By Lester Aldrich, BridgeNews
Kansas City--July 24--At the third annual meeting of the Organization for Competitive Markets here, a work in progress by the Iowa Attorney General became the centerpiece of the gathering. The model legislation was a contract producer's "bill of rights," and attendees saw it as a means of gaining leverage against a corporate agriculture machine that they charged was abusing individual farmers.
In two appearances Friday and Saturday, Iowa Attorney General chief of staff Eric Tabor presented the legislation's framework to the gathering, saying other efforts to help farmers were unsuccessful or showed unsatisfactory results. Pieces of this already are state law in Iowa, but farmers need the whole package.
Attorneys General in other states "are very concerned about competition" within their states, Tabor said. However, they are having trouble using anti-trust laws to enhance competition.
The way the courts have interpreted these laws is not favorable to small and medium-sized agricultural producers, and the results are very hard to change, he said. The courts have tended to view things only from the consumer side of the picture and not from the producer's point of view.
As a result, Tabor's office has resorted to legislative means, he said. He was afraid that abusive practices alleged to have occurred in the poultry industry were shifting into the hog industry, which is a traditional mainstay of Iowa's agriculture.
The model legislation's specifics aren't completed yet, he said, but the general ideas include things that come from other legislation like requirements for plain language, a three-day cooling-off period and banning confidentiality in contracting.
A ban on confidentiality in contracting already exists in Iowa, Tabor said, and the model legislation his office is working on includes this provision. Many times, one of the parties in a contract-growing arrangement insists on keeping the terms confidential, even from the signer's own lawyer. But with the anti-confidentiality law in Iowa, the Attorney General is collecting and publishing various contracts on its Web site for producers to compare.
The model legislation also includes provisions for a production contract lien, which the grower can file for $10.00, he said. This puts the grower first in line to get paid should a company go bankrupt.
Iowa's legislation also would ban certain "unfair trade practices," Tabor said. It would contain anti-discrimination language, preventing buyers from avoiding growers for non-market-related practices.
It also would prohibit coercive tactics to get growers to fall into a narrow field of acceptable behavior, he said. Companies would not be allowed to intimidate or take retaliatory action against a whistle-blower, for instance, and a grower will be allowed to exercise rights to a court of law. A contract may not have a provision where the grower can sign away such constitutional rights.
THE LITIGATION CLEARINGHOUSE
Attendees also were advised that the organization was putting together a "litigation clearinghouse" to compile a database on anti-trust lawsuits that can be used by lawyers in case research. OCM's associate legal counsel Doug O'Brien made the presentation, saying the Packers and Stockyards Act allows for "private enforcement," but this provision hadn't been used much.
Most farmers don't know it exists, most lawyers are unfamiliar with anti-trust cases and there aren't enough definitions of P&SA terms in administrative rules, O'Brien said.
The clearinghouse would collect any type of information that would lead to "successful" litigation against a packer or poultry processor for unfair practices, O'Brien said. He called for attendees to submit specific instances of unfair or unjustly discriminatory conduct by packers and for documents and records concerning trials that deal with the Packers and Stockyards Administration.
The clearinghouse also would keep a list of attorneys interested in this type of litigation, O'Brien said.
LEGISLATION CLEARINGHOUSE
Brian Levy, research associate and administrator for the Institute for Local Self-Reliance, told the group of a similar clearinghouse. This one is called a "legislation clearinghouse," and it is being formed to collect various forms of state legislation to identify successful and unsuccessful portions, allowing legislators elsewhere to formulate good policy.
Levy also wanted examples of contracts, good and bad, as well as information on passing a law that will stand up to court challenge.
THE NEED
Other speakers and participants raged against the contract growing machine, saying such efforts are necessary because of the imbalance of power and a lack of alternatives for growers.
The group tended to focus on poultry contracts but said hog-growing contracts show many similarities. They warned that hog farmers, and possibly cattle producers as well, could be swept up in the contract-growing system and find themselves in a powerless situation.
Under these systems, farmers make sizable investments (commonly around $500,000) in single-purpose buildings. And then, because they are locked into such a huge loan or have so much of their own money tied up in something they can't do anything else with, they are forced to take the terms of a poultry company.
They are afraid to make any waves because, while the loan is for 10 to 15 years, the contract is only on a flock-to-flock basis. Each flock for broiler chickens is in the buildings for only about seven weeks. The chicken processor doesn't have to put its birds in the grower's buildings.
Many of those growers took out their loans and built the buildings before they ever saw a contract, and those who had more favorable contracts to begin with now find them changed, the speakers said.
In addition, William Heffernan, University of Missouri rural sociologist, said each production facility contracts with growers in a 25- to 30-mile radius of the plant, and the circles of influence rarely overlap. So a monopoly situation exists within the circles.
Growers also fear retaliation measures by the packer, they said. Since the processor controls which birds will be placed, a disgruntled grower can be given sick or genetically inferior birds with no recourse. If they die, it's always the grower's fault, the speakers said. They also can be given inferior or short-loaded feed, affecting a grower's feed conversion rates and the rate of pay.
Tom Green, a former contract poultry grower for ConAgra spoke to the group and outlined many of the problems he had with his contract and why it wasn't renewed. When asked why growers will sign such contracts, he said many of them will be like him, too trusting, too anxious to be productive farmers and too naive to look closely at what they're getting themselves into.
Many others will be desperate for any way at all that holds a glimmer of hope to keep from losing a farm that has been in the family for many generations, Green said. On much of the land in the U.S. south, there's not much else that can be done with the land because it is too poor.
All of that makes them ripe for contract growing, which they don't mind, but it also leaves them vulnerable to abuse, which many claim they, or others, have experienced.
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