USDA would reform 'tournament' system in poultry production

Poultry farmers would have more protection against abuse by processors under a USDA proposal to revamp the "tournament" system that pits producers against each other in a competition for income, said the Biden administration on Thursday. The administration also announced $200 million in funding to help independent meat processors go into business or expand production.

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"The funding and new rule we're announcing today ultimately will help us give farmers and ranchers a fair shake, strengthen supply chains, and make food prices fairer," said Agriculture Secretary Tom Vilsack.

The proposed rule on the tournament system would be the first of three regulations promised by the administration months ago. The second would make it easier for a producer to prove unfair treatment by a processor, and the third would update the USDA's definitions of unfair and deceptive practices, undue preferences, and unjust practices by processors.

As part of the highly integrated poultry system, farmers sign contracts to raise broiler chickens, with the processor providing the birds and the feed. Pay is generally determined by how well the farmers perform compared to other farmers — the so-called tournament. Reformers say the system is ripe for abuse.

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To give farmers more information, the proposed rule would require processors to say what financial returns a grower should expect, reveal the degree of control the processor would exercise over a producer, and offer details about the inputs they provide to farmers. The chief executives of processing companies would be required to vouch for the accuracy of the disclosures.

The USDA also said it would open an inquiry into whether some practices in the tournament system are so unfair they should be banned or regulated.

Farm groups were divided on the tournament proposal and the two other regulations being drafted. Some of the larger livestock groups, with members throughout the meat supply chain, say the regulations will imperil marketing agreements that pay a premium for animals with high-quality meat. Activists, though, say they would give independent producers more leverage in dealing with the handful of companies that dominate cattle, hog, and poultry slaughter.

Vilsack also announced that $200 million was available through the new Meat and Poultry Intermediary Lending Program to diversify meat processing. Increased competition among meat processors would result in higher prices for livestock and lower retail prices, said the USDA.

The $200 million would be split into $15 million blocks that local nonprofit groups would use as revolving funds for activities related to meat and poultry processing, such as buying land or modernizing equipment. The new program was part of a $1 billion initiative unveiled in January to create a more resilient meat sector. "Our over-reliance on just a handful of giant processors leaves us all vulnerable, with any disruptions at these bottlenecks rippling throughout our food system," the White House said in a fact sheet, using Covid-19 outbreaks at packing plants in early 2020 as an example.

In addition, the USDA said it would put $25 million into training programs for meat industry workers and begin a top-to-bottom review of its regulations to promote competition throughout agricultural markets, including fertilizer and seeds as well as livestock.