By Eldon McAfee, IPPA legal counsel
Posted Feb. 19, 2010
As discussed in the attached article from the July issue of the Iowa Pork Producer magazine, there are requirements under the Packers and Stockyards Act that must be met for swine and poultry production contracts, swine marketing contracts, as well as arbitration clause requirements that apply to all livestock and poultry contracts.
As a result of these requirements, the U.S.D.A. Grain Inspection, Packers and Stockyards Administration (GIPSA) issued a statement yesterday that it settled two cases against two Minnesota pork producers for violations of requirements for production contracts. In each case, the producer paid a $1,500 penalty. In the Feb. 18 statement, GIPSA stated it found:
· One producer, in the contract with the contract grower, failed to disclose “right to cancel and additional capital investment, and failed to include proper choice of law and venue.”
· The other producer “did not clearly disclose the grower/finisher’s right to cancel; the method by which the grower may cancel the contract; the deadline for canceling the contract; and an ‘Additional Capital Investments Disclosure Statement.’”
A couple of key points about the federal law:
· Some producers may mistakenly believe that these contracting requirements only apply to marketing contracts with packers. However, that is not the case as discussed in the attached article and as illustrated by these two GIPSA penalty cases.
· The disclosure statement notifying the contract grower that additional large capital investments may be required is being enforced by GIPSA even if the contract itself does not require additional large capital investments.
To avoid GIPSA penalties, all producers who have production contracts with contract growers or pig sales agreements with other producers should carefully review those contracts to make sure they comply with federal Packers and Stockyards contracting requirements. Producers with questions about those requirements should contact an attorney for individual legal advice.
Livestock Contracting Requirements
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