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Farm Press Release

For immediate release - Wednesday, September 13, 2000.
Contact Bob Brammer - 515-281-6699.

Iowa Leads States Pushing "Producer Protection Act"

Attorney General Tom Miller leads sixteen farm and ranch states in proposing new laws to protect producers who enter contracts to provide grain or livestock.

DES MOINES. Iowa Attorney General Tom Miller announced today that sixteen State Attorneys General have drafted new laws to protect contract growers and producers - the growing number of farmers and ranchers who produce livestock or grain on contract with large contractor companies.

"Contracting poses serious risks for producers and ultimately for consumers," Miller said. "Contracting has its place and its benefits, and it certainly is growing quickly, but we want to be sure farmers get a fair shake in a time when there is a strong trend toward consolidation and concen-tration in agriculture. There can be a huge disparity in bargaining power between farmers and contractor companies. We're working to be sure the scales aren't tipped against ordinary producers."

Miller and the Farm Division of his office led the multi-state project of drafting the model legislation, which is designed to be introduced in state legislatures. Several of the measures are based on laws that recently were adopted in Iowa -- banning confidentiality clauses in contracts, for example, and giving farmers a first-priority lien for payments in case a contractor company goes out of business. Miller said his office would ask the Iowa Legislature to approve other elements contained in the model act.

"We are proposing moderate measures that will protect farmers but will not be overly burdensome for processors," Miller said.

In a joint statement accompanying the model "Producer Protection Act," Miller and the sixteen State Attorneys General said the legislation would "help preserve competition in agriculture for the benefit of farmers and consumers."

The Attorneys General cited their concern about "the rapid trend toward consolidation in agriculture" and that fewer and fewer firms control the production, processing, preparation and retailing of agricultural commodities and food. The rapid rise of production contracts and marketing contracts has dramatically increased vertical integration in U.S. agriculture.

"We worry that this conglomeration of economic power may lead to anti-competitive practices and adversely affect the prices paid to farmers for commodities and the prices paid by consumers for food," said the Attorneys General, who serve in many important farm and ranch states.

Attorney General Miller said: "In production contracting, we worry about the great disparity in bargaining power and marketing information between the contractor companies and individual producers. Large companies often offer contracts to producers on a take-it-or-leave-it basis. Risks to producers are buried in pages of legalese, and producers easily can be stuck with unfair contract terms. On top of that, they may be barred from disclosing any of the terms to others," he said.

"We've already addressed several of those issues in Iowa," he said. "We want to do more in Iowa, and we want other states to join the effort to protect their farmers and ranchers as well."

The Attorneys General said contracting often results in unfair shifting of economic risk to farmers and ranchers, especially those who are required to make large capital investments in buildings and equipment. And they said the fact that most agricultural contracting is done in secrecy "severely limits the ability of farmers to compare contracts and negotiate the best or even a fair deal."

The model state legislation "Producer Protection Act" would:

  • Require contracts to be in plain language and contain disclosure of material risks.
  • Provide contract producers with a three-day right to review production contracts.
  • Prohibit confidentiality clauses in contracts. This provision -- which is modeled after a law enacted last year in Iowa -- would help maintain the "market transparency" that historically has been available to farmers and ranchers through auctions and terminal and futures markets. "Farmers and ranchers should have the freedom to discuss their contracts with other farmers at the coffee shop, not to mention with their own lawyers and bankers," Miller said.
  • Provide producers with a first-priority lien for payments due under a contract - in case the contractor company should go out of business. Iowa approved such a measure in 1999.
  • Protect producers from having contracts terminated capriciously or as a form of retribution if farmers already have made a sizeable capital investment required by the contracts.
  • Make it an unfair practice for processors to retaliate or discriminate against producers who exercise rights including the right to join producer organizations.

The model legislation was endorsed by the Attorneys Generals of Colorado, Indiana, Iowa, Kentucky, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, North Dakota, Oklahoma, Vermont, West Virginia, Wisconsin, and Wyoming.

The joint statement of the Attorneys General said they did not necessarily agree on every single provision of the model "Producer Protection Act," and that the legislation would need some customization for each state. "Nevertheless, we see a real benefit for states to enact similar laws and we see this model statute as an important starting point," they said.

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