the livestock and poultry industries - eventually borne by producers and consumers - of more than $1.64 billion, including nearly $880 million to the beef industry, more than $401 million to the pork industry and almost $362 million to the poultry industry.

"The GIPSA rule is very vague and ill-defined, will create considerable uncertainty among producers and packers alike and will have a detrimental effect particularly on small producers," said NPPC President-elect Doug Wolf, a pork producer from Lancaster, Wis. "The bottom line is that the rule will add to the costs of buying and selling hogs, increase the risk of litigation and lead to more vertical integration in the pork industry, all of which means lost jobs and higher meat prices."

"GIPSA never consulted with industry in an effort to determine the full economic impact of the rule. Therefore, the industry had to go out and conduct its own economic analysis, which is what we are presenting here today," said John Burkel, a turkey grower from Badger, Minn. "This proposed rule, if implemented, will result in job losses that will severely hurt rural America - the parts of America that the Secretary of Agriculture is trying to grow."

"National Meat Association members include many smaller independent companies that are really going to be impacted by this rule. "Among the many changes suggested in the proposal, packers would be banned from selling livestock to other packers, competitive harm would not have to be proven to make anticompetitive allegations, and private contracts would be made public on GIPSA's website," said Jimmy Maxey, director of Certified Meat Products and former NMA Chairman. "These are restrictions and criteria that could stifle normal business operations, have been rejected by Federal courts and are contrary to a free and open market."
 

Sandhusker

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"...Cattlemen's Beef Association (NCBA), the National Meat Association (NMA), ..." It just never ends, does it.
 

Bill

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Jolley: Five Minutes With Washington Lawyer Bob Hibbert & The GIPSA proposal
11/12/2010 09:45AM
There are some ‘fly-off-the-handle’ events that quickly move from polite discourse to take no prisoners emotional rhetoric. Facts be damned, the argument becomes, I’ve got my own facts and yours stink, probably because you’re in cahoots with the devil and your way will drag us all to hell.

That certainly seemed to be the course of action when R-CALF and NCBA hosted back-to-back, dueling banjo type press conferences in Kansas City on Wednesday. R-CALF’s quickly called event included representatives of the Organization for Competitive Markets, The National Farmers Union, DOMINA LAW Group and the Contract Poultry Growers Association of the Virginias.
The groups presented a unified front that said the new GIPSA proposal would restore fair market and the recent AMI analysis was bunk. Words spoken from the podium and used in the press packets were far more threatening and combative, of course.
Next came NCBA’s turn at bat. There press conference was called earlier and it presented a study, conducted by Informa Economics Inc. on behalf of the National Cattlemen’s Beef Association (NCBA), the National Meat Association (NMA), the National Pork Producers Council (NPPC) and the National Turkey Federation (NTF).

It claimed the rule would result in “job losses of more than 22,800, with an annual drop in gross domestic product by as much as $1.56 billion and an annual loss in tax revenues of $359 million.”
Following both conferences, I interviewed Bill Bullard, CEO of R-CALF, Mike Callicrate, Owner of Ranch Foods Direct, Rob Murphy, Senior Vice President of Informa Economics and Colin Woodall, VP of Government Affairs with NCBA and you can view them online here.
Those are staggering numbers to contemplate in today’s fragile economy but far less frightening than the worst case scenario AMI study that placed the financial burden in some frigid north zone surpassing $14 billion. Either number could potentially turn off the economy’s life support system.
But all that is unsubstantiated rhetoric right now; best guesses hazarded by people and organizations with a lot of their personal irons in the fire. What will really happen if the GIPSA rules are adopted is something only the marketplace will answer.
So I wanted to talk with a third party, someone with knowledge of the rules and regs propagated by the feds but with no pre-paid soapbox to stand on. Bob Hibbert came to mind. I’ve known him for years and I’ve always respected his cool demeanor while handling hot issues. As a lawyer, he always seemed to be a scholar, first.
Hibbert is a partner with the Washington law firm of K&L Gates and he focuses on federal regulation of the food and agricultural industries, with emphasis upon USDA.

Giving him an insider’s view of the mechanizations of the USDA, he served as their senior attorney and directed their standards and labeling staff, formulating policy in areas including food safety, product standards and nutrition labeling. He was also Vice President and General Counsel with the American Meat Institute, a position I’m sure the R-CALF folks will hold against him.
I asked him a few questions about the potential impact of the GIPSA proposal. A point of clarification on my last question which quotes Dudley Butler as saying the proposal was ‘a litigator’s dream’ – several people at the R-CALF press conference who attended the event where those words were supposedly spoken have stoutly denied that Butler said them. Because they were part of the original question, I left the quote in place.

Q. Bob, the pending proposal issued by USDA’s Grain Inspection and Practice of Stockyards Administration has created considerable controversy and split the cattle industry into two warring factions, each accusing the other of seriously misleading the public. From a third party, what effects would the proposal have on the beef industry?
A. In the short to medium term, a lot of confusion, litigation and the absorption of extra and unnecessary costs. In the longer term and ironically, probably an acceleration of the concentration of economic power at both the packer and producer level as these things shake themselves out.
Q. The AMI recently published a study that claimed the economic impact of the proposal could be approximately $14 billion, well above the $100 million threshold where the USDA should review the economic impact. R-CALF dismissed the research claiming “The study is not a study at all. It is a direct political threat by the monopolistic meatpackers to exact financial harm on producers and consumers as a retaliatory measure if GIPSA proceeds to prohibit them from exerting abusive market power to lower cattle prices to producers and increase beef prices to consumers.”
Their claim leads to two important questions. First, is it reasonable to believe the threshold might be reached if the proposal is accepted?
A. I've looked at the study but I would hasten to add that I am not an economist. Inevitably the key to such things is what sort of assumptions and projections you make on the front end. Since AMI is an organization that is strongly (and in my opinion correctly) opposed to the proposal, it is only fair to assume that it has made some assumptions that tend to drive the number up. But there is an awful lot of room to make different assumptions and still be well north of 100 million dollars. Given all of the economic issues the proposal jumps into, I just don't see how anyone can seriously argue that we are not well above that threshold here.
The related process problem is not really addressed by USDA when it simply says it is receptive to comment on this particular issue. In point of fact it is obligated to conduct such analyses before it presents such proposals to the public as opposed to patching things up on the fly.
Q. Second, do packers constitute a monopoly that should be addressed by the courts?
A. The literal answer to the question is of course not. The term "monopoly" means market control by a single economic entity. If we discount the rhetoric a bit, I assume that R-CALF is concerned about the level of concentration in the industry. It obviously has that right, but I think statistics bear out the claim that the percentage of the beef market controlled by the three biggest packers has held pretty steady for the past twenty-five years or so.
Q. You wrote, “The proposal in its current form is so profoundly misguided that it is negative, and could well wind up reverberating negatively throughout the entire meat and poultry sector for many, many years to come,” noting that a preferable way to conduct the market is for “a continued evolution of a production and marketing system where signals can be sent, as directly as possible, from the consumer all the way to the farm, identifying preferences for finished products based upon taste, quality, safety, and a host of other attributes is a valuable and necessary thing.”
Can that be done under the existing structure without endangering the supply side of the equation or is the continuing exit of small scale cattle ranchers inevitable?
A. I think the honest answer is that there are forces in the economy far outside the scope of this proposal that probably are going to continue to work against the survival of a good number of smaller scale ranchers. But I also think that a lot of the best opportunities for the smaller rancher, not unlike those available to the smaller processor, involve situations where he can differentiate himself in the marketplace and extract a premium price for his efforts. Adoption of this proposal would only make that much more difficult.
Q. GIPSA head Dudley Butler is a lawyer who has been called a family farm advocate and he’s called the proposal a litigator’s dream. There seems to be little doubt that it will undo decades of legal decision-making. What reaction might we expect from packers as well as cattle ranchers as they try to come to grips with some new legal realities?
A. Assuming that something along the lines of the proposal is finalized, you will probably see defensive strategies being adopted by packers that will inject a lot of extra day-to-day costs into the system, particularly as things first roll out. A lot of plaintiff's lawyers will see Mr. Dudley's dream as a new marketing opportunity and will persuade some groups of ranchers to try their luck in court. Some may well succeed, but the big paydays will be for the lawyers as opposed to their clients.

Chuck Jolley is a free lance writer, based in Kansas City, who covers a wide range of ag industry topics for Cattlenetwork.com and Agnetwork.com.
 

Bill

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Sandhusker said:
"...Cattlemen's Beef Association (NCBA), the National Meat Association (NMA), ..." It just never ends, does it.

Any facts or studies to back up your and R-Klans opinion Sandhusker ...... other than packers are evil and therefore NMA and NCBA must be wrong?
 

Sandhusker

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Bill said:
Sandhusker said:
"...Cattlemen's Beef Association (NCBA), the National Meat Association (NMA), ..." It just never ends, does it.

Any facts or studies to back up your and R-Klans opinion Sandhusker ...... other than packers are evil and therefore NMA and NCBA must be wrong?

You don't think that hasn't been hashed out enough yet, Bill?
 

Big Muddy rancher

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Sandhusker said:
Bill said:
Sandhusker said:
"...Cattlemen's Beef Association (NCBA), the National Meat Association (NMA), ..." It just never ends, does it.

Any facts or studies to back up your and R-Klans opinion Sandhusker ...... other than packers are evil and therefore NMA and NCBA must be wrong?

You don't think that hasn't been hashed out enough yet, Bill?

In other words you don't know the details of the new rule. :roll:
 

Sandhusker

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Actually, you're right, I don't know the details. But, I do know who is a credible source for information, and it sure as hell isn't the packers or their puppets.
 

Big Muddy rancher

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Sandhusker said:
Actually, you're right, I don't know the details. But, I do know who is a credible source for information, and it sure as hell isn't the packers or their puppets.

So post some details from your sources. :?

Or better yet a unbiased source. :D
 

Soapweed

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Sandhusker said:
Actually, you're right, I don't know the details. But, I do know who is a credible source for information, and it sure as hell isn't the packers or their puppets.

Sandhusker, doesn't it bother you just a little bit to be on the same side of this issue as Oldtimer? :???: :wink:
 

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Soapweed said:
Sandhusker said:
Actually, you're right, I don't know the details. But, I do know who is a credible source for information, and it sure as hell isn't the packers or their puppets.

Sandhusker, doesn't it bother you just a little bit to be on the same side of this issue as Oldtimer? :???: :wink:

That's a warning shot across the bow?
 

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Chuck Jolley...That certainly seemed to be the course of action when R-CALF and NCBA hosted back-to-back, dueling banjo type press conferences in Kansas City on Wednesday. R-CALF’s quickly called event included representatives of the Organization for Competitive Markets, The National Farmers Union, DOMINA LAW Group and the Contract Poultry Growers Association of the Virginias.

Get your facts straight Chuck, R-CALF did not host one of the press conferences, OCM hosted it. If you can't even get that right, what else that you write are we supposed to believe?
 

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The new GIPSA rules are a bad idea with regard to beef cattle trade. Perhaps the structure of the poultry business needs some serious overhauling and certainly the hog business may be next in line. Those business structures are entirely different than the beef industry. The beef business will suffer greatly with the vague language simply allowing a "one price fits all" set of rules to be interpreted anyway a court or judge would like. It appears that many of the cattle producers that are in favor of the new rules are potentially the farthest removed and least informed about what goes on at the feedlot and packing level. I have spent a lot of time in each of the sectors of the beef business from seedstock to packer and my perspective from that experience gives me a firm opinion that the suggested rules are bad for business. I find it insane that the very group of producers that accuses the feeders/packers of having too much control of cattle price would prefer to give control to the government and the courts. In what area has the government really improved our lives in the past handful of years? Country of Origin Labeling? How did that work out for you? It added the cost that was expected and that's about it. Made it tougher for packers to manage and sell beef, period. Great, let's all go out and handicap the guys that create a market outlet for our cattle. Perfect.

Taking away the opportunity to receive a premium for the better cattle simply flies in the face of a competitive market. Folks, I've sold fed cattle to the packer in three different marketing formats. I've talked to many, many packer buyers about how they price different pens of cattle. I've run many breakevens at the feedlot level to try to establish price to purchase cattle. There are differences in cattle based on multiple factors. If you want a better price, deliver what the market wants. Go find the value-added opportunities out there. Complaining that your neighbor was paid more than you were paid at the auction does not imply market manipulation. It means that the buyer paid what he was willing to pay on that given day. If you don't like the system then find a way to market the cattle better. Go talk to four or five feedlots and get them interested in your cattle. Show them why they should have confidence in the quality that you are offering. Retain ownership or even just 25% ownership of the cattle in the feedlot. If it's all roses and stacks of cash for the feeders and packers then why not take a hold and play in those wading pools? You might just find out that it's pretty tough to make a buck in any of the beef producing sectors and not everyone can win all the time.

We've got to get our eyes open here before it's too late! Government intervention will not improve the beef business, I assure you. Yes, we need price transparency in the marketplace and we need the current GIPSA rules to protect the basic principals of a fair market, but these new rules will hinder the markets. If this thing goes through in it's current form then we've got trouble on our hands. We'll be headed right back down the commodity path that we've been trying to scratch and claw out of for all of these years.

Finally, if your cattle are poor and below the market or if you are lazy and just want your cash handed over without any effort, then yes, you will probably love the proposed GIPSA rules because these are the only folks that will actually see their cattle value go up!! The better and prudent producer will be handcuffed and slapped in the face for his efforts.

Perhaps I'll create some unrest here and may not win friends in certain circles. That's fine. I'm saying what's in my heart and on my mind. I've seen this business from more angles than many producers and I feel it my responsibility to speak up for my own good and the good of everyone that raises these beasts for a living.

God bless you all and may He see fit that we can continue to feed His people with nutritious and tasty BEEF!

:cboy:
 

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