Trump Must Choose Between Farmers and ‘Big Meat’

(Bloomberg) -- In November, farmers voted overwhelmingly for Donald Trump. Now they’re waiting to see if it pays off.

Among the final actions of the Obama administration were new rules making it easier for chicken farmers—who exist inside a commercial vise constructed by agribusiness—to sue the companies for anti-competitive behavior. The big meat lobbying firms oppose any new rules, and now that the Trump administration has frozen all regulations, it’s unclear if those protections will ever take effect.

Trump won the White House last year in large part thanks to support from rural voters who contend they didn’t fully benefit from the economic recovery. Farm incomes, having reached a record high in 2013, are expected to fall for a third successive year while debt levels have climbed.

Alton Terry hopes Trump will begin to make things right by farmers, first off by letting Obama’s rules take effect. For a decade, Terry worked as a chicken farmer for Tyson Foods before filing for bankruptcy. He holds the company, and the government, responsible for his plight.

Terry worked on a contract, with his paycheck dependent on the final weight of his birds. But after he got involved with a farmer advocacy group, Tennessee Poultry Growers Association, Tyson stopped weighing his birds properly, he alleged in a lawsuit. Terry, 52, complained to the Grain Inspection Division of the Packers and Stockyards Administration, an arm of the U.S. Department of Agriculture tasked with keeping the agricultural industry fair and competitive. Not long after that, Tyson canceled his contract altogether, he said.

Initially, Tyson didn’t deny the claims. Instead, it simply denied doing anything illegal. Since then, the company has challenged Terry’s version of events, but in the end it didn’t matter. A federal judge and the U.S. Court of Appeals in Cincinnati agreed with the company’s legal argument that Terry didn’t have a claim (The U.S. Supreme Court declined to hear an appeal).

This is where former Obama’s rules would have come into play: The laws Terry claims were broken, the judge found, require harm not just to the farmer, but to the whole industry—and Terry didn’t show that.

“Although Terry asserts a number of wrongful acts by Tyson, his complaint does not allege that Tyson’s actions had an anticompetitive effect,” the appellate court wrote. Affirming the ruling of the trial judge, the three judge panel found that because only Terry was harmed by Tyson’s behavior, and not the poultry industry in general, the company was off the hook. Adding insult to injury, the court also ordered Terry to pay Tyson more than $27,000 in attorneys fees. Despite taking jobs in oil fields in Texas and Louisiana for two years, Terry eventually lost his farm and sought protection from creditors. 

“That was just so depressing for me because I was never late on anything,” Terry said in an interview. “I had perfect credit and had to do a bankruptcy.”

Years of effort by Obama

The decision in Terry’s case was handed down in May 2010, and almost seven years later, the Obama administration finally—after years of effort—put forward proposed rules so that a lawsuit like his wouldn’t fail on legal grounds. The Farmer Fair Practice Rules take aim at what many farmers say is a fundamentally unfair system that keeps contract growers under the thumb of companies who supply their birds.

The first rule, an “interim final rule,” originally set to go into effect on Feb. 21, would make it unnecessary to show harm to the whole industry, giving a lawsuit like Terry’s a better shot. The second, which is still a proposed rule, would change the “tournament system” that companies use to pay farmers. Currently, chicken growers compete against each other, with the object being to raise the most pounds of chicken on the least pounds of feed. Farmers say the two most important elements—the chicks and the feed—are provided by the company and therefore, the game is basically out of their control.

It’s not uncommon for farmers to lose money on their flocks if they fall on the low end of the tournament. The third rule, also still “proposed,” defines what kinds of actions would qualify as “unfair, unjustly discriminatory or deceptive.”

Terry supports the rules—even if they came too late to help him. Chicken farmers also have the support of the Rural Advancement Foundation International-USA, which said the USDA was “moving in the right direction” and “standing up for the family farmer.” The American Farm Bureau Federation, which represents hundreds of thousands of farmers, is also generally supportive of the rules, as is the National Farmers Union.

But the National Chicken Council, the National Cattlemen’s Beef Association, and the National Pork Producers Council all oppose them. “These rules,” NCC President Mike Brown said, “would stifle innovation, lead to higher costs for consumers, and cost jobs by forcing the best farmers out of the chicken business.” He also warns that they could “open the floodgates to frivolous lawsuits.”

The question now is whether the new president will side with the farmers who overwhelmingly voted for him, or with the agribusiness lobby and a Republican Party establishment that regularly favors deregulation. This and Trump’s own edict yesterday that for every new regulation, two would have to go.

“There’s gonna be a fight in the Republican controlled Congress because Big Meat doesn’t want it to happen,” says Genell Pridgen, another former contract poultry grower. But her expectations of Trump are clear. “People down here are expecting Trump to pull it off.” Pridgen, of Snow Hill, N.C., declined to say which candidate got her vote last November, but said her community voted for Trump largely based on the promise that he would stand up to D.C. insiders who she says failed them. “The doors were going to be opened and the sunshine allowed in: We no longer have to be serfs on our own land—there would be no more corporate agribusiness control,” Pridgen said. “If he’s not able to pull off at least some of this stuff, I think a lot of rural America will just give up.”

Terry expressed similar sentiments. “I think everybody that voted for Trump thought, ‘hey, here’s a guy that will take on the establishment.’” (Terry also declined to say who he voted for, but said it wasn’t Democratic nominee Hillary Clinton, citing the Clintons’ longstanding ties to the Tysons.)

Praise for Vilsack

Both Pridgen and Terry say they recognize the new rules are the product of the Obama administration, yet neither saw that as reason enough to vote for Clinton. “People were glad that [former U.S. Secretary of Agriculture Tom] Vilsack pushed to get them out before he left,” Pridgen explains. Now, she says, “everybody’s looking to Trump to stand up to the Democrats and Republicans.”

“Obama did the right thing,” Terry says, “but he never got up on the bully pulpit.”

Not all farmers and ranchers, though, support the rules. David Alders, a poultry farmer in Texas since 1989, thinks the tournament system is a good one and rewards hard work. “Am I sometimes frustrated that I get a flock of birds that is health compromised? I am,” he says. “But the company has a tremendous incentive to deliver quality chicks.”

After all, bad chicks make bad chickens, which is bad for the company selling them. When it happens, he doesn’t think it’s the result of any kind of systemic persecution, as farmers like Terry have alleged. “There are probably places where that’s occurred, but I don’t think that’s industry practice at all.”

“We want the farmers who raise chickens for us to be successful and dispute the allegations in Mr. Terry’s lawsuit,” a Tyson spokesperson said in a statement.

Despite being opposed to additional regulation, Alders also recognizes the uneven nature of the company-farmer relationship. He wants more transparency in contracting, and an open avenue to litigate unfair practices. “I’m not for a philosophy that says the companies should have the ability to change the terms of a contract or target individual growers or treat their contractors in any way that’s less than even handed and fair,” he says. “If that occurs, it should be pursued.”

Matt Perrier, a cattle rancher in Kansas, is also concerned with the rules, but for a different reason. He’s worried, like the NCBA, that rules against showing “undue preference” could lead to lawsuits against meatpackers that pay higher prices for higher quality beef. His family has been raising Angus bulls, used to impregnate the cows that produce the calves that become Angus steaks, since 1964, fetching far higher prices than standard bulls do. “The folks buying those high dollar bulls,” he says, “they can in turn sell their cattle for more money and that’s what we want to continue.”

But this concern, proponents of the rules say, is unfounded. “The NCBA argument is a sky is falling scare tactic,” says Bill Bullard, chief executive of R-CALF USA, a national non-profit focused on boosting the U.S. cattle and sheep industries. “The rules make clear that if there is a legitimate business justification for granting a preference or advantage to some but not to others, it is not considered ‘undue,’ and would not be actionable.”

An uncertain future 

For now, the future of the rules remains unclear. A memorandum issued by Trump Chief of Staff Reince Priebus on inauguration day postponed the effective date of published rules by 60 days. This is a typical move in a new administration, but it puts these rules in legal limbo.

For the interim final rule, it can be revised from its current version, or the new USDA can go through the lengthy rule making process again to toss it.. The other two rules are even more vulnerable. “Proposed rules are just proposed,” says Cary Coglianese, a law professor at the University of Pennsylvania and director of the Penn Program on Regulation. “They have no legal effect and a new administration coming in could decide not to go forward with them.” They could just sit on the shelves waiting for another administration. “It’s anybody’s guess what this administration will do,” Coglianese says. 

The USDA declined to comment on the future of the rules, but it’s reasonable to assume Trump’s nominee to run the Department of Agriculture, former Georgia Governor Sonny Perdue III (no relation to the chicken empire of the same name), will have a key role in choosing between farmers and Big Meat.

“From growing up on a farm to being governor of a big agriculture state, he has spent his whole life understanding and solving the challenges our farmers face, and he is going to deliver big results for all Americans who earn their living off the land,” Trump said in a statement. Where Perdue lands on the ability of farmers to stand up to companies is an open question. His resume, however, hews more closely to the traditional, deregulation bent of the party. As governor, Perdue was known for promoting pro-business policies while working to streamline government.

Advocates of the rules are keeping their hopes up for now. Sally Lee, program director at Rural Advancement Foundation International, is co-director of the upcoming documentary Under Contract, about the struggles of poultry farmers. She says that “farmers we work with are optimistic that this administration will move forward once they have a chance to review the rules.”

To contact the author of this story: Deena Shanker in New York at dshanker@bloomberg.net.

To contact the editor responsible for this story: David Rovella at drovella@bloomberg.net.