Study of Proposed GIPSA Rule Finds Greatly Increased Costs For Farmers, Ranchers

A comprehensive economic analysis of USDA's proposed regulations governing the buying and selling of livestock and poultry concludes that the rules would be "bad for farmers and ranchers, bad for consumers and bad for rural America," according to the National Pork Producers Council and the other meat and meat processing organizations that sponsored the study.

A comprehensive economic analysis of USDA's proposed regulations governing the buying and selling of livestock and poultry concludes that the rules would be "bad for farmers and ranchers, bad for consumers and bad for rural America," according to the National Pork Producers Council and the other meat and meat processing organizations that sponsored the study. 

The study, issued Nov. 10, was conducted by Informa Economics, which publishes this newsletter. It was sponsored by the National Cattlemen's Beef Association, National Meat Association, National Pork Producers Council and National Turkey Federation. 

According to the Informa analysis of the proposal that has been put forward USDA's Grain Inspection, Packers and Stockyards Administration, adopting the rule would result in 22,800 lost jobs, an annual drop in the nation's gross domestic product by as much as $1.56 billion and an annual loss in tax revenues of $359 million. 

The so-called 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 a statement by the National Pork Producers Council. 

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 study projects that the rule would cause contraction in major livestock industries, such as a 494,000-head reduction in cattle, a 1.25-million-head decline in hogs and 55.2-million-head reduction in poultry.  

Asked about the impetus for the industry to conduct its own economic analysis of the proposed rule, John Burkel, a spokesman for the National Turkey Federation said, "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." 

The Informa analysis is the second study which indicates the costs from the GIPSA proposal could be significant. Those findings run counter to assertions by USDA that the rule was not deemed "economically significant," as costs were estimated at less than $100 million for the plan. 

An unknown at this point is whether farm-state lawmakers upset about the proposed GIPSA rule will seek to restrict USDA's ability to implement the rule through appropriations legislation that could be taken up during the current post-election congressional session. In the past, members of Congress have used the appropriations process to stop USDA from using any funds to implement rules to which there is significant opposition.  

Should this tactic be applied to appropriations legislation covering fiscal 2011, it is more likely to become apparent next year, since the odds of Congress approving all appropriations measures –– in what appears to be a two-week lame duck session this year –– are virtually zero. It is more likely that Congress will pass a temporary continuing resolution to keep the government funded until February or March before adjourning for the year in early December. 

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