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GIPSA debate heats up with economic study

DANIEL LOOKER 11/10/2010 @ 5:10pm Business Editor

A USDA rule intended to put teeth in the 89-year-old Packers and Stockyards Act was debated at dueling press conferences held in Kansas City, Missouri, Wednesday as the National Association of Farm Broadcasters began its annual convention there.

November 22 is the deadline for farmers, ranchers and others in the industry to comment on what’s become known as “the GIPSA rule,” after the USDA agency that would enforce it, the Grain Inspection, Packers and Stockyards Administration. The first draft, released last June, would require Packers to keep records of contracts with producers to make available to regulators. And it would ban giving preferential prices for large volume alone but would allow continued use of marketing grids that pay premiums for higher quality and cutout.

Wednesday, the National Pork Producers Council and National Cattlemen’s Beef Association released a study by  Informa Economics showing that the uncertainty from the new rule and higher costs for packers to implement it would result in widespread economic costs over the next few years.

Including indirect effects, it would result in 22,800 lost jobs, a drop of $1.5 billion in the nation’s annual gross domestic product (GDP) and lost federal, state and local tax revenue of $359 million.

“I think the Informa study shows we’re talking real money here,” said Bill Donald, a Montana rancher who is president-elect of the NCBA. Donald said that when he first heard about the GIPSA rule, “I was open minded and maybe a little naively optimistic.”

But Donald and other members of the two producer groups argue that the rule is too vague and worry that uncertainty by packers over its enforcement and costs will lead them to abandon the use of contracts now widespread in the industry, resulting in lower prices to producers. The Informa study was conducted for the National Meat Association in cooperation with NCBA, NPPC and the National Turkey Federation.

Rob Murphy, Senior Vice President of Informa Economics, said the study started with interviews at all levels of the meat industry, from retailer to producer and was based on a survey of processor estimates of the cost of complying with the GIPSA rule. Then the numbers were run through an input-output model of the U.S. economy.

Murphy said some of the effects wouldn’t be immediate and might take three to four years to work through the economy.

When a reporter told Murphy that the rule doesn’t prohibit buying on contract, he replied, “you are technically correct that there is nothing in the rule that would prohibit contracting.”

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