The use of production and marketing contracts in agriculture has dramatically increased the vertical integration and concentration of U.S. agriculture. Processors benefit from extraordinary bargaining power, and are able to offer “take it or leave it” contracts to farmers. As a result, most contracts contain obscure language, payment plans, and confidentiality provisions that make it difficult to negotiate a fair deal. Once farmers agree to a contract, there are no provisions barring early cancellation, which may leave farmers with huge loans on production equipment and no market. Also lacking are laws preventing processor retribution against farmers who attempt to collectively organize. And when wastes from poultry houses spill into the environment, it is farmers- not processors- who remain liable, even though it is processors who own poultry and livestock under production contracts. While the negative trend towards contracting spreads from poultry to hogs and cattle, new rules are under development to protect growers.
Nationally, several bills protecting contract farmers stalled in the 106th Congress – the Poultry Farm Protection Act of 1999 (H.R. 2829) and the Family Farm Cooperative Marketing Amendments Act of1999 (H.R. 2830)
In the absence of federal legislation on the issue, states have developed rules of their own–though many of the laws needed to protect contract growers are not yet enacted. Recently the IA Attorney General’s office released a comprehensive model contract law- the “Producer Protection Act“- that draws on a variety of proposals and statutes in other states. Also under development are state laws that assign environmental liability to integrators for the wastes of poultry grown under contract.
On the federal level, U.S. Senator Harkin introduced the Agricultural Producer Protection Act of 2000 in October 2000. The Act incorporates many of the same elements found in the model law released by the IA Attorney General’s office.
Liability issues are of great concern to contract growers. Under production contracts, growers do not own the birds but are nonetheless responsible for waste spills and other permit violations. Under development are state laws that assign environmental liability to integrators for the wastes of poultry grown under contract. Several laws in Iowa were proposed in 2000 (HF 2245, SB 2182 and SF 2198, SF 2387) to make integrators liable for environmental violations committed by contract producers, but the bills failed. Kentucky’s Division of Water finalized regulations on concentrated animal feedlot operations (CAFOs) which include integrator liability.
Minnesota has a law that assigns responsibility to the parent companies of subsidiary processors to pay producers if the contractor fails to uphold the contract. Other states have proposed similar laws, though none have passed.