Packers and Stockyards

Review

Chelsea Good

Livestock Marketing Association

VP of Government and Industry Affairs

Overview

• Current Requirements / History of the Law

• Modernization Concerns

• Process so far

• LMA 9-stop listening tour

• Cross industry outreach

• Next Steps

• Three possibly short-term changes

GIPSA History

• P&S Act enacted in 1921 to address concerns

about marketing and distribution of livestock and

meat products at the turn of the century.

P&S RequirementsWho falls under GIPSA requirements?

•GIPSA regulates livestock markets (aka stockyards

or market agencies selling on commission), packers,

dealers, and order buyers

•Farmers and feedyards are not covered

•GIPSA is not sure if online auctions are covered and

in what circumstances

Main Topics

•Financial Protection

•Competition and Transparency

Financial Protection

• Current Toolso Prompt Payment o Bond o Markets Keep Custodial Account

for Trust Funds o Packer Statutory Trusto Reparations Cases o Insolvency

Competition / Transparency

• Unjust, unreasonable, unfair, deceptive, or discriminatory practices are prohibited

• Markets publish rates • Scale requirements• Markets must sell livestock in consignment

and key employees (auctioneers and weigh masters) may not buy

• Disclosure required when the market or an owner or employee buys

• Packers and dealers must be in competition and independent of one another

Concerns About the Law

• Is it doing what was intended?

• Is it causing more harm than good in some situations?

• Has it kept up with time?

Review Process

• 9-Stop Listening Tour to Receive Member Feedback (summer 2015)

• Meeting with other industry stakeholders; Initial look at existing policies (fall 2015)

• Working with Cornerstone Government Affairs, USDA, and Congressional staff to analyze law and potential solutions (winter 2015/2016)

Listening Tour Takeaways

• Very few regional differences • Need for modernization of requirements

• Ex: Prompt Payment• Ability to use new technology to transfer money

• Internet sales handling producers’ money should be covered

• Need for improved financial protection against dealer default• Current bonds not sufficient• Dealer Statutory Trust preferred

• Update Focus should be on Financial Protection• GIPSA completion and transparency requirements backed

up by modern technology and more information and options for producers selling livestock

• Inconsistent enforcement in a concern

Industry Discussion Takeaways

• Need for modernization of some requirements recognized

• Recognition that agriculture is more successful when united on a topic

• In order to maintain consensus, focus should be targeted to financial protections

• Education of congress and the industry will be part of the process

Possible Adjustments

1.Prompt Payment•Current Requirement: Pay by close of next business day (often by a check in the mail)

•Breaks down into cattle for slaughter and not•Allows wire transfer; not other electronic payment

•Proposed Requirement: Speeds up payment and allows for new types of transfers

•Seller is present•Actually deliver check that day or next day OR•Start wire or electronic transfer by close of business the next day

•Seller is not present•Either of the options above OR•Mail check by close of next business day

Possible Adjustments

2. Dealers Statutory Trust• Provide increased protection in addition to bonds• Modeled after Packer Trust (1976)• Would allow unpaid livestock producers and

markets to take priority in event of dealer default, first opportunity to be made whole by assets (e.g. accounts receivable)

3. Include Video and Online Auctions• Clarify that all selling agents handling producers’

money, selling on a commission basis must comply with P&S requirements

• Provides financial security to all producers, regardless of where they sell

Questions?

Chelsea Good

LMA VP of Government and Industry Affairs

Email - cgood@lmaweb.com

Cell – 816-305-9540

Guiding Principles

• The law should provide for open competition.• The law should regulate only where necessary.• The law should provide the financial protection it

was intended to provide. • The law should be modernized to reflect 21st

century business practices and allow for the development of new marketing techniques.

• GIPSA should focus resources on the most serious concerns of the livestock industry.

• Enforcement should be implemented in a just, uniform, and transparent manner.

General Questions

• What is P&S’s main job currently

• What should it be?

• What do they do well?

• What could they do better?

• Who should fall under P&S requirements?

Financial Protection

Prompt Payment

•Should there be a prompt payment requirement?

•What time frame and payment methods should qualify as

prompt payment?

Bonds

•Should there be a bond requirement?

•Should there be any changes to bond levels?

Custodial Accounts

•Should livestock markets be required to have custodial

accounts for producers’ funds?

•Are any changes needed?

Packer Statutory Trust

•Has the packer statutory trust been an effective tool?

•Any changes needed?

Financial Protection

Are there tools to protect producers or

markets financially that P&S should

consider adding?

Examples - Dealers’ statutory trust

/ letter of credit instead of a bond

Competition / Transparency

GIPSA prohibits “unfair,” “deceptive,” and

“discriminatory” practices

•How have you seen GIPSA apply these terms?

What specific behaviors should GIPSA regulate for

competition and transparency?

• Should livestock markets be able to exclude certain

individuals from their businesses?

• Should market employees and owners be able to buy

at their market? If so, who and when? Should

disclosure be required?

• Should an order buyer be permitted to carry orders for

multiple people?

Does GIPSA effectively enhance competition by

prohibiting collusion between packers and between

buyers?

Wrapping up

• In an ideal world, what would the P&S requirements be?

• How little P&S requirements would you be comfortable with?

• What changes could be made to the way GIPSA does business?

Updates to the requirements

1921 – P&S Act passes

1942 – Brand inspection fee provision added

1958 – Increased scope to add more livestock

marketing businesses.

1976 – Packer Statutory Trust and packer bond

requirements added

1976 – Prompt payment requirement added for

markets, packers, and dealers

1978 – Allowed for % tariffs

2008 – Farm Bill directed Secretary to establish

criteria for “undue or unreasonable.”

2009 – Regulations were promulgated but mostly

rejected