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Resurrection of GIPSA Rule a bad idea

Free Market Reflections with Steve Dittmer

I’m sure you all are tired of bad ideas from south of the border. So I’m sad to report that one of our fringe groups down here has partially resurrected one of the most self-destructive ideas to ever come out of government, in collusion with attorneys and livestock industry malcontents.

Those of you with memory extending to at least the early 1990s will recall that the beginning of major improvements in beef quality delivered to the consumer came about with the end of selling on the average. For decades, cattle had been sold live, assessed by the eye and the scale, and packers bid on the load, estimating how the load would come out on the average. They guessed how many head in the load would grade Choice, how many wouldn’t grade, how many would yield grade 4, 5 and 6, etc.

It was not until cattle feeders began to accept the concept of accepting payment based on carcass grade and yield, thereby getting paid on the basis of carcass quality, that quality improvement began making serious advancements. Being willing to stand on the quality of, and being paid on the basis of, individual carcasses changed the whole game. It rewarded those willing to pay attention to genetics, manage health, nutrition and feeding properly, and be open to different marketing methods.

However, not everyone wanted to do the extra work such management levels required. They wanted to get paid more but not earn it. In line with other socialist philosophies they like, they wanted to get paid for other people’s efforts in improving beef quality but not do the work.

This was part of the impetus behind a rule promulgated by the Grain Inspection, Packers and Stockyards Administration, the so-called GIPSA Rule, with the prohibition spelled out — packers would not be allowed to pay premiums for better quality nor discount for the lack thereof. It would be a mandated return to buying on the average. Another component in the Rule was a directive from Congress to provide a definition for “unfair” and “deceptive practices,” even though the Packers and Stockyards Administration had pretty well delineated what those practices were by its enforcement actions since the 1920s.

In keeping with their philosophy of blaming other people for anything bad, these folks wanted to sue the packers for market manipulation. The problem was all federal courts had already ruled that plaintiffs could not prove their claims under the Packers and Stockyard Act, section 202, without proving harm or likely harm to competition.

This GIPSA Rule was promulgated during the Obama administration and largely written by J. Dudley Butler, the administrator at GIPSA. Before joining GIPSA, he was an attorney who specialized in suing packers. I happened to be recording Butler, before his appointment to GIPSA, when he described a “plaintiff lawyer’s dream” as the chance to get a packer lawsuit in front of a sympathetic federal jury, rather than judges in state court. The arena for big multi-million-dollar judgments, he explained, were federal courts.

So Butler set about implementing a rule that would make it much easier to bring suit against packers, plus the above components and a string of restrictions on how poultry processors could manage their relationships with contract poultry producers.

Free market livestock groups fiercely opposed the GIPSA Rule and Congress put clauses in legislation preventing GIPSA from implementing it. The Trump Administration’s Agriculture Secretary Sonny Perdue said he would not move forward with the interim rule.

The Organization for Competitive Markets (OCM), a group that counts Butler as a founder and recently was taken over by the anti-livestock Humane Society of the U.S. (HSUS), sued USDA to force the GIPSA Rule back on the agenda. USDA revealed at trial that it was putting the rule back on the regulatory agenda for spring 2019. There was no indication as to whether it would try to implement the previous rule or begin anew.

Either prospect is horrifying. The threat to all the progress made in beef quality, consistency and predictability is a threat to the long-term existence of the beef industry, as it could fatally damage the model by which consumers have been supplied with top-quality product at a reasonable cost. Now that consumers know what quality beef is like and demand a similar product with every purchase, returning to a lottery system, where a steak may be great one time and lousy the next, could doom the mass market for beef.

The impetus behind value-added beef, paying for quality based on carcass value, came from a consumer study that rated one in four steaks as a poor eating experience. We cannot afford a return to steak roulette.

About the author


Steve Dittmer is the CEO of Agribusiness Freedom Foundation, a non-profit group promoting free market principles throughout the food chain. He can be reached at [email protected]



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