A rule proposed by the U.S. Department of Agriculture would eliminate pay deductions for chicken producers, Secretary Tom Vilsack said Monday.
Under the current poultry payment system, an incentive-based arrangement known within the industry as a tournament system, farmers who raise poultry earn a base payment from the companies that buy the product and bring it to a retail market.
Companies contract with producers to supply broiler chicks, feed, and veterinary care and then it’s up to the farmers to raise healthy, substantial chickens at a mutually agreed price.
Farmers have opportunities for bonuses based on the quality of their flock.
But companies can also deduct pay from producers’ base pay based on that year’s market. If demand is down or if one producer successfully raises more chickens than another producer, the chicken company can deduct pay from the lesser farmer’s contracted compensation.
The proposed rule would prohibit companies from deducting that pay.
“If you’re going to establish a base pay, then it can’t go below that,” Vilsack said at a Monday press conference.
Industry groups say the tournament system makes sense economically and promotes competition in the chicken industry.
But critics, including groups that advocate for farmers, say it often harms smaller farmers, leading to a more consolidated industry and a tougher market for producers.
Vilsack said Monday that the USDA’s proposed rule would not compromise the quality of meat sold to grocery shoppers around the country, but rather balance the relationship between producers and companies.
