WASHINGTON — A rule proposed by the U.S. Department of Agriculture would eliminate pay deductions for chicken producers, Secretary Tom Vilsack said Monday.
Under the existing poultry payment system, an incentive-based arrangement known within the industry as a tournament system, farmers who raise poultry earn a base payment from the companies that buy the product and bring it to a retail market.
Companies contract with producers to supply broiler chicks, feed, and veterinary care and then it’s up to the farmers to raise healthy, substantial chickens at a mutually agreed price.
Farmers have opportunities for bonuses based on the quality of their flock.
But companies can also deduct pay from producers’ base pay based on that year’s market. If demand is down or if one producer successfully raises more chickens than another producer, the chicken company can deduct pay from the lesser farmer’s contracted compensation.
The proposed rule would prohibit companies from deducting that pay.
“If you’re going to establish a base pay, then it can’t go below that,” Vilsack said at a Monday press conference.
Industry groups say the tournament system makes sense economically and promotes competition in the chicken industry.
But critics, including groups that advocate for farmers, say it often harms smaller farmers, leading to a more consolidated industry and a tougher market for producers.
Vilsack said Monday that the USDA’s proposed rule would not compromise the quality of meat sold to grocery shoppers around the country, but rather balance the relationship between producers and companies.
This new rule is one of several under the Packers and Stockyards Act enacted by President Joe Biden’s administration seeking to combat monopolization in the agricultural industry. Congress passed the Packers and Stockyards Act in 1921 to regulate competition in livestock markets.
In 2021, under Biden’s Executive Order on Promoting Competition in the American Economy, the administration aimed to ensure fair industry competition and equitable practices.
USDA finalized the Inclusive Competition and Market Integrity rule in March as part of this executive order. The rule addresses mistreatment and discrimination of livestock and poultry producers based on identity factors such as race, religion, national origin, or sex.
The Poultry Grower Payment Systems and Capital Improvement Systems rule now enters a public comment period through which industry members, consumers, and others can offer feedback. It may then be revised and, if allowed, published as a final ruling in the Federal Register.
