AMI Study Finds GIPSA Livestock Rule Would Cut Rural Jobs, Increase Meat Prices

A rule proposed by USDA's Grain Inspection, Packers and Stockyards Administration would have far-reaching negative economic effects on U.S. livestock producers and U.S. consumers according to a recent study commissioned by the American Meat Institute.

A rule proposed by USDA's Grain Inspection, Packers and Stockyards Administration would have far-reaching negative economic effects on U.S. livestock producers and U.S. consumers according to a recent study commissioned by the American Meat Institute.

The study, which was conducted by John Dunham & Associates, estimates that 104,000 U.S. workers would lose their jobs if the rule becomes operational. Livestock producers would be among those especially hard-hit, losing as many as 21,274 jobs. In addition to the job loss associated with the rule, fewer producers would result in a decrease in supply and an increase in the cost of meat. This cost increase, estimated at 3.3 percent, would be felt by consumers at the grocery store.

The proposed GIPSA rule is part of an overall effort by the administration and some livestock and farm organizations to counter what they believe is an unfair competitive advantage that meatpackers have over livestock producers. At its core, this dissatisfaction arises from the belief that the high level of concentration in the livestock processing industry is contributing to antitrust behavior, or at least the allegation of antitrust behavior.

As part of the effort, USDA and the Department of Justice want to require meatpackers to maintain written records that provide justification for differential pricing or any deviation from standard price or contract terms offered to producers. If a packer believes it can justify disparate treatment of producers, it must have a legitimate reason for that differential treatment.

Not all livestock organizations accept this view. The National Pork Producers Council, for example, is calling on USDA to conduct a thorough economic analysis of the GIPSA proposal to determine the likely effects that its implementation would have on the pork industry. NPPC may believe that such an analysis by USDA might dovetail with the findings of the AMI-commissioned study.

USDA did conduct an analysis of its proposed rule before publishing it for comment. That study found the economic effects of the rule likely would be far more limited. Instead, it found that imposing the rule would create economic benefits for farmers that largely outweigh costs that are born by meatpackers and poultry companies. Opponents question the thoroughness of the earlier USDA study. 

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