The U.S. Department of Agriculture wants to expand guidance currently in place for loans to contract poultry operations to apply to contract pork operations, Agriculture Secretary Tom Vilsack announced. The guidance protects growers from “questionable business practices,” USDA said in a release.
“Contracted poultry and pork operations face increased risk in these challenging economic times, and this additional guidance for pork, putting it in agreement with the poultry guidance, will aid the loan officers in our county offices as they continue to make informed decisions on loans for contracted pork operations, providing opportunities for producers while at the same time protecting the interests of the taxpayers who fund the loans USDA makes,” Vilsack said.
USDA currently provides guidance to county offices on the analysis and evaluation of applications for direct and guaranteed loans for contract poultry operations, as well as on how those loans are serviced.
The intention of the guidance is to protect loan repayment and ensure that loans from the USDA’s Farm Service Agency do not enable integrator practices that can harm producers, the USDA said. According to the department’s press release, some integrators have canceled “old contracts and beg[u]n new contracts with new producers, supported by FSA loans” in order to cut costs. This practice has “left some producers suddenly without contracts and unable to pay back their FSA loans,” the release said.
In addition to the contracting guidance expansion to pork production, FSA will issue an Advanced Notice of Proposed Rulemaking to solicit input from the pork and poultry industries regarding the prevalence of type of contracting situation. FSA will solicit proposals for the best way for USDA to address these contract situations in the long term.
Additionally, USDA's Grain Inspection, Packers and Stockyard Administration will investigate allegations from producers that companies are targeting producers for contract termination. GIPSA will examine the allegations to determine whether such practices violate Section 202 of the Packers and Stockyards Act, which prohibits packers, swine contractors and live poultry dealers from engaging in unfair, deceptive and discriminatory practices.