Biden administration proposes rule on fairer payment for chicken farmers

By Leah Douglas

(Reuters) – Poultry companies in the U.S. could be required 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 the administration of President Joe Biden to enhance competition in the meatpacking sector, where four companies control between 55% and 85% of the cattle, hog and chicken markets.

Under the rule, chicken farmers could no longer have their base compensation docked for how their flocks compare to their peers, and would receive more information to assess risks associated with capital improvements requested by poultry companies.

Often, contract poultry farmers for companies, such as Tyson Foods (NYSE:) and Pilgrim’s Pride (NASDAQ:) are paid in a “tournament system” that ties their compensation to performance – like how much their chickens weigh, or mortality rate – against other farmers. The farmers are also typically responsible for paying for updates to their chicken barns.

“Producers came to me and indicated deep concerns about the ways they were being handled and dealt with in this tournament system,” Agriculture Secretary Tom Vilsack said on a call with reporters.

The agency previously finalized a rule to enhance transparency between chicken farmers and processors, and another to prohibit retaliation against chicken farmers for whistle-blowing or participating in associations.

The USDA expects to release more rules on competition in the livestock sector in the coming months, Vilsack said.

The proposed rule announced on Monday will be open to public comment for 60 days.