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Statement of Need: The Grain Inspection Packers and Stockyards Administration (GIPSA) believes that the failure to disclose certain terms in a poultry growing arrangement constitutes an unfair, discriminatory, or deceptive practice in violation of section 202 (7 U.S.C. 192) of the Packers and Stockyards Act (P&S Act). Because of vertical integration and high concentration within the poultry industry, poultry growers do not realistically have the option of negotiating more favorable poultry growing arrangement terms with competing live poultry dealers because there may be no other live poultry dealers in the poultry grower’s immediate geographic area or there may be significant differences in equipment requirements among live poultry dealers. There is considerable asymmetry of information and an imbalance in market power. This final rule will level the playing field by requiring that all live poultry dealers adopt fair and transparent practices when dealing with poultry growers.

Summary of the Legal Basis: One of GIPSA’s primary functions is the enforcement of the P&S Act, (7 U.S.C. 181 et seq.) (P&S Act). Under authority granted to us by the Secretary of Agriculture, GIPSA is authorized (7 U.S.C. 228) to make those regulations necessary to carry out the provisions of the P&S Act.

Alternatives: GIPSA collected input on several alternatives like issuing policy guidance to GIPSA employees, providing public notice that failure to provide growers with additional contract information was an unfair practice in violation of § 202 of the P&S Act, or recommending that growers seek redress of grievances through civil court action or arbitration. GIPSA determined that none of these alternatives will meet the needs of poultry growers. We believe, however, that this final rule will provide the best means of achieving statutory intent at the lowest cost to poultry growers and live poultry dealers.

Anticipated Costs and Benefits: Costs: The costs to both poultry growers and live poultry dealers are negligible, as the rule does not impose significant additional requirements that increase actions that the poultry grower and the live poultry dealer must enact; they merely affect the timeliness of those actions. In some cases, the final rule requires that the poultry grower and the live poultry dealer commit to writing terms and conditions that are already in effect, but do not mandate what those terms and conditions must be. Thus, the only additional cost is the cost of producing and transmitting the printed document. Benefits: Collectively, the regulatory provisions in the final rule mitigate potential asymmetries of information between poultry growers and the live poultry dealers, which will lead to better decisions on the terms of compensation and reduce the potential for the expression of anti-competitive market power. The provisions achieve this primarily by improving the quality and timeliness of information to growers, and to some extent to live poultry dealers as well. Benefits should accrue to poultry growers from an enhanced basis for making the decision as to whether to enter into a growout contract, and from additional time available to make plans for any necessary adjustments in those instances when the poultry grower is subject to a contract termination. Net social welfare will benefit from improved accuracy in the value (pricing) decisions involved in transactions between poultry growers and live poultry dealers as they negotiate contract terms.

Risks: None.