Where is support for the small farmer when it’s needed?

American consumers, who rarely think about these things, are mostly unaware that the chicken, beef and pork that we buy in the supermarket is raised by thousands of small farmers who agree to raise the birds and animals with which they are supplied to the specifications of the big companies. The companies typically provide the feed, and dictate the requirements for the animals’ care.

With the big companies providing research and development, and guaranteeing a price to reduce the small farmer’s risk, there is no reason this cannot be a good system for providing meat to consumers at a reasonable price (leaving aside environmental concerns over concentrated animal feedlots, which is a subject for another day).
 
{mosads}Good contracts are fundamental to commerce when they are enforceable and parties to the contracts have relative parity. Unfortunately, at present the farmers lack market power relative to the big meat companies, and thus are in a “take it or leave it” position in which they dare not complain about the way they are treated or question the big companies’ interpretation of contract terms.

The farmers maintain that they have no recourse if the companies don’t live up to their end of the bargain, for example, if they are initially supplied with unhealthy young birds, or are provided with questionable feed. The Grain Inspection, Packers and Stockyard Administration (GIPSA) of the Department of Agriculture received 60,000 comments on the proposed rule that would establish clearer standards for the contracts on which many family farmers depend for their livelihood.

To read the complaints of farmers who contract with the big meatpackers is to be reminded of farmers of earlier generations who worked on shares for landowners who held all the cards.

A comment from the Center for Rural Affairs, a supporter of the proposed new rule, provides an insight into the relative powerlessness of the growers under current conditions. “It is a simple courtesy and a prudent business practice,” the CRA writes, “to provide someone entering into a contract the right to discuss the contract with their lawyer, financial advisor, family members or other confidants. Packer-producer contracts ought to be written in plain language. The common practice of creating intentionally-misleading and confusing contracts should end now.”

The farmers have been waiting for three years for GIPSA to produce a final rule. The big meat companies, meanwhile, have seized the opportunity presented by Republican control of the House of Representatives to urge additional delay.

Creating good rules to correct unfair imbalances in market relations is a time-honored function of effective government. That is why, in an earlier time, we regulated the railroads so that farmers could ship crops to market without paying exorbitant rates. It’s why we have laws to protect the rights of workers to organize, and laws to protect homeowners from misleading mortgage lenders.   

Tomorrow (Thursday), the Small Business Committee of the House of Representative will hold a hearing on the proposed new rule. Apparently, the Committee leadership has made up its mind. The Committee website announces that the hearing will discuss: “How USDA’s Proposed GIPSA Rule Hurts America’s Small Businesses.” 

The Committee will hear from two Department of Agriculture officials and from spokespeople from the National Meat Association, the National Turkey Federation, and the National Cattlemen’s Beef Association. Not one small business owner or family farmer is scheduled to testify.

Michael Lipsky is a distinguished senior fellow at Demos.