Leah Douglas
(Reuters) – U.S. poultry companies could be forced to adjust how they pay their contract chicken farmers under a rule proposed by the U.S. Department of Agriculture on Monday.
The rule is the third proposed by President Joe Biden’s administration to increase competition in the meatpacking sector, where four companies control between 55% and 85% of the markets for cattle, hogs and chicken.
Under the rule, poultry farmers would no longer be able to rely on base compensation based on how their flocks compare to peers and would receive more information to assess the risks associated with capital improvements requested by poultry companies.
Poultry farmers often enter into contracts with companies such as Tyson Foods (NYSE:) and Pilgrim’s Pride (NASDAQ:) are paid on a “tournament system” that ties their compensation to performance (such as the weight of their chicks or mortality rate) compared to other farmers. Farmers are also usually responsible for paying for upgrading their poultry houses.
“The producers came to me and expressed deep concern about the way they are being treated in this tournament system,” Agriculture Secretary Tom Vilsack said on a call with reporters.
The agency previously finalized a rule aimed at increasing transparency between poultry farmers and processors, as well as a rule prohibiting retaliation against poultry farmers for whistleblowing or participating in associations.
The USDA plans to publish additional rules on competition in the livestock sector in the coming months, Vilsack said.
The proposed rule, announced Monday, will be open to public comment for 60 days.