[Federal Register Volume 88, Number 227 (Tuesday, November 28, 2023)]
[Rules and Regulations]
[Pages 83210-83301]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-24922]



[[Page 83209]]

Vol. 88

Tuesday,

No. 227

November 28, 2023

Part II





 Department of Agriculture





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Agricultural Marketing Service





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9 CFR Part 201





Transparency in Poultry Grower Contracting and Tournaments; Final Rule

Federal Register / Vol. 88, No. 227 / Tuesday, November 28, 2023 / 
Rules and Regulations

[[Page 83210]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

9 CFR Part 201

[Doc. No. AMS-FTPP-21-0044]
RIN 0581-AE03


Transparency in Poultry Grower Contracting and Tournaments

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule amends the regulations under the Packers and 
Stockyards Act, 1921 (Act), to add disclosures and information that 
live poultry dealers engaged in the production of broilers must furnish 
to poultry growers with whom dealers make poultry growing arrangements. 
The rule also establishes additional disclosure requirements for live 
poultry dealers engaged in the production of broilers who use poultry 
grower ranking systems to determine settlement payments for broiler 
growers. These requirements add targeted transparency to the market for 
grower services that will inhibit deceptive practices related to 
broiler contracting and performance. The Act protects fair trade, 
financial integrity, and competitive markets for livestock, meat, and 
poultry.

DATES: This final rule is effective February 12, 2024.

FOR FURTHER INFORMATION CONTACT: S. Brett Offutt, Chief Legal Officer/
Policy Advisor, Packers and Stockyards Division, USDA AMS Fair Trade 
Practices Program, 1400 Independence Ave. SW, Washington, DC 20250; 
Phone: (202) 690-4355; or email: <a href="/cdn-cgi/l/email-protection#eb98c589998e9f9fc5848d8d9e9f9fabd78acb83998e8dd6" http: usda.gov">usda.gov</a>">s.brett.offutt@usda.gov</a>.

SUPPLEMENTARY INFORMATION: At the beginning of the 20th century, a 
small number of meat packing companies dominated the industry and 
engaged in practices that were deemed anticompetitive and harmful to 
livestock producers. In response, Congress enacted the Packers and 
Stockyards Act, 1921 (Act), 7 U.S.C. 181 et seq., which seeks to 
promote fairness, reasonableness, and transparency in the livestock 
marketplace by prohibiting practices that are contrary to these goals. 
In the 100 years since the Act went into effect, livestock business 
practices have changed significantly, particularly in the poultry 
industry, for which provisions were added to the law in 1935 (Act of 
August 14, 1935, 49 Stat. 648).
    Within the last 40 years, the poultry industry has become highly 
integrated, with most live poultry dealers operating as ``integrators'' 
who frequently own or control all segments of the production process 
except growout, where poultry growers raise young poultry to harvest 
size under poultry growing arrangements (contracts). Most integrators 
employ a relative performance or grower ranking system to determine 
grower payment, as explained later in this section. Thus, AMS's 
references to ``integrator'' in the discussion of this final rule refer 
specifically to those live poultry dealers who are vertically 
integrated and generally use a relative performance or grower ranking 
system to determine grower payment.
    Over the same 40-year time span, the industry has also become more 
concentrated.\1\ One measure of industry concentration is the four-firm 
concentration ratio, which is the combined market share of the four 
largest firms in the industry. A higher four-firm concentration ratio 
means a higher level of industry concentration. In 1963, the four firm 
concentration ratio for chickens was 14 percent.\2\ By 1980, the four-
firm concentration ratio for integrators processing broilers was 32 
percent.\3\ By 2022, the four-firm concentration ratio increased to 57 
percent.\4\ Concentration is even higher at the local level in which 
growers operate. In the last available survey of local markets, 
MacDonald and Key (2011) found that about one quarter of contract 
growers reported that there was just one live poultry dealer close 
enough to grow for; another quarter reported two; another quarter 
reported three; and the rest reported four or more.\5\
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    \1\ One measures of industry concentration is the four-firm 
concentration ratio, which is the combined market share of the four 
largest firms in the industry. A higher four-firm concentration 
ratio means a higher level of industry concentration. Rapid 
increases in broiler productivity, an important factor driving 
consolidation, did not begin until after World War II. Charles R. 
Knoeber. ``A Real Game of Chicken: Contracts, Tournaments, and the 
Production of Broilers.'' Journal of Law, Economics, & Organization, 
Vol. 5, No. 2. (Autumn, 1989).
    \2\ Michael Ollinger, James MacDonald, and Milton Madison. 
Structural Change in U.S. Chicken and Turkey Slaughter. U.S. 
Department of Agriculture, Economic Research Service. Agricultural 
Economic Report No. 787, September 2000, p. 7.
    \3\ John M. Crespi, Tina L. Saitone, and Richard J. Sexton 
Competition in U.S. Farm Product Markets: Do Long-Run Incentives 
Trump Short-Run Market Power?, Applied Economic Perspectives and 
Policy (2012) volume 34, number 4.
    \4\ WATT Poultry USA, March 2023. Companies ranked by weekly 
ready to cook pounds.
    \5\ James M. MacDonald, Technology, Organization, and Financial 
Performance in U.S. Broiler Production, EIB-126, U.S. Department of 
Agriculture, Economic Research Service, June 2014: 30, https://www.ers.usda.gov/webdocs/publications/43869/48159_eib126.pdf?v=0.
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    There are approximately 16,500 broiler (chicken grown for meat) 
growers--those who actually raise the chickens from chicks, often under 
contract with live poultry dealers--in the U.S.\6\ Based on comments 
from the industry, broiler growers typically have no employees, but 
some may employ a handful of workers outside themselves and their 
families.\7\ According to annual reports filed with the Department of 
Agriculture (USDA), there were 42 live poultry dealers engaged in 
broiler production in the U.S. in their fiscal year 2021.\8\ Of those, 
20 have fewer than 1,250 employees each, and have average annual sales 
of $77 million.\9\ Fewer than 5 percent of approximately 20,000 U.S. 
broiler grower contracts are with these 20 dealers.\10\ More than 95 
percent of broiler grower contracts are with the 22 larger live poultry 
dealer companies that employ more than 1,250 employees each and have 
average annual sales of $3.6 billion.\11\ Total U.S. chicken sales for 
these dealers was $58.6 billion in 2019.
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    \6\ USDA, NASS. 2017 Census of Agriculture: United States 
Summary and State Data. Volume1, Part 51. Issued April 2019.
    \7\ AMS has no exact data on grower revenues but assumes most 
broiler growers are small businesses as defined by the Small 
Business Administration (SBA), with annual sales of less than $3.5 
million.
    \8\ All live poultry dealers are required to annually file PSD 
form 3002 ``Annual Report of Live Poultry Dealers,'' OMB control 
number 0581-0308. The annual report form is available to public on 
the internet at https://www.ams.usda.gov/sites/default/files/media/PSP3002.pdf.
    \9\ Live poultry dealers annual report submissions PSD form 3002 
``Annual Report of Live Poultry Dealers,'' to AMS. OMB control 
number 0581-0308.
    \10\ Ibid.
    \11\ Ibid.
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    Most broiler growers raise poultry under a contractual growing 
arrangement commonly known as a tournament system.\12\ Under this 
system, integrators use a relative performance or grower ranking system 
for settlement purposes, i.e., to determine grower payment among a 
group of competing growers. Poultry growers in tournament systems find 
themselves competing for payment without access to information in the 
possession of the integrators that would allow growers to manage, as 
best they can, poultry production under the

[[Page 83211]]

payment systems established by the integrators.
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    \12\ Citing data from the 2011 ARMS survey, MacDonald states 
``97 percent of broilers were grown under contract, 94 percent of 
contracts included payment incentives tied to grower performance, 
and 93 percent of those contracts tied the incentives to relative 
performance--that is, performance compared to other growers.'' See 
MacDonald, James M. Technology, Organization, and Financial 
Performance in U.S. Broiler Production, EIB-126, U.S. Department of 
Agriculture, Economic Research Service, June 2014: 27.
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    Live poultry dealers generally do not provide, and poultry growers 
and prospective poultry growers find themselves unable to negotiate 
access to, (1) critical information needed to properly assess farm 
revenue streams and the operation of poultry growing contracts, and (2) 
information related to the distribution of inputs delivered to growers 
affecting performance among tournament participants. Whether from a 
representation, omission or practice, the inability to secure this 
information exposes growers to deception and risks of deception that 
could be reduced or eliminated with the provision of the information. 
Additionally, live poultry dealers possess or are reasonably expected 
to possess this information and are able to provide it to growers with 
minimal costs. For more than two decades, USDA, through the 
Agricultural Marketing Service (AMS) and its Packers and Stockyards 
Division (PSD) which now administers the Act, and formerly through 
Grain Inspection Packers and Stockyard Administration (GIPSA), has 
received numerous complaints from poultry growers about poultry growing 
contracting in general and tournament systems particularly. While the 
complaints cover a range of concerns, a central concern is the gap 
between expected earnings and the ability to achieve those outcomes 
through reasonable efforts by the grower. This central concern is 
manifested specifically where live poultry dealers fail to make 
transparent the range of financial outcomes possible in these 
arrangements, where they exert high degrees of discretion that can and 
do adversely affect growers, and where they fail to provide information 
necessary for growers to understand and respond to changing factors 
(i.e., input differences) in the operation of their contracts.
    Among other things, the Act protects growers from deceptive 
practices wherein they can be misled through lack of information from 
live poultry dealers regarding both potential revenues and the risks 
growers assume in the course of making and operating their contracts. 
Accordingly, AMS is establishing rules that will increase transparency 
in broiler growing contracting, including tournament systems, targeted 
at key decision points for growers--at the time of contracting and 
housing upgrades, and at the provision of inputs during tournaments. 
These are points where live poultry dealers repeatedly and consistently 
either omit vital information or make misleading statements, which 
prevents growers from understanding the risks they are taking on. Such 
misrepresentations may inhibit growers' ability to choose amongst 
competing live poultry dealers on a level playing field.
    This rulemaking sets forth enforceable transparency requirements 
under section 202(a) of the Packers and Stockyards Act that will secure 
a more level playing field for growers and foster a marketplace with 
fairer contracts and the fairer operation of those contracts under the 
contract production model. Deception undermines the integrity of the 
market and deprives producers of the true value of their livestock.
    In addition to the prohibitions on deceptive practices set forth 
this final rule, AMS is also evaluating additional specific 
prohibitions and regulatory limitations. To facilitate additional 
input, data, and ideas that may inform further efforts to regulate the 
poultry tournament system, USDA put forward an Advance Notice of 
Proposed Rulemaking seeking stakeholder input. Based on that input, AMS 
has included in the Office of Management and Budget's Spring 2023 
Regulatory Agenda an upcoming proposed rule entitled ``Poultry Grower 
Payment Systems and Capital Improvement Systems.'' \13\ AMS welcomes 
engagement with interested stakeholders around ideas to be developed in 
that further rulemaking on poultry tournaments.
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    \13\ RIN: 0581-AE18, available at https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202304&RIN=0581-AE18.
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I. Overview

    On June 8, 2022, AMS published in the Federal Register (87 FR 
34980; Docket No. AMS-FTPP-21-0044) a proposal to amend the regulations 
implementing the Packers and Stockyards Act. AMS solicited comments on 
the proposed rule for an initial period of 60 days and extended the 
comment period 15 days on August 8, 2022 (87 FR 48091) through August 
23, 2022. AMS received 504 comments, some with multiple signatories, 
from individual poultry growers, trade organizations representing 
producers, poultry companies, the meat industry, State- and national-
level agriculture groups, other associations, and non-profit 
organizations. After consideration of all comments, AMS adopts the 
proposed rule, with modification. Section V details the regulatory 
changes made by this final rule. Modifications to the proposed 
rulemaking are discussed in Section VI. Public comments are discussed 
by topic in Section VII.
    This rulemaking adds two new sections to PSD regulations under the 
Act, introducing new disclosure requirements that live poultry dealers 
engaged in the production of broilers must furnish to broiler growers 
with whom they establish broiler growing arrangements. In doing so, the 
final rule builds on existing disclosure concepts under the Act in 7 
U.S.C. 197(a) through (c) and in the regulations that effectuate the 
Act at 9 CFR 201.55; 9 CFR 201.56(d); 9 CFR 201.99; and particularly 9 
CFR 201.100, with respect to the poultry industry, which provide for a 
range of disclosures such as settlement sheets and establish other 
regulatory requirements. The current disclosure framework has improved 
transparency in poultry contracting and has helped close the asymmetric 
information gap between the parties, thus reducing the market failure 
caused by asymmetric information.\14\ However, the modern poultry 
industry, in particular the broiler chicken segment, now requires 
increasingly large capital investments; and under the tournament 
system, growers are subject to intense pressures to perform, as well as 
financial and operational risks that may exacerbate the dangers of 
deception.
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    \14\ The concept of asymmetric information and associated market 
failures is discussed in a seminal article: Akerlof, G.A. ``The 
Market for `Lemons': Quality Uncertainty and the Market Mechanism.'' 
The Quarterly Journal of Economics Vol. 84, No. 3 (August 1970).
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    Section 202(a) (7 U.S.C. 192(a)) of the Act prohibits live poultry 
dealers from engaging in deceptive practices. This rulemaking 
establishes prohibitions against specific deceptive practices, such as 
withholding important information on the economic, financial, and 
operational risks growers take when entering into and operating their 
growing agreements. Growers can make more informed business decisions 
when they know the economic, financial, and operational risks 
associated with poultry growing. A lack of transparency for growers in 
poultry growing arrangements also creates an environment where growers 
are more vulnerable to other marketplace abuses.
    Live poultry dealers have possession of key information that is 
materially useful for growers as they make decisions. This information 
asymmetry can be exploited by dealers to impede growers' ability to 
understand, evaluate, and compare contracts offered by dealers, bargain 
efficiently with competing dealers where and to the extent possible 
given the highly concentrated nature of the poultry industry, and 
manage their farm effectively for the risks they confront.

[[Page 83212]]

This type of deceptive conduct denies growers the benefits of market 
and the full value of their services, and results in misallocation of 
grower resources, heightened live poultry dealer bargaining power, and 
significant financial risk to growers.
    This rule adds a new Sec.  201.102 to the regulations, adding to 
the list of required disclosures a live poultry dealer must make to 
broiler growers and prospective broiler growers in connection with 
poultry growing arrangements. By obtaining these disclosures prior to 
making the underlying capital investment, growers are better positioned 
to understand and evaluate growing arrangements. The rule further 
requires live poultry dealers to specify additional terms in broiler 
growing contracts about variables that are highly correlated with 
grower annual revenue. This information is not routinely shared with 
growers. AMS intends for these new requirements to improve transparency 
and inhibit deceptive practices in poultry growing arrangements.
    Additionally, this rule adds a new Sec.  201.104 to the regulations 
to require live poultry dealers to provide information related to the 
integrator-controlled input distribution to poultry growers paid under 
grower ranking systems (tournaments), where growers are paid based on 
their performance relative to a grouping of other growers. These 
disclosures allow growers to evaluate the distribution of inputs 
affecting performance such as poultry breed, gender ratio, and flock 
health--of their own flock and as compared to flocks of all tournament 
participants. These new data points will help growers better 
understand, evaluate, and compare the relationships between inputs, 
flock performance, and payment under their poultry growing arrangement. 
The requirements in this rule are intended to provide greater 
transparency and inhibit deceptive practices in the operation of 
poultry grower ranking systems.
    Finally, this rule makes conforming changes to the regulations by 
adding to the list of definitions in Sec.  201.2 to define terms used 
in new Sec.  201.102 and new Sec.  201.104.
    Specifically, this final rule requires the following of live 
poultry dealers engaged in the production of broilers:
    1. A Live Poultry Dealer Disclosure Document (Disclosure Document), 
to be provided to prospective or current broiler growers that contains 
critical information about the broiler growing arrangement when seeking 
to establish, renew, revise, or replace a broiler growing arrangement 
with the grower, including when a broiler growing arrangement would or 
might reasonably require a broiler grower to make an original or 
additional capital investment to comply with the live poultry dealer's 
housing specifications. A governance framework and CEO-certification 
enhances the accuracy and enforceability of the disclosures.
    a. The Disclosure Document includes summaries of the dealer's 
litigation history with broiler growers and its bankruptcy filings over 
the past 5 years, the dealer's policies and procedures regarding sale 
of the grower's farm or assignment of the growing arrangement to 
another party, and the dealer's average annual turnover rate for 
broiler growers over the past five years.
    b. The Disclosure Document describes the live poultry dealer's 
policies and procedures regarding certain instances of heightened 
discretion or unusual circumstances which would otherwise be opaque--
specifically, increased layout times; sick or diseased flocks; natural 
disasters, weather-related events, or other events adversely affecting 
the physical infrastructure of the local complex or the grower 
facility; other events potentially resulting in massive depopulation of 
flocks affecting grower payments; feed outages including outage times; 
grower complaints relating to feed quality, formulation, or 
suitability; as well as any appeal rights growers may have relating to 
any of those items.
    c. The Disclosure Document provides a more fulsome set of financial 
disclosures, including average annual gross payments to growers over 
the past 5 years broken out by quintiles to reflect the full range of 
outcomes, and a summary of information pertaining to grower variable 
costs inherent to broiler production.
    2. Mandated disclosures in the contract that also set out the 
minimum number of placements to be delivered to the broiler grower's 
farm for each year of the broiler growing arrangement contract, as well 
as the minimum stocking density of each placement.
    3. When a poultry grower ranking system is used, disclosures of 
critical information about the flock (e.g., stocking density, breed 
names and ratios, breeder facility identifiers, and breeder flock age) 
placed with the grower must be disclosed within 24 hours of delivery.
    4. When a poultry grower ranking system is used, dealers must 
provide settlement disclosures regarding critical information about 
each grower's ranking within the system, in particular the nature of 
the inputs received (e.g., stocking density, breed names and ratios, 
breeder facility identifiers, and breeder flock age) and housing 
specifications for each growout period, without the identities of the 
growers to each other.

II. Background

A. Demand for This Rulemaking

    For more than two decades, poultry growers have complained to USDA 
of abuses that arise in the contracting process and the operation of 
those contracts under poultry grower ranking systems, also known as the 
tournament system, a payment method which dominates the broiler chicken 
industry. To address these longstanding concerns regarding the fairness 
and competitive functioning of the market, Executive Order 14036 
``Promoting Competition in the American Economy'' (86 FR 36987; July 9, 
2021), directs the Secretary of Agriculture (Secretary) to consider 
rulemaking to address, among other things, unfair treatment of farmers 
arising from certain practices related to poultry grower ranking 
systems. AMS has considered that direction in undertaking this 
rulemaking, as well as in undertaking an Advance Notice of Proposed 
Rulemaking around ideas to be developed in further rulemaking on 
poultry tournaments.
    USDA's efforts to address grower complaints of malfeasance and 
abuses in the broiler industry now span more than a decade.\15\ In 
2010, USDA held a series of workshops in conjunction with the 
Department of Justice (DOJ) to hear from producers about concentration 
and trade practice issues in agriculture. At the workshop in Normal, 
Alabama, poultry growers complained that their success or failure is 
dependent on factors controlled by their integrators.\16\ Further, 
growers were troubled by the lack of alternative integrators in many 
regional relevant markets, which further heightens the bargaining 
position of integrators.\17\ Grower public comments at the workshop 
were consistent with numerous comments submitted to USDA in connection 
with previous rulemaking efforts, as well as on the June 8, 2022, 
proposed rulemaking.
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    \15\ See, generally, Leonard, Christopher, The Meat Racket 
(2014).
    \16\ Transcript, United States Department of Justice, United 
States Department of Agriculture, Public Workshops Exploring 
Competition in Agriculture: Poultry Workshop May 21, 2010, Normal, 
Alabama (https://youtu.be/j11GXzvA7u0?t=1822).
    \17\ See Domina, David A. and Robert Taylor. ``The Debilitating 
Effects of Concentration Markets Affecting Agriculture,'' Drake 
Journal of Agricultural Law 15 (May 2010): 61-108. See also Leonard, 
Christopher, The Meat Racket (2014).
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    Growers expressed concerns about contract dependency, uncertainty 
of

[[Page 83213]]

pay, and informational asymmetries related to farm revenues and debt. 
Poultry growers have indicated they lack information about certain 
crucial production factors controlled by live poultry dealers, such as 
the anticipated frequency and density of flock placements and bird 
target weight under poultry growing arrangements, which heavily 
influence grower payments on an individual flock basis and over the 
long term.\18\
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    \18\ United States Department of Justice, United States 
Department of Agriculture, Public Workshops Exploring Competition in 
Agriculture: Poultry Workshop May 21, 2010; Normal, Alabama (https://youtu.be/8CvEGyMQ9v8?t=2156).
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    Growers cited the level of control and discretion reserved to 
integrators under their contracts, remarking how discretionary 
decisions controlled by integrators related to inputs quality, flock 
placements, housing specifications, tournament grouping, and other 
production factors can significantly affect grower revenue and 
profitability. Many growers were worried that contract terms did not 
cover the time required to repay the debt on their farms, noting that--
sometimes unforeseen--additional capital investments, such as those 
necessitated by integrators' housing specifications, can plunge growers 
into further debt without assurances of adequate or stable returns.\19\ 
Growers indicated they do not have adequate information with which to 
assess original and additional capital investments because pay rates 
alone are insufficient for long-term revenue estimates without 
assumptions related to integrator discretionary production 
decisions.\20\ Growers have also raised concerns regarding the use of 
overly rosy ``pro forma'' financial estimates, including income 
projections, during the contracting process, which in the growers' 
experience are not realized.\21\
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    \19\ United States Department of Justice, United States 
Department of Agriculture, Public Workshops Exploring Competition in 
Agriculture: Poultry Workshops May 21, 2010; Normal, Alabama 
(https://youtu.be/j11GXzvA7u0?t=2422) (https://youtu.be/j11GXzvA7u0?t=3032).
    \20\ United States Department of Justice, United States 
Department of Agriculture, Public Workshops Exploring Competition in 
Agriculture: Poultry Workshops May 21, 2010; Normal, Alabama 
(https://youtu.be/j11GXzvA7u0?t=2453).
    \21\ United States Department of Justice, United States 
Department of Agriculture, Public Workshops Exploring Competition in 
Agriculture: Poultry Workshops May 21, 2010; Normal, Alabama 
(https://youtu.be/8CvEGyMQ9v8?t=4226; https://youtu.be/j11GXzvA7u0?t=3084; https://youtu.be/j11GXzvA7u0?t=3091).
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    Finally, poultry growers complained to USDA about being prohibited 
by dealers from asserting their rights under the current regulations to 
discuss poultry growing contracts with USDA government representatives 
(including PSD), family members, lenders, and other business 
associates. Some growers allege they have been threatened or retaliated 
against by integrators for asserting those rights, including for 
responding to Federal Government requests for information--
specifically, the 2010 DOJ Workshop.\22\ USDA also received comments to 
the proposed rule that alleged some growers were harassed, intimidated, 
and retaliated against for refusing to make expensive upgrades to their 
growing operations.
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    \22\ United States Department of Justice, United States 
Department of Agriculture, Public Workshops Exploring Competition in 
Agriculture: Poultry Workshops May 2010; Normal, Alabama (https://youtu.be/8QJ_K06lp5M?t=1051).
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    Similar to the comments received during the 2010 workshop, comments 
received in response to this proposed rule specifically reaffirmed that 
one prevalent deceptive practice involves live poultry dealers' 
omission of key information in the contracts with growers. This 
omission of information caused growers to believe that they were 
signing up for a contract that in practice they did not end up 
receiving or provide providing services under. Numerous comments to the 
proposed rule described how dealers provide growers with inadequate 
information on settlement sheets, particularly related to payment, and 
how, without this information, growers could not make sound business 
decisions.
    Commenters have noted live poultry dealers do not provide critical 
information about--
    <bullet> typical upfront associated costs;
    <bullet> revenues and the full range of possible outcomes thereto;
    <bullet> sale-of-farm policies;
    <bullet> dealer bankruptcy and litigation history with poultry 
growers;
    <bullet> grower turnover rate;
    <bullet> how dealers handle--and growers are affected by--
depopulation, sick chicks, natural disaster, weather-related events, 
and impairments to the physical infrastructure of the local complex or 
the grower's facility; feed outages; feed quality, formulation, and 
suitability; and appeals processes related thereto;
    <bullet> minimum flock numbers and stocking densities;
    <bullet> information about inputs and any differences between them, 
such as about the breeds, chick weights, breeder facilities, breeder 
flock age, and bird sexing--both at delivery and at settlement; and
    <bullet> at settlement, information about housing type. Growers 
expressed a strong need for such information, as they could use it when 
deciding how to manage their farms, grow chicks, and take on--or not 
take on--additional risks in growing broiler chicken.

B. Market Structure and Production Contracts

    Integrated live poultry dealer firms typically own and manage local 
``complexes'' of integrated operations that include hatcheries, feed 
mills, transportation systems, and processing facilities, and they 
contract with individual growers within a local region to raise birds 
for meat and hatchery eggs.\23\ As explained earlier, these live 
poultry dealers that own and manage vertically integrated operations 
are referred to in the industry as ``integrators.''
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    \23\ MacDonald, James M. Technology, Organization, and Financial 
Performance in U.S. Broiler Production, EIB-126, U.S. Department of 
Agriculture, Economic Research Service, June 2014.
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    Through vertical integration, integrators control the complete 
supply chain from the genetics of breeder stock to slaughter. While 
integrators own most of the inputs and manage the operation of the 
supply chain, they outsource the function and major costs of raising 
poultry to broiler growers--and control much of that process through 
production contracts. Contracting with individual growers to grow out 
broilers, rather than procuring broilers from company-owned farms, is 
advantageous to integrators for two reasons: (1) the rapid pace of 
technological change in broiler production since the 1950s requires 
ongoing significant capital investments, and (2) the use of tournaments 
to compensate growers insulates growers from common production risks 
(such as disease and extreme weather) and lowers transaction costs.\24\
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    \24\ Charles R. Knoeber. ``A Real Game of Chicken: Contracts, 
Tournaments, and the Production of Broilers.'' Journal of Law, 
Economics, & Organization, Vol. 5, No. 2. (Autumn, 1989).
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    Through the poultry growing arrangement, broiler growers provide 
the growout facilities and the equipment, labor, and management 
associated with those facilities. Broiler growers are typically 
responsible for utilities, fuel, maintenance, and repairs. Growers are 
responsible for ensuring the equipment functions properly and the 
environment inside the poultry house is satisfactory at all times 
throughout placement, including waste removal and disposal of deceased 
birds. These activities are subject to significant discretion and 
control by the integrator through contract terms and integrator-
supplied supervisors or service technicians who oversee growers. 
Integrators exert significant power over contract poultry grower 
operations

[[Page 83214]]

through individual production contracts and payment systems.
    Grower revenue is a function of payment per flock multiplied by the 
number of flocks over a time period. While the specific formula for 
flock payment varies among integrators, it typically involves the 
evaluation of three variables: payrate, farm weight, and feed consumed. 
Where used to allocate payment, the tournament system is supposed to 
essentially rank growers on their efficiency in production, with 
payrates adjusted up or down based upon the growers' deviation from 
average performance of all growers over the growout period.
    Growers' annual revenues are heavily dependent upon the annual 
number of flock placements and stocking density \25\ of each placement, 
which are typically discretionary functions controlled by the 
integrator. Empty poultry houses do not produce revenue. Additionally, 
under tournament contract payments, flock performance--and therefore 
per flock payments--can be influenced by integrator discretionary 
decisions related to variation in input distributions like poultry 
breeds,\26\ bird sex,\27\ breeder stock age,\28\ stocking density,\29\ 
consistency of feed availability,\30\ and the type and administration 
of veterinary medicines.\31\
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    \25\ Often expressed as a ratio of birds per square foot, or 
pounds (target weight of poultry at harvest) per square foot, 
stocking density reflects the number of birds placed on a farm or in 
a poultry house.
    \26\ Muir, W.M. and SE Aggrey. Poultry Genetics, Breeding, and 
BioTechnology (2003).
    \27\ See Burke, William, and Peter J. Sharp. ``Sex Differences 
in Body Weight of Chicken Embryos.'' Poultry Science 68.6 (1989): 
805-810; and Beg, Mah, et al. Effects of Separate Sex Growing on 
Performance and Metabolic Disorders of Broilers. Diss. Faculty of 
Animal Science and Veterinary Medicine, Sher-e-Bangla Agricultural 
University, Dhaka, Bangladesh, 2016.
    \28\ See Washburn, K.W., and R.A. Guill. ``Relationship of 
Embryo Weight as a Percent of Egg Weight to Efficiency of Feed 
Utilization in the Hatched Chick.'' Poultry Science 53.2 (1974): 
766-769; Weatherup, S.T.C., and W.H. Foster. ``A Description of the 
Curve Relating Egg Weight and Age of Hen.'' British Poultry Science 
21.6 (1980): 511-519; Wilson, H.R. ``Interrelationships of Egg Size, 
Chick Size, Posthatching Growth and Hatchability.'' World's Poultry 
Science Journal 47.1 (1991): 5-20; Goodwin, K. ``Effect of Hatching 
Egg Size and Chick Size Upon Subsequent Growth Rate in Chickens.'' 
Poultry Science 40 (1961): 1408-1409; Morris, R.H., D.F. Hessels, 
and R.J. Bishop. ``The Relationship Between Hatching Egg Weight and 
Subsequent Performance of Broiler Chickens.'' British Poultry 
Science 9.4 (1968): 305-315; Peebles, E. David, et al. ``Effects of 
Breeder Age and Dietary Fat on Subsequent Broiler Performance. 1. 
Growth, Mortality, and Feed Conversion.'' Poultry Science 78.4 
(1999): 505-511. AMS notes additionally that research in this and 
related areas has limitations. It is older and results are mixed. 
AMS is concerned that publically available research has stagnated, 
despite the introduction of new breed strains in the intervening 
years. Because integrators now own the genetics companies, AMS has 
additional concerns that research has, in effect, been privatized, 
creating informational asymmeteries. Based on regulatory experience 
and on public comments, growers believe these factors affect 
performance, highlight its value to growers from disclosure.
    \29\ Dozier III, W.A., et al. ``Stocking Density Effects on 
Growth Performance and Processing Yields of Heavy Broilers,'' 
Poultry Science 84 (2005): 1332-1338; Puron, Diego et al. ``Broiler 
performance at different stocking densities.'' Journal of Applied 
Poultry Research 4.1:55-60 (1995).
    \30\ Dozier III, W.A., et al. ``Effects of Early Skip-A-Day Feed 
Removal on Broiler Live Performance and Carcass Yield.'' Journal of 
Applied Poultry Research 11.3 (2002): 297-303.
    \31\ Treatments may be necessary to mitigate disease within a 
single poultry house or an entire flock, or to boost the performance 
of suboptimal progeny from impaired breeder flocks, as described 
above. These treatments may affect the flock's growth rate or 
mortality. See Wells, R.G., and C.G. Belyawin. ``Egg quality-current 
problems and recent advances.'' Poultry science symposium series. 
No. 636.513 W4. 1987. (citing Spackman, D. ``The Effects of Disease 
on Egg Quality.'')
---------------------------------------------------------------------------

    Moreover, when integrators encounter problems in performing their 
contract obligation to provide inputs, they often seek to resolve them 
via discretionary functions reserved to the integrator under the 
contract. From growers' points of view, these are operational risks 
that can result in actual or perceived disparate treatment among 
growers. When natural disasters or weather events affect the 
integrators' ability to provide chicks and feed or other key physical 
infrastructure of the local complex or grower facility, growers are 
unlikely to be aware of the integrators' policies and procedures that 
dictate allocation of inputs or determine availability or supplemental 
pay. Similarly, if a disease outbreak or massive depopulation event 
affects growers, growers have a right to be informed of the policies 
and procedures that will be implemented to control the outbreak, assign 
payment, and reallocate inputs. As feed is a primary input for growout, 
growers must be made aware of policies and procedures to report issues 
of feed suitability and quality to company personnel. Integrators do 
not necessarily share these policies and procedures with growers and 
often use informal rules with respect to the above-mentioned issues. 
Without this critical information, growers' ability to understand and 
evaluate, as well as compare contracts among integrators, is impeded, 
and the potential for deception in contracting and deceptive practices 
in the operation of those contracts increases.
    Due to market consolidation combined with certain natural factors 
(such as the fragility of birds, limiting their transport), many 
integrators operate as monopsonists \32\ or oligopsonists \33\ in their 
relevant regional market. Some research \34\ shows a correlation in 
local markets between the number of available integrators and grower 
payments, with payments shrinking as the number of integrators 
decreases. In local markets, the lack of alternative integrators, 
coupled with integrator control and discretion over production 
contracts, leaves growers with little bargaining power to obtain 
reasonable contract assurances and transparency.
---------------------------------------------------------------------------

    \32\ Merriam-Webster online dictionary: A monopsonist is one who 
is a single buyer for a product or service of many sellers. https://www.merriam-webster.com/dictionary/monopsonist; accessed 3/8/2022.
    \33\ Merriam-Webster online dictionary: Oligopsony is a market 
situation in which each of a few buyers exerts a disproportionate 
influence on the market. An oligopsonist is a member of an 
oligopsonistic industry or market. https://www.merriam-webster.com/dictionary/oligopsonist; accessed 3/8/2022.
    \34\ MacDonald, James M., and Nigel Key. ``Market Power in 
Poultry Production Contracting? Evidence from a Farm Survey''. 
Journal of Agricultural and Applied Economics 44 (November 2012): 
477-490. See also, MacDonald, James M. Technology, Organization, and 
Financial Performance in U.S. Broiler Production, EIB-126, U.S. 
Department of Agriculture, Economic Research Service, (June 2014): 
29-30.
---------------------------------------------------------------------------

    Under the existing poultry industry market structure, growers are 
dependent on a live poultry dealer and receive only nominal assurances 
related to production levels and the variables composing farm revenue, 
while integrators set those production levels and have significantly 
more data related to grower payment variables, which generate costs 
integrators seek to minimize. The failure to provide critical 
information is deceptive given the conditions of asymmetrical 
information that compound as growers accumulate debt and operate in a 
tournament they do not control, both of which are discussed in greater 
detail below.

C. Grower Debt and Hold-Up Risk

    Poultry growout operations require significant financial 
investments on the part of poultry growers, who typically provide the 
facilities (poultry housing and necessary equipment), utilities 
(electricity, gas, and water), manure management, compliance with 
environmental regulations, labor, and day-to-day management of growing 
poultry. One of the costliest investments is in poultry housing and 
equipment, the requirements of which are dictated to the poultry grower 
by the live poultry dealer through the contract. Throughout the term of 
the contract, live poultry dealers may encourage, incentivize, or even 
require a poultry grower, at the grower's expense, to upgrade existing

[[Page 83215]]

housing or equipment in order to renew or revise an existing contract. 
Revenue instability and continuing debt accumulation may explain the 
low returns to equity \35\ in this space.
---------------------------------------------------------------------------

    \35\ MacDonald (June 2014) Op. Cit., pp. 38-40. Data from the 
Agricultural Resource Management Survey--Version 4, Financial and 
Crop Production Practices, 2011, and U.S. Census Bureau, 2011 
Quarterly.
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1. Construction Costs
    A 2011 study estimated a cost of $924,000 for site preparation, 
construction, and necessary equipment for four 25,000-square-foot 
poultry houses (or $231,000 per house) in rural Georgia at that time, 
independent of the cost for the land.\36\ Costs for establishing 
poultry houses have increased substantially since 2011, due to the 
advancement of new technologies in poultry housing and the increased 
cost of materials. AMS estimates current construction costs at nearly 
$500,000 per poultry house.\37\
---------------------------------------------------------------------------

    \36\ Cunningham, Dan L., and Brian D. Fairchild. ``Broiler 
Production Systems in Georgia Costs and Returns Analysis 2011-
2012.'' UGA Cooperative Extension Bulletin 1240 (November 2011), 
University of Georgia Cooperative Extension.
    \37\ See, for example, Cunningham and Fairchild (November 2011) 
Op. Cit.; Simpson, Eugene, Joseph Hess and Paul Brown, Economic 
Impact of a New Broiler House in Alabama, Alabama A&M & Auburn 
Universities Extension, March 1, 2019 (estimating a $479,160 
construction cost for a 39,600 square foot broiler house).
---------------------------------------------------------------------------

    Poultry growers can incur considerable debt to make the investments 
necessary for poultry production. Most new broiler housing is debt-
financed. According to MacDonald, U.S. contract poultry growers' total 
debt amounted to $5.2 billion, or 22 percent of the total value of 
their assets, in 2011.\38\ The research cited here found that debt 
loads--and exposure to liquidity risks, should flock placements and 
revenues fall--are closely related to the age of the operation, with 
newer farmers carrying greater debt relative to the value of farm 
assets. Farmers with fewer than six years of experience in broiler 
production carried debt equal to 51 percent of assets, on average, and 
one quarter of those farmers carried debt equal to at least 77 percent 
of assets.
---------------------------------------------------------------------------

    \38\ MacDonald (June 2014) Op. Cit.
---------------------------------------------------------------------------

    The weight of poultry grower debt load can be exacerbated by three 
additional factors: (1) the length, in terms of time, of a poultry 
growing arrangement is rarely long enough to cover the grower's debt 
repayment period, and can be as short as one flock; (2) growers may be 
encouraged or required by live poultry dealers to invest in facility 
upgrades, which may lead to additional debt; and (3) poultry housing is 
a specific-use asset with little salvage or repurpose value.\39\ In 
other words, the grower is unlikely to be able to use or sell the 
facilities for a different purpose should the poultry growing contract 
be terminated. These ``term,'' ``upgrade,'' and ``specific use'' 
problems are rooted in asymmetrical information problems at the 
contracting stage, where live poultry dealers have knowledge and 
control of production and technical/equipment needs over the useful 
life of the poultry farm and growers do not. Combined, these factors 
create classic hold-up risk, where live poultry dealers make contract 
renewal dependent on further grower investments not disclosed at the 
time of the original agreements.\40\
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    \39\ Poultry growing facilities are often characterized by 
certain expensive attributes, such as temperature and other habitat 
control systems. A fully equipped poultry growing facility 
repurposed, for example, as a hay barn or other storage is unlikely 
to generate the revenue necessary to meet a grower's $400,000 
mortgage obligation. Nor is repurposing it for an alternative 
livestock usage, such as hogs or dairy cows, possible, at least 
without retrofitting that would essentially demolish the growout 
facility. The grower's return on investment is tied to using the 
facility as intended.
    \40\ Vukina, Tom, and Porametr Leegomonchai. ``Oligopsony Power, 
Asset Specificity, and Hold-Up: Evidence from the Broiler 
Industry.'' American Journal of Agricultural Economics 88 (2006).
---------------------------------------------------------------------------

    Grower debt problems are exacerbated by the limited number of live 
poultry dealers in most localities and by complex dealer-specific 
requirements that inhibit grower movement between dealers, particularly 
for growers with older poultry houses. For example, a grower who 
currently produces smaller birds for one live poultry dealer may desire 
to move to a different dealer that wants larger birds. The grower could 
be required to upgrade their poultry growing facility to include more 
cooling capacity in order to accommodate larger birds. However, such 
upgrades may not be economically feasible for the grower, so the grower 
stays with their current live poultry dealer. Growers also may 
encounter problems trying to sell their farm to exit the industry. 
Banks commonly require that a prospective buyer secures a contract with 
a live poultry dealer to be approved for financing the farm, making the 
availability of the poultry growing contract a critical element to the 
farm's sale. Growers have often expressed frustration with live poultry 
dealer refusals to offer contracts to interested buyers, thwarting farm 
sales. Growers need to understand how live poultry dealer policies and 
procedures affect their ability to sell their poultry operation.
    Grower debt and dependance on live poultry dealers contribute to 
additional risks that are enhanced by other informational disparities. 
For example, dealers are not required to provide growers information 
related to the financial condition of the dealer or complex. Complexes 
that are underperforming financially may be subject to closure or 
reduced production levels, resulting in negative effects on grower 
revenue and potential contract termination. Growers also lack insight 
into other growers' satisfaction with a dealer and how often growers 
and dealers are involved in disputes, legal or otherwise. Dissension 
between a grower and their dealer can often result in contract 
termination and/or litigation between the parties. Dealers have readily 
available access to information concerning their financial health, 
grower churn,\41\ and frequency of litigation with growers. Disclosure 
of these items is critically useful information for growers to 
understand and evaluate risk and compare contracts among competing live 
poultry dealers. A live poultry dealer's failure to disclose this 
information to growers is deceptive.
---------------------------------------------------------------------------

    \41\ Grower churn refers to changes in grower make up at a given 
complex. This metric reflects growers who have been terminated or 
left on their own accord.
---------------------------------------------------------------------------

2. Returns to Equity
    The substantial debt accumulation, hold-up risk, and lack of 
competition for grower services, in an environment of opacity and 
asymmetrical information, is reflected in low grower returns to equity. 
In 2011, data drawn from a nationally representative sample of growers 
showed that the median payment received by contract growers was 5.55 
cents per pound of farm weight. However, 10 percent of growers earned 
at least 7.02 cents per pound, while 10 percent earned less than 4.32 
cents per pound.\42\ The sample data ranged across all growers and all 
contract types, but research has also shown that payments can range 
widely within specific contract types and within individual grower 
pools, creating revenue uncertainty for growers.\43\
---------------------------------------------------------------------------

    \42\ MacDonald (June 2014) Op. Cit.
    \43\ Knoeber, Charles R. and Walter N. Thurman. ``Testing the 
Theory of Tournaments: An Empirical Analysis of Broiler 
Production.'' Journal of Labor Economics 12 (April 1994). Levy, 
Armando and Tomislav Vukina. ``The League Composition Effect in 
Tournaments with Heterogeneous Players: An Empirical Analysis of 
Broiler Contracts.'' Journal of Labor Economics 22 (2004).
---------------------------------------------------------------------------

    Perhaps even more concerning than the range of grower contract 
payments are the low returns on equity for poultry operations. 
According to USDA's Economic Research Service (ERS),\44\ a

[[Page 83216]]

special survey conducted in 2011 showed mean returns on equity were 
negative for operations with one to two poultry houses, and increased 
with the size of the operation to positive 2.7 percent among operations 
with six or more houses. These figures were below mean rates of return 
on equity for large and midsize U.S. farms.\45\ In AMS's experience, 
growers are experiencing the ongoing harm of contracting practices that 
omit critical information, such as certain dealer policies and 
procedures, input differences, information needed to evaluate returns 
across quintiles, and more.
---------------------------------------------------------------------------

    \44\ MacDonald (June 2014) Op. Cit., pp. 38-40. Data from the 
Agricultural Resource Management Survey--Version 4, Financial and 
Crop Production Practices, 2011, and U.S. Census Bureau, 2011 
Quarterly Financial Report (QFR): Manufacturing, Mining, Trade, and 
Selected Service Industries. https://www2.census.gov/econ/qfr/pubs/qfr11q4.pdf; accessed 1/19/2022.
    \45\ MacDonald (June 2014) Op. Cit. p. 40.
---------------------------------------------------------------------------

D. Tournaments

    The majority of growers producing poultry under production 
contracts are paid under a poultry grower ranking or ``tournament'' pay 
system.\46\ Under poultry grower ranking systems, the contract between 
the live poultry dealer and the poultry grower provides for payment to 
the grower based on a grouping, ranking, or comparison of poultry 
growers delivering poultry to the dealer during a specified period 
based on metrics \47\ created by the integrator. Per flock performance 
payments under tournament contracts generally depend on three 
variables: pay rate, farm weight, and feed consumed. In a simplified 
example, the live poultry dealer places flocks with ten growers under 
contract to deliver the same size of finished poultry to the dealer's 
processing plant at the end of a specified growout period. Upon 
harvest, each grower's performance (e.g., farm weight and feed 
conversion) is determined by an integrator-determined formula. The 
integrator then compares individual grower results against average 
results for all growers in the group, and ranks individual growers 
according to their relative performance within the group of ten 
growers. Grower contract payrate is adjusted up or down in relation to 
the grower's deviation from the average within the tournament grouping 
for that specific growout period.
---------------------------------------------------------------------------

    \46\ MacDonald (June 2014) Op. Cit. See footnote 20 on page 27 
citing ARMS data from 2011 that reported 97% of broilers are grown 
under contract, with 93% of contracts tied to relative performance.
    \47\ Metrics are typically associated with ``costs''. Formulas 
to calculate the metric vary among integrators. A high ``cost'' 
grower would be a poor performance, as a low ``cost'' grower would 
have performed well.
---------------------------------------------------------------------------

    Grower experience and skill, the technical specifications and 
relative sophistication of the housing, and other factors, such as the 
makeup of tournament groupings or inconsistent grower effort, may all 
affect performance. However, integrator decisions about inputs provided 
to tournament growers can also impact growers' relative performance.
    Under the tournament system, integrators control the source of 
inputs and the distribution of those inputs to growers. Key inputs 
provided by the integrator are not always uniform with respect to 
quality characteristics across complexes or across time, and variation 
in these quality characteristics may impact grower performance. Based 
on AMS's experience, live poultry dealers will select strategies around 
broad types of inputs to grow at certain complexes, in general, to 
target customer preferences or to meet product requirements relating to 
growout or slaughter efficiency. For example, certain genetically 
tailored birds will be used to grow out more meat in certain areas or 
with uniformity in larger or smaller sizes to help live poultry dealers 
tailor their production. Similarly, feed inputs may be tailored based 
on the availability of grains or to achieve other animal health goals. 
However, within these broader strategies, there are a wide range of 
differences to the inputs that growers state are material to the 
growout process--such as the sex and age of the chicks, age and health 
of breeder flocks, the feed mix overall based on different grain 
availability, and more. Timely performance by live poultry dealers and 
dispute resolution are also relevant to the growout process. For 
example, improper delivery of feed mix designed for different stages of 
growout or delayed delivery or pickup of inputs are all potentially 
relevant.
    In comments, dealers have denied or downplayed the significance of 
input variability and its effect on bird performance. Grower commenters 
are concerned about input differences and prefer some level of parity 
in input allocations, or at least mitigation of any disparities. 
Growers, however, unlike integrators, do not have direct access to the 
specific input differences, which makes it difficult if not impossible 
for them to evaluate whether their compensation is related to 
management and skill or correlated with ``favorable'' inputs. The lack 
of information further enables an opaque market environment where 
integrators may provide different inputs with little check on those 
actions.
    The omission of this known information by integrators--impedes 
growers' ability to understand, evaluate, and adjust their performance, 
management, and skill as growers. In the absence of this information, 
growers are deprived of known information necessary to understand their 
performance and payment in operation under contract.

E. Addressing the Omission of Information

    As described above, live poultry dealers have engaged in a series 
of omissions in the contracting process and operation of those 
contracts that deprives growers of the ability to make contracting and 
investment decisions and manage the operation and risks of their farms. 
This rule addresses that deceptive practice with regulatory 
transparency mandates enforceable under the Act. Eliminating deception 
will increase the intensity of competition amongst live poultry dealers 
to the benefit of growers. Growers need this information to understand 
the market for grower services, to understand and evaluate their 
performance under the terms of the contract, and to make decisions 
about their investments and operations of their farms that may improve 
performance or mitigate risks under those contracts. The additional 
information will intensify competition in the market for grower 
services. As a result of more complete and transparent information for 
all market participants, live poultry dealers will have to compete more 
vigorously for grower services, allowing growers to benefit from the 
competition in the market.
    The lack of this information further contributes to an opaque 
market environment that exposes growers to greater risks from actions 
by live poultry dealers. The deprivation of this information is a 
deceptive practice under the Act. The final rule addresses that ongoing 
deception with specific transparency requirements in the contracting 
process and during the ongoing operation of those contracts, consistent 
with the FTC's approach to similar problems in franchising. These 
transparency requirements, together with a governance framework 
designed to enhance the reliability of the disclosures, are enforceable 
under the Act by AMS and by growers under section 202(a)'s prohibition 
on live poultry dealers engaging in deceptive practices.

III. Authority

    Congress enacted the Act to promote fairness, reasonableness, and 
transparency in the marketplace by prohibiting practices that are 
contrary to

[[Page 83217]]

these goals. In 1921, the Act's stated purpose was to ``regulate 
interstate and foreign commerce in livestock, live-stock products, 
dairy products, poultry, poultry products, and eggs.'' At that time, 
poultry was included in the definition of a ``packer.'' Amendments to 
the law in 1935 added a new type of entity under its jurisdiction, the 
``live poultry dealer.'' The poultry industry of that time involved 
marketing of live animals in large population centers, accompanied by 
various unfair, deceptive, and fraudulent practices. The 1935 
amendments required that live poultry handlers be licensed, and 
subjected them to criminal penalties for violations. Congress also made 
sec. 202 (7 U.S.C. 192) applicable to live poultry dealers.\48\ The 
Poultry Producers Financial Protection Act of 1987 (Pub. L. 100-173), 
modified and replaced parts of the 1935 amendments. The new provisions 
further protected growers of live poultry by adding payment provisions 
(sec. 410), trust provisions (sec. 207), and adding and modifying the 
liability provisions (secs. 411, 412, and 308), including creating a 
private cause of action for violations of sec. 202 of the Act.
---------------------------------------------------------------------------

    \48\ An Act to Amend the Packers and Stockyards Act, S. 12, 74th 
Cong. (1935).
---------------------------------------------------------------------------

    AMS authority to regulate deception and deceptive practices is 
well-established.\49\ Sec. 202(a) of the Act (7 U.S.C. 192(a)) 
prohibits live poultry dealers, with respect to live poultry, from 
engaging in or using deceptive practices or devices. Further, sec. 
410(a) of the Act (7 U.S.C. 228b-1(a)) requires live poultry dealers 
obtaining live poultry under a poultry growing arrangement to make full 
payment for such poultry to the poultry grower from whom the dealer 
obtains the poultry on a timely basis. Sec. 407(a) of the Act (7 U.S.C. 
228(a)) authorizes the Secretary to make rules and regulations as 
necessary to carry out the provisions of the Act. Such regulations are 
found, in part, at 9 CFR part 201.
---------------------------------------------------------------------------

    \49\ See, e.g. . . . Philson v. Cold Creek Farms, Inc., 947 F. 
Supp. 197, 201 (E.D.N.C. 1996) (``[T]he violation of a regulation 
such as 9 CFR 201.82 is indisputably prohibited by the PSA . . . 
.''); see also Stafford v. Wallace, 258 U.S. 495, 515, 42 S. Ct. 
397, 401, 66 L. Ed. 735 (1922) (finding the Act Constitutional); O V 
Handy Bros Co v. Wallace, 16 F. Supp. 662, 666 (E.D. Pa. 1936) 
(finding the regulation of live poultry dealers Constitutional).
---------------------------------------------------------------------------

    Disclosure is a key component of the current regulations in place 
pursuant to the Act. The current regulations require disclosure of 
weights in the settlement of sales of livestock and live poultry,\50\ 
disclosure of certain potential conflicts of interest in the 
consignment of livestock at auction,\51\ and disclosures for poultry 
growers at contracting and on settlement, including the payment 
formula, performance plans, grading certificates, and more.\52\
---------------------------------------------------------------------------

    \50\ 9 CFR 201.55 and 9 CFR 201.99.
    \51\ 9 CFR 201.56(d)
    \52\ 9 CFR 201.100(a).
---------------------------------------------------------------------------

    Like sec. 202(a) of the Act, sec. 5 of the Federal Trade Commission 
(FTC) Act also prohibits deceptive practices.\53\ The FTC has long 
implemented disclosure requirements under sec. 5 of the FTC Act for the 
purpose of providing adequate information necessary for parties in 
imbalanced business relationships to inhibit deceptive practices. In 
1981, the FTC adopted a policy statement summarizing its longstanding 
approach to deception cases, which AMS takes notice of.\54\ For 
example, FTC's Franchise Rule requires the franchising industry to 
provide prospective purchasers of franchises information necessary to 
weigh the risks and benefits of an investment by providing required 
disclosures in a uniform format.\55\ This rule is designed to similarly 
provide current and prospective poultry growers with sufficient 
information prior to entering into an agreement.
---------------------------------------------------------------------------

    \53\ For a discussion of the Act in relation to the FTC Act, 
see, e.g., Kades, Michael. ``Protecting Livestock Producers and 
Chicken Growers,'' Washington Center for Equitable Growth, May 2022, 
https://equitablegrowth.org/research-paper/protecting-livestock-producers-and-chicken-growers/.
    \54\ Federal Trade Commission, Policy Statement on Deception, 
1983, available at https://www.ftc.gov/system/files/documents/public_statements/410531/831014deceptionstmt.pdf.
    \55\ 16 CFR part 436; 84 FR 9051 (May 2019).
---------------------------------------------------------------------------

    Additionally, disclosure requirements are commonly utilized in the 
regulation of financial markets, housing consumer protection, and other 
complex markets with significant information imbalances, to prevent 
deception and other abuses.\56\ In those markets, disclosure commonly 
yields multiple benefits, starting with correcting the specific 
information asymmetries that give rise to deception.\57\ For example, 
disclosure can also function to create reputational disincentives to 
counter potentially problematic behavior. This rule is designed in part 
with that in mind. Given the longstanding set of grower complaints 
about input differences, costly capital investments, and other 
problematic practices arising from live poultry dealers' high degree of 
control over growers under a poultry growing arrangement, transparency 
can reasonably be expected to contribute, at least in part, to 
improvements in fair dealing by market participants. Overall, 
disclosure is recognized as a cost-effective tool to prevent deception 
and improve market integrity.
---------------------------------------------------------------------------

    \56\ D.W. Carlton and J.M. Perloff, Modern Industrial 
Organization (1994): 624.
    \57\ Paula J. Dalley, ``The Use and Misuse of Disclosure as a 
Regulatory System,'' 34 Fla. St. U. L. Rev. 1089 (2007). https://ir.law.fsu.edu/lr/vol34/iss4/2.
---------------------------------------------------------------------------

IV. Summary of the Proposed Rule

    In the June 2022 proposal, AMS proposed to revise current 
regulations in 9 CFR 201.100 regarding the timing and contents of 
poultry growing contracts. Currently, that section sets forth the 
disclosures a live poultry dealer must make to poultry growers and 
prospective poultry growers in connection with poultry growing 
arrangements. The proposal would have revised Sec.  201.100 by 
requiring dealers to disclose additional information to poultry growers 
and prospective poultry growers in connection with poultry growing 
arrangements. In the proposal, the regulations also would have required 
live poultry dealers to specify additional terms in poultry growing 
contracts to improve transparency and forestall deception in the use of 
poultry growing arrangements.
    AMS also proposed to add a new Sec.  201.214 to the regulations to 
require live poultry dealers to provide certain information to poultry 
growers in tournament pay systems about integrator-controlled inputs 
related to the poultry flocks growers receive for growout. Proposed new 
Sec.  201.214 also would have added a new level of transparency to 
grower ranking sheets. The proposal was intended to enable poultry 
growers to evaluate the distribution of inputs among all tournament 
participants in order for poultry growers to assess the effect on 
grower payment.
    Finally, AMS proposed to add to the list of definitions in Sec.  
201.2 to define terms used in the proposed revisions to Sec.  201.100 
and proposed new Sec.  201.214.
    Upon consideration of public comments on the proposed rule, AMS 
modified some of its proposed provisions in this final rule. An 
overview of the new or revised rule provisions follows in Section V, a 
discussion of changes from the proposed rulemaking is in Section VI, 
and a discussion of the public comments on the proposed rulemaking is 
in Section VII.

V. New or Revised Provisions

    AMS addresses concerns related to market power imbalance and 
asymmetric information in poultry grower contracting by adding two new 
sections to 9 CFR part 201 that implements the Act. The first section 
addresses the lack of transparency and

[[Page 83218]]

associated deceptive practices in broiler grower contracting. The 
second section addresses the lack of transparency and associated 
deceptive practices in the use of poultry grower ranking systems to 
determine tournament grower payment settlements for broiler growers. In 
both cases, live poultry dealers are required to make disclosures that 
provide broiler growers more information with which to evaluate poultry 
growing arrangements.
    This rule will better balance the quantity, quality, and type of 
critical information broiler growers, prospective broiler growers, and 
live poultry dealers engaged in the production of broilers have as they 
enter and operate under broiler growing arrangements. Through this 
rulemaking, the agency requires dealers to provide growers with 
critical information during the contracting process. This rule gives 
growers the ability to understand and evaluate contracts from dealers. 
The rule enhances the integrity of the marketplace overall, helps 
reduce the risk of other forms of problematical market practices, such 
as the inappropriate provision of different inputs to different 
growers, and prevents certain deceptive practices by dealers.
    AMS also made conforming changes and changes for clarity in Sec.  
201.2, Sec.  201.100(a), and Sec.  201.100(b). This section provides an 
overview of the new and revised provisions.

A. Definitions

    This rule amends Sec.  201.2 by removing the paragraph designations 
within the section, reorganizing the definitions alphabetically, and 
adding definitions for new terms. The new terms are: breeder facility 
identifier, breeder flock age, broiler, broiler grower, broiler growing 
arrangement, complex, gross payments, grower variable costs, housing 
specifications, inputs, letter of intent, Live Poultry Dealer 
Disclosure Document, minimum number of placements, minimum stocking 
density, number of placements, original capital investment, placement, 
poultry grower ranking system, poultry growout, poultry growout period, 
prospective broiler grower, prospective poultry grower, and stocking 
density. Additionally, this rule incorporates into Sec.  201.2 the 
statutory definitions of: commerce, live poultry dealer, poultry 
grower, and poultry growing arrangement.

B. Disclosure

    To address concerns related to deception and deceptive practices by 
dealers in contracting for broiler growing arrangements and in the 
operation of such contracts, this final rule adds new, enforceable 
transparency requirements on live poultry dealers for the benefit of 
growers. Specifically, it adds a new section at Sec.  201.102,--
disclosures for broiler production, and makes conforming changes to 
Sec.  201.100(a) and (b). Currently, 9 CFR 201.100 describes the 
documents that live poultry dealers must provide to poultry growers 
within certain timeframes. Paragraph (a) of Sec.  201.100 requires a 
dealer to provide the grower with a true written copy of the offered 
poultry growing arrangement on the date the dealer provides poultry 
housing specifications to the grower. The final rule retains the 
requirement for all live poultry dealers but revises the language in 
paragraph (a) for clarity by replacing ``house specifications'' with 
``housing specifications,'' replacing the personal pronoun ``you'' with 
``the dealer,'' and by removing the word ``as'' from the beginning of 
the paragraph. Paragraph (b) of Sec.  201.100 requires live poultry 
dealers to allow growers to discuss the terms of poultry growing 
arrangement offers with a Federal or State agency, the growers' legal 
and financial advisors and lenders, other growers for the same dealer, 
and family members or other business associates with whom growers have 
valid business reasons for consulting about the offered poultry growing 
arrangements. This final rule retains the requirement but revises the 
language to clarify that the right to discuss the terms of the poultry 
growing arrangement offer also applies to prospective poultry growers 
and, if applicable, to the accompanying Disclosure Document described 
in Sec.  201.102. This rule also revises the language to remove the 
personal pronoun ``you'' and replace ``must allow poultry growers to 
discuss the terms of a poultry growing arrangement offer'' with ``may 
not prohibit a poultry grower or prospective poultry grower from 
discussing the terms of a poultry growing arrangement offer'' for 
clarity. The rest of Sec.  201.100 remains unchanged.
    This final rule adds new Sec.  201.102--Disclosures for broiler 
production--establishing new disclosure requirements in addition to 
those required by Sec.  201.100 for live poultry dealers engaged in the 
production of broilers. This rule adds new definitions to Sec.  201.2 
for: broiler, meaning any chicken raised for meat production; broiler 
grower, meaning a poultry grower engaged in the production of broilers; 
broiler growing arrangement, meaning a poultry growing arrangement 
pertaining to the production of broilers; and prospective broiler 
grower, meaning a person or entity with whom the live poultry dealer is 
considering entering into a broiler growing arrangement.
    New paragraph 201.102(a)--Obligation to furnish information and 
documents--requires the live poultry dealer engaged in the production 
of broilers (``dealer'') to provide the prospective or current broiler 
grower with the Disclosure Document, as described in paragraph (b) of 
the section, in addition to the true written copy of the broiler 
growing arrangement, under three different scenarios.
    First, under Sec.  201.102(a)(1), a live poultry dealer engaged in 
the production of broilers seeking to renew, revise, or replace an 
existing broiler growing arrangement or to establish a new broiler 
growing arrangement that does not contemplate modifications to existing 
housing specifications will be required to provide both the broiler 
growing arrangement and the Disclosure Document to the grower at least 
14 calendar days before the dealer executes the broiler growing 
arrangement, provided that the grower may waive up to 7 calendar days 
of that time period. Housing specifications is defined as a description 
of--or a document relating to--a list of equipment, products, systems, 
and other technical poultry housing components required by a live 
poultry dealer for the production of live poultry. A live poultry 
dealer will likely have multiple housing specifications that operate in 
concert to create housing tiers at a given complex. The housing 
specifications document or list should accurately reflect the minimum 
requirements for qualification under a specific housing tier. Growers 
agree to provide housing that meets the minimum requirements of a live 
poultry dealer.
    Second, under Sec.  201.102(a)(2), a live poultry dealer that 
requires the grower to make an original capital investment to comply 
with the dealer's housing specifications will be required to provide 
the grower simultaneously with four relevant documents. These documents 
are a true written copy of the broiler growing arrangement, the housing 
specifications, the Disclosure Document, and a letter of intent that 
can be relied upon to obtain financing for the original capital 
investment.
    Finally, under Sec.  201.102(a)(3), a live poultry dealer engaged 
in the production of broilers seeking to offer or impose modifications 
to existing housing specifications that could reasonably require the 
grower to make an additional capital investment will be required to 
provide the grower

[[Page 83219]]

simultaneously with four relevant documents. These documents are a true 
written copy of the broiler growing arrangement, modified housing 
specifications, the Disclosure Document, and a letter of intent that 
can be relied upon to obtain financing for the additional capital 
investment. AMS expects most growers will seek financing for additional 
capital investments. The simultaneous production of the three other 
documents will: (1) provide growers with improved information with 
which to assess the new capital investment and (2) allow growers to 
establish appropriate timelines for contemplating the investment.
    The required contents and format of the Disclosure Document cover 
pages are provided in Sec.  201.102(b)--Prominent disclosures. 
Paragraph 201.102(b) specifies the required elements for the cover 
pages of the Disclosure Document, including basic information about the 
live poultry dealer, key points in the broiler growing arrangement, and 
precise language for certain notices the dealer must make to the 
grower. AMS has developed downloadable instructions that contain the 
language required by Sec.  201.102(b) for live poultry dealers. The 
instructions (Form PSD 6100 (Live Poultry Dealer Disclosure Document 
Form Instructions, OMB Control No. 0581-0308)) are intended to simplify 
compliance with these notification requirements and provide guidance 
for complying with Sec.  201.102(c) and (d). Under Sec.  201.102(b)(1), 
the required Disclosure Document cover page must include the title 
``LIVE POULTRY DEALER DISCLOSURE DOCUMENT'' in capital letters and bold 
type. Section 201.102(b)(2) requires live poultry dealers engaged in 
the production of broilers to list their name, type of business 
organization, principal business address, telephone number, email 
address, and if applicable, primary internet website address.
    Paragraph 201.102(b)(3) requires the dealer to specify the length 
of the term of the broiler growing arrangement. Including this 
information at the front of the Disclosure Document clearly identifies 
for growers the live poultry dealer and the associated broiler growing 
arrangement under consideration.
    Under Sec.  201.102(b)(4), the live poultry dealer engaged in the 
production of broilers must include a notice to the grower that 
highlights that grower income may be significantly affected by 
decisions made by live poultry dealers, and encourages growers to 
carefully review the information in the Disclosure Document. Then, 
under Sec.  201.102(b)(5), the dealer must state the minimum number of 
poultry placements on the broiler grower's farm annually and the 
minimum stocking density for each flock to be placed under the broiler 
growing arrangement. The minimum stocking density is the ratio that 
reflects the minimum weight of poultry per facility square foot the 
live poultry dealer intends to harvest from the grower following each 
growout.
    New broiler growers may not understand how the discretionary 
actions of live poultry dealers affect grower payments. Many broiler 
growers are paid based on farm weight multiplied by a feed conversion 
variable. A live poultry dealer exercising discretion in placements, 
stocking density, and target weight is directly affecting that farm 
weight basis. Cautioning growers about the potential impact of dealer-
controlled inputs and providing growers with the minimum number of 
flocks and minimum stocking density of flocks to be placed with the 
grower annually under the broiler growing arrangement will help growers 
assess the projected baseline value of their broiler growing 
arrangement.
    Under Sec.  201.102(b)(6), the live poultry dealer engaged in the 
production of broilers must include one of two alternative statements 
depending on whether the offered broiler growing arrangement includes 
housing specifications that require or could reasonably require an 
original or additional capital investment. If the new, renewed, 
revised, or replacement broiler growing arrangement does not 
contemplate modifications to existing housing specifications, the 
dealer must include the statement in Sec.  201.102(b)(6)(i) in the 
Disclosure Document cover pages. The dealer's statement explains the 
grower's right to read the Disclosure Document and all accompanying 
documents carefully, and notes that the live poultry dealer is required 
to provide the current or prospective broiler grower with the 
Disclosure Document and a copy of the broiler growing arrangement at 
least 14 calendar days before the dealer executes the broiler growing 
arrangement, provided that the grower may waive up to 7 calendar days 
of that time period. This timing has been amended to match the revised 
timing in the final rule, as explained above. Alternatively, if the 
dealer offers a new broiler growing arrangement that requires the 
current or prospective broiler grower to make an original capital 
investment, as in Sec.  201.102(a)(2), or offers or imposes 
modifications to existing housing specifications that could reasonably 
require the current broiler grower to make an additional capital 
investment, as in Sec.  201.102(a)(3), the dealer must include the 
statement in Sec.  201.102(b)(6)(ii).
    The statement in Sec.  201.102(b)(6)(ii) explains the grower's 
right to read the Disclosure Document and all accompanying documents 
carefully, and notes that the live poultry dealer engaged in the 
production of broilers is required to simultaneously provide the 
broiler grower with the Disclosure Document, a copy of the broiler 
growing arrangement, the new or modified housing specifications, and 
the letter of intent. These required statements in the Disclosure 
Document cover pages will notify broiler growers of their rights under 
the regulations and indicate what documents they must receive from the 
live poultry dealer within the described timeframes.
    Under Sec.  201.102(b)(7), the live poultry dealer engaged in the 
production of broilers must include a statement notifying the broiler 
grower that the terms of the broiler growing arrangement will govern 
the grower's relationship with the live poultry dealer's company. The 
statement further notifies broiler growers of their right, 
notwithstanding any confidentiality provision in the broiler growing 
arrangement, to discuss the terms of the broiler growing arrangement 
and the Disclosure Document with a Federal or State agency; the 
grower's financial advisor, lender, legal advisor, or accounting 
services representative; other growers for the same live poultry 
dealer; and a member of the grower's immediate family or a business 
associate. The statement explains that a business associate is a person 
not employed by the broiler grower, but with whom the current or 
prospective grower has a valid business reason for consulting when 
entering into or operating under a broiler growing arrangement.
    Finally, Sec.  201.102(b)(8) requires the live poultry dealer 
engaged in the production of broilers to include the following 
statement in bold type in the Disclosure Document cover pages: ``Note 
that USDA has not verified the information contained in this document. 
If this disclosure by the live poultry dealer contains any false or 
misleading statement or a material omission, a violation of Federal 
and/or State law may have occurred.'' With this language, this rule 
clarifies that the Disclosure Document is not subject to agency review 
prior to submission to broiler growers, and that legal recourse may be 
available for some present and future controversies related to the

[[Page 83220]]

Disclosure Document and the broiler growing arrangement.
    Paragraph 201.102(c)--Required disclosures following the cover 
page--specifies the information the live poultry dealer engaged in the 
production of broilers must provide in the Disclosure Document 
following the cover pages. Under Sec.  201.102(c)(1), the dealer must 
provide a summary of litigation over the previous 5 years between the 
live poultry dealer and any broiler grower, including the nature of the 
litigation, its location, the initiating party, a brief description of 
the controversy, and any resolution. Information about a live poultry 
dealer's litigation with poultry growers within the relevant period, 
particularly the basis of the litigation and the volume of litigation 
relative to the number of growers with whom the dealer contracts, will 
help growers identify conflict origins and better assess potential risk 
of conflict.
    Paragraph 201.102(c)(2) requires the live poultry dealer engaged in 
the production of broilers to provide a summary of all bankruptcy 
filings in the previous 5 years by the dealer and any parent, 
subsidiary, or related entity of the live poultry dealer. Bankruptcy of 
the live poultry dealer poses a very real financial risk to grower 
financial returns. Recent or current bankruptcy filing is an indicator 
of the financial health of the live poultry dealer, which a broiler 
grower may need to consider when deciding whether to enter or continue 
a contractual relationship with the dealer.
    Paragraph 201.102(c)(3) requires the live poultry dealer engaged in 
the production of broilers to provide a statement that describes the 
dealer's policies and procedures regarding the potential sale of the 
broiler grower's farm or assignment of the broiler growing arrangement 
to another party. This information is important for broiler growers to 
have when considering a broiler growing arrangement because growers may 
choose or be forced to exit poultry farming for various reasons, such 
as the death or disability of the grower or the prospect of other 
occupational opportunities. However, in some situations, farm sales and 
assignments might be contingent on approval from the live poultry 
dealer. Growers informed of these policies and procedures can develop a 
coherent strategy, should they desire to exit poultry farming.
    Paragraph 201.102(c)(4) contains new requirements for the live 
poultry dealer engaged in the production of broilers to disclose their 
policies and procedures, as well as any appeal rights, arising from 
increased lay-out time; sick, diseased, and high early mortality 
flocks; natural disasters, weather events, or other events adversely 
affecting the physical infrastructure of the local complex or the 
grower facility; other events potentially resulting in massive 
depopulation of flocks affecting grower payments; feed outages 
including outage times; and grower complaints relating to feed quality, 
formulation, or suitability. If no policy or procedure exists, the live 
poultry dealer must acknowledge ``no policy exists'' for each item 
listed in Sec.  201.102(c)(4)(i)-(vi). The rule is not intended to 
require live poultry dealers to have polices for every listed 
occurrence, nor is the rule intended to have a legal consequence for 
simply not having a policy. Disclosing, however, that no policy exists 
is important to the poultry grower for risk assessment during the 
contracting process, and for protection against arbitrary undisclosed 
policies or procedures when the listed situations arise during the 
operation of the contract. The live poultry dealer will also be 
required to describe any policies on grower appeal rights associated 
with these events should a grower disagree with the live poultry 
dealer's actions or determinations.
    Paragraph 201.102(c)(5) adds a new requirement for live poultry 
dealers engaged in the production of broilers to disclose broiler 
grower turnover data. Specifically, the live poultry dealer will be 
required to provide a table showing the average annual broiler grower 
turnover rates for the previous calendar year and the average broiler 
grower turnover rates of the 5 previous calendar years at both a 
company level and a local complex level. The broiler grower turnover 
rate is the number of grower separations during the time period divided 
by the average number of growers during the same period. The broiler 
grower turnover rate relates to the general risk of contracting with a 
live poultry dealer. Growers may compare the turnover rates of multiple 
live poultry dealers as a consideration in assessing relative risk when 
making contracting decisions. Instructions for calculating and 
normalizing table values are provided on Form PSD 6100 (OMB Control No. 
0581-0308).
    Under Sec.  201.102(d)--Financial disclosures--live poultry dealers 
engaged in the production of broilers must provide certain additional 
information in the Disclosure Document. Under Sec.  201.102(d)(1), live 
poultry dealers will be required to provide in the Disclosure Document 
tables showing quintiles of average annual gross payments to broiler 
growers at the local complex for each of the previous 5 years.\58\ If 
there are nine or fewer growers at a local complex, live poultry 
dealers will not be required to report quintiles of average annual 
gross payments as this would result in the disclosure of the unique 
payment information of one or more growers. Unique payment information 
is considered confidential business information. For local complexes 
with nine or fewer growers, live poultry dealers will be required to 
report only the mean and one standard deviation from the mean of the 
average annual gross payment to growers at the local complex. Average 
payments must be shown in U.S. dollars per farm facility square foot. 
Further, the required tables must be organized by year, housing 
specification tier, and quintile or mean and standard deviation.\59\ 
Instructions for calculating and normalizing table values are provided 
in Form PSD 6100. This rule adds to Sec.  201.2 a definition for 
complex, meaning a group of local facilities under the common 
management of a live poultry dealer. The definition states that a 
complex may include, but not be limited to, one or more hatcheries, 
feed mills, slaughtering facilities, or poultry processing facilities.
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    \58\ The word ``local'' in this discussion is used to 
differentiate between the complex with which the grower may be 
considering a contract and all the other complexes a dealer may own.
    \59\ Most dealers do not own or operate growout and breeder 
facilities, but they do own everything else around which the growout 
facilities are organized--i.e., the complex. The complex commonly 
includes the processing plant and feed mill and may include other 
production facilities. Growers produce for a particular local 
complex, even though the dealer may own more than one local complex 
and other complexes around the country. Depending on the technical 
needs for optimizing poultry growth for each product type, the 
dealer may have multiple different housing specifications for 
growers who produce different products for the complex. Therefore, 
the required table will show average payments to growers in each of 
the different housing specifications at the complex.
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    The required disclosure of historical revenue information relating 
to growers in the same local complex will give the current or 
prospective broiler grower considering entering into a broiler growing 
arrangement a clear and accurate picture of potential earnings under 
the arrangement and help the grower evaluate whether those earnings are 
sufficient. Providing insights into the variability of cash flow within 
any given year will enable growers to make informed business decisions, 
manage risk, and improve farm management.
    Paragraph 201.102(d)(2) provides that, if the housing 
specifications for poultry growers under contract with the live poultry 
dealer in the local complex are modified so that an additional capital

[[Page 83221]]

investment may be required, or if for some other reason annual gross 
payment averages for the previous 5 years do not accurately represent 
expected future grower payment averages, the Disclosure Document must 
provide additional information. The additional information includes 
annual payment projections by quintile or mean and standard deviation 
(depending on the number of growers at the local complex). The 
projections must reflect anticipated payments to growers under contract 
with the complex with the same housing specifications for the term of 
the applicable broiler growing arrangement. The dealer also must 
explain why the historical data does not provide an accurate 
representation of future earnings. Live poultry dealers engaged in the 
production of broilers considering or undertaking actions related to 
discretionary functions, such as changes in pay rates, pay systems, 
housing specifications, growout models, stocking densities, or number 
of annual placements, must provide grower payment projections to allow 
growers to determine the financial feasibility of the upgrades and make 
better-informed business decisions. Standardized grower payment 
projections will include realistic expectations about future earnings.
    Paragraph 201.102(d)(3) requires the live poultry dealer engaged in 
the production of broilers to provide a summary of any information the 
dealer collects or maintains pertaining to grower variable costs 
inherent to broiler production. A conforming change, for clarity and 
emphasis purposes, to Sec.  201.2 adds a definition for grower variable 
costs to mean those costs related to poultry production that may be 
borne by the poultry grower, which may include, but are not limited to, 
utilities, fuel, water, labor, repairs and maintenance, and liability 
insurance. The modified language is intended to help improve 
readability; the listed costs are not required to be treated as grower 
variable costs under a poultry growing arrangement if the parties 
choose to contract for them in some other manner. Receiving information 
on grower variable costs will allow broiler growers to make informed 
decisions about their participation in the broiler production business.
    Finally, under Sec.  201.102(d)(4), the live poultry dealer engaged 
in the production of broilers must supply the contact information for 
the State university extension service office or the county farm 
advisor's office that can provide relevant information to the current 
or prospective broiler grower about grower costs and broiler farm 
financial management in the grower's geographic area.
    Paragraph 201.102(e)--Small live poultry dealer financial 
disclosures--exempts from the requirement to provide the Disclosure 
Document required under Sec.  201.102(a)(1) live poultry dealers 
engaged in the production of broilers that, together with all companies 
controlled by or under common control with the dealer, slaughter fewer 
than 2 million live pounds of broilers weekly (104 million pounds 
annually). The exemption applies to these small operators as long as 
their housing specifications are static. If their housing 
specifications are modified, requiring an additional capital investment 
from growers, these smaller operators will be required to provide the 
complete Disclosure Documents, as specified in Sec.  201.102(a)(2) or 
(a)(3), to balance any financial risk of the new investment. AMS 
proposed--and retains this exemption in the final rule--because, in 
general, smaller operators are in discrete market segments and not 
engaged in the same market practices that are as likely to deceive as 
larger live poultry dealers' practices, which reduces the risks to 
growers and the need for the disclosures mandated in this rule. 
Examples of such market practices include allowing growers to be 
responsible for providing some inputs (e.g., feed), allowing growers to 
use older growout facilities, or granting growers more discretion in 
production decisions. Additionally, AMS will continue to monitor the 
impact of this rule on small businesses to ensure that its analysis is 
correct and to determine whether enforcement discretion may be 
appropriate.
    This final rule adds new Sec.  201.102(f)--Governance and 
certification, which requires the live poultry dealer engaged in the 
production of broilers to establish, maintain, and enforce a governance 
framework designed to review and ensure the accuracy and completeness 
of the Disclosure Document, and ensure the live poultry dealer's 
compliance with all its obligations under the Act and its regulations. 
The governance framework and anti-fraud protections require oversight 
by corporate officers and ensure legal accountability. Under Sec.  
201.102(f), the framework must be reasonably designed to audit the 
accuracy and completeness of disclosures under the Disclosure Document 
and ensure compliance with the Act and associated regulations. The 
principal executive officer of the live poultry dealer's company, or a 
person performing similar functions, must certify that the company 
complies with the governance framework requirement and that the 
Disclosure Document is accurate and complete. The certification 
requirement is tailored to ensure the soundness and accuracy of the 
procedures used to produce the Disclosure Document and the information 
contained therein.\60\
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    \60\ Certification of regulatory compliance requirements is 
found in several regulatory regimes involving important market 
compliance protocols. These include section 302 of the Sarbanes-
Oxley Act (Pub. L. 107-204; 116 Stat. 745) and Title XIII of the 
Bank Holding Company Act (12 U.S.C. 1851 et seq.) and regulations 
thereunder, commonly known as the Volcker Rule, including revisions 
designed to simplify the rule. See ``Subpart D--Compliance Program 
Requirements'' (12 CFR 248.20 and discussion in 79 FR 5535); 
``Revisions to Prohibitions and Restrictions on Proprietary Trading 
and Certain Interests in, and Relationships With, Hedge Funds and 
Private Equity Funds'' (84 FR 61974).
---------------------------------------------------------------------------

    The framework requirement helps ensure that the company has in 
place specific steps that it will take to comply with this rule. It 
seeks to balance effectiveness at providing the internal controls 
necessary for reliable disclosure with some degree of flexibility to 
enable dealers to design a framework appropriate to manage the risks 
relating to the preparation of complete and accurate disclosures given 
their own particular operations.
    As explained earlier, to simplify compliance with this requirement, 
AMS has developed instructions for compiling the Disclosure Document, 
Form PSD 6100, with standardized language that live poultry dealers can 
use. The language includes a certification statement the principal 
executive officer of the live poultry dealer's company, or a person 
performing similar functions, must sign.
    Section 201.102(g)--Receipt by growers--requires a live poultry 
dealer engaged in the production of broilers to include in the 
Disclosure Document a signature page. The signature page includes a 
statement highlighting the requirements for timely delivery of the 
disclosure document, potential liability for a false or misleading 
statement or a material omission, and how to contact USDA to file a 
complaint at its website or by telephone.
    The live poultry dealer must also obtain the current or prospective 
grower's dated signature on the signature page, or obtain alternative 
documentation to evidence delivery and that the dealer used best 
efforts to obtain grower receipt according to the specified timeframes. 
The dealer must provide a copy of the dated signature page or 
alternative documentation to the grower and retain a copy of the dated 
signature page or alternative documentation in the dealer's records

[[Page 83222]]

for 3 years following expiration, termination, or non-renewal of the 
broiler growing arrangement. Including the required statement informs 
growers that false or misleading statements or material omissions 
contained in the Disclosure Document may form a basis for legal action. 
Requiring live poultry dealers to collect and retain proof of 
compliance will ensure compliance with the regulation.
    Paragraph 201.102(g) also contains new clear language and 
translation requirements for the document. Under Sec.  201.102(g)(3), 
the Disclosure Document must be presented in a clear, concise, and 
understandable manner for growers, and it references Form PSD 6100 for 
guidance on the presentation of the information and required 
calculations. Under Sec.  201.102(g)(4), the live poultry dealer must 
make reasonable efforts to ensure that growers are aware of their right 
to request translation assistance, and to assist the grower in 
translating the Disclosure Document at least 14 calendar days before 
the live poultry dealer executes the broiler growing arrangement that 
does not contemplate modifications to the existing housing 
specifications (provided that the grower may waive up to 7 calendar 
days of that time period). For a broiler growing arrangement that does 
contemplate modifications to the existing housing specifications, the 
translation assistance must be provided when the live poultry dealer 
provides the Disclosure Document to the grower.
    Reasonable efforts include but are not limited to providing current 
contact information for professional translation service providers, 
trade associations with translator resources, relevant community 
groups, or any other person or organization that provides translation 
services in the broiler grower's geographic area. Reasonable efforts 
may also include allowing additional time to review the translated 
Disclosure Document. A live poultry dealer may not restrict a broiler 
grower or prospective broiler grower from discussing or sharing the 
Disclosure Document for purposes of translation with a person or 
organization that provides language translation services.
    AMS also added a provision to Sec.  201.100 preventing live poultry 
dealers from restricting growers from sharing the Disclosure Documents 
with legal counsel, accountants, family, business associates, and 
financial advisors or lenders.
    Nothing in the rule prevents companies from providing a 
translation, provided it is complete, accurate, and not misleading. As 
indicated previously, this rule is intended to improve transparency in 
poultry production contracting by providing poultry growers with 
relevant information to make more informed business decisions. These 
new requirements will enable the prospective or current poultry grower 
to better understand the information provided in the disclosures.

C. Contract Terms

    Currently, Sec.  201.100(c)--Contracts; contents--specifies certain 
information that must be included in a poultry growing arrangement. The 
live poultry dealer is required to specify the duration of the contract 
and conditions for termination of the contract by each of the parties, 
all terms relating to the poultry grower's payment, and information 
about a performance improvement plan for the grower, if one exists. In 
the final rule, AMS did not reduce the requirements in Sec.  201.100(c) 
for all live poultry dealers. AMS adds new Sec.  201.102(h)--Contract 
terms--introducing additional requirements that apply exclusively to 
live poultry dealers engaged in the production of broilers. Paragraph 
201.102(h) requires live poultry dealers engaged in the production of 
broilers to specify the minimum number of placements to be delivered to 
the broiler grower's farm annually in each year of the contract, as 
well as the minimum stocking density of each of those placements. The 
minimum number of placements and the minimum stocking density of each 
placement under the broiler growing arrangement directly impact broiler 
grower revenues. Both figures are crucial to a current or prospective 
grower's ability to evaluate potential earnings under the contract and 
their ability to meet financial obligations. Requiring live poultry 
dealers engaged in the production of broilers to include this 
information in broiler growing contracts will improve growers' ability 
to understand and evaluate contracts offered by dealers, and prevent 
deceptive practices in the contracting process. Providing such 
information may also allow lenders and guarantors to better evaluate 
the desirability of broiler loans they are asked to consider.

D. Poultry Grower Ranking Systems

    AMS adds a new Sec.  201.104--Disclosures for broiler grower 
ranking system payments. This new section applies exclusively to live 
poultry dealers engaged in the production of broilers who use a poultry 
grower ranking system to calculate broiler grower payments. New Sec.  
201.104 specifies the recordkeeping and disclosure requirements for 
such dealers. AMS amends Sec.  201.2 to add definitions for terms used 
in new Sec.  201.104. In addition, Sec.  201.100(f) of the current 
regulations, which contains requirements for grouping or ranking sheets 
and which AMS proposed to remove in the proposed rule, is retained in 
the final rule to reflect that the existing grouping or ranking sheet 
requirements continue to apply to all live poultry dealers, while the 
additional grouping or ranking sheet requirements at Sec.  201.104(c) 
apply exclusively to live poultry dealers engaged in the production of 
broilers.
    Currently, live poultry dealers are required under the regulations 
at Sec.  201.100(d) to furnish poultry growers in poultry grower 
ranking systems with settlement sheets that show the grower's precise 
position in the ranking for that tournament. AMS adds a requirement in 
new Sec.  201.104(a)--Poultry grower ranking system records--that 
requires a live poultry dealer engaged in the production of broilers 
who calculates payment under a poultry grower ranking system to produce 
and maintain records showing how certain inputs were distributed among 
participants. Further, the dealer must maintain those records for 5 
years. Maintaining records allows USDA or any other party with the 
proper legal authority to collect the records and access to records 
during an investigation or legal action. AMS adds to Sec.  201.2 the 
term poultry grower ranking system, meaning a system where the contract 
between the live poultry dealer and the poultry grower provides for 
payment to the poultry grower based upon a grouping, ranking, or 
comparison of poultry growers delivering poultry during a specified 
period. AMS also adds the term inputs to Sec.  201.2. Inputs is defined 
as the various contributions to be made by the live poultry dealer and 
the poultry grower as agreed upon by both under a poultry growing 
arrangement. The definition also states that such inputs may include, 
but are not limited to, animals, feed, veterinary services, medicines, 
labor, utilities, and fuel.
    Paragraph 201.104(b)--Placement disclosure--requires a live poultry 
dealer engaged in the production of broilers who uses a poultry grower 
ranking system to calculate broiler grower payments to provide certain 
information about the flock placed with the broiler grower within 24 
hours of the placement on the grower's farm. Specifically, the dealer 
must provide the flock's stocking density, expressed as the number of 
poultry per facility square foot; the names and ratios of breeds of the 
flock delivered; the ratios of male and female birds in the flock if 
the sex had been determined; the breeder

[[Page 83223]]

facility identifier; the age of the egg-laying breeder flock from which 
each broiler grower's placement is produced; information regarding any 
known health impairments of the breeder flock and of the poultry 
delivered to the broiler grower; and what, if any, adjustments will be 
made to grower pay to reflect any of these inputs. As explained earlier 
in this document, each of these inputs may influence farm weight and 
feed conversion. In some cases, a broiler grower may adjust management 
practices in response to potential impacts of inputs on flock 
performance. This requirement provides the broiler grower with basic, 
accurate information about the placement at the outset of each growout 
period that may inform the grower's management decisions during 
growout. Armed with this information, growers may be better able to 
efficiently allocate resources during flock growout and maximize their 
individual profitability.
    This rule adds definitions to Sec.  201.2. Breeder facility 
identifier is defined as the identification a live poultry dealer 
permanently assigns to distinguish among breeder facilities supplying 
eggs for the poultry placed at the poultry grower's facility. As 
permanent identifiers, these identifiers must be consistent flock to 
flock. Identifiers that remain the same from one growout period to the 
next allow growers to observe patterns, if any, related to the 
performance of flocks originating with different breeders. Live poultry 
dealers may assign alphabetic, numeric, or other identifiers to each 
farm to keep the identity of individual breeder facilities private.
    Breeder flock age means the age in weeks of the egg-laying flock 
that is the source of poultry placed at the poultry grower's facility. 
Depending on the type and breed of poultry being raised, the age of the 
breeder flock producing the eggs from which poultry for growout are 
produced may influence the grower's production decisions, for example, 
whether additional monitoring is necessary, or determining the 
appropriate height of waterers and feeders.
    Under Sec.  201.104(c)--Poultry grower ranking system settlement 
documents--a live poultry dealer engaged in the production of broilers 
employing a poultry grower ranking system to calculate settlement 
payments for broiler growers must provide every grower within the 
tournament ranking system with settlement documents that show certain 
information about each grower's ranking within the system, as well as 
the inputs each broiler grower received, for each growout period. 
Paragraph 201.104(c)(1) requires live poultry dealers engaged in the 
production of broilers to show the housing specifications for each 
grower grouped or ranked in the system during the specified growout 
period.
    Paragraph 201.104(c)(2) requires live poultry dealers engaged in 
the production of broilers to make visible to all grower participants 
in the poultry grower ranking system the distribution of dealer-
controlled inputs provided to all participants. Specifically, dealers 
must disclose the stocking density at each grower's placement, 
expressed as the number of poultry per facility square foot. The dealer 
must: disclose the names and ratios of the breeds of poultry and the 
ratios of male and female poultry, if the sex of the poultry has been 
identified (i.e., ``sexed''), placed at each broiler grower's farm; 
indicate with the use of breeder facility identifiers the source of 
poultry placed at each broiler grower's farm; disclose the age of the 
egg-laying breeder flock from which each broiler grower's placement is 
produced; and, report the number of feed disruptions of 12 hours or 
more each grower experienced during the growout period.
    As mentioned above, live poultry dealers are currently required to 
provide settlement sheets showing each grower's ranking within the 
poultry grower ranking system and to show the actual figures used to 
rank poultry growers for settlement purposes. However, poultry growers, 
in particular broiler chicken growers, have complained to USDA that the 
limited information they receive does not allow them to effectively 
evaluate their performance compared to others because they do not know 
how the inputs they receive compare to the inputs other growers 
receive. Nor do they know how their performance relates to housing 
specifications. Further, some growers believe other growers within the 
same poultry grower ranking system receive superior inputs to their 
own.
    The placement and settlement information required under Sec.  
201.104 will enable broiler growers to make factual comparisons about 
their performance relative to other growers' performance within the 
poultry grower ranking system.

E. Severability

    AMS considers some but not all of the provisions of this final rule 
to be severable. Specifically, changes to Sec.  201.100--Records to be 
furnished poultry growers and sellers, and the provisions of new 
Sec. Sec.  201.102--Disclosures for broiler production, and 201.104--
Disclosures for broiler grower ranking system payments, are generally 
severable within themselves and from each other. Thus, if a court were 
to find any of, some combination of, or some portion of those 
provisions to be unlawful or unenforceable, AMS intends that all other 
provisions as set forth in this rule would remain in effect to the 
maximum possible extent.
    For example, if a court were to find one of the required disclosure 
items in Sec.  201.102(c) or (d) unlawful, AMS would nevertheless 
intend the remaining disclosure requirements in Sec.  201.102 to stand. 
However, provision of those disclosures to broiler growers is dependent 
upon the requirement to do so in Sec.  201.102(a), so AMS would intend 
that paragraph (a) in Sec.  201.102 is not severable from paragraphs 
(c) or (d). In another example, AMS intends that the reference to Form 
PSD 6100 instructions in Sec.  201.102 (g)(3) is severable from the 
requirement in the same paragraph to present Disclosure Document 
information in a clear, concise, and understandable manner. Thus, if 
the reference to Form PSD 6100 were to be invalidated, live poultry 
dealers would nevertheless be required to include all the elements of 
the Disclosure Document as described Sec.  201.102 in a clear, concise, 
and understandable manner.
    AMS considers the provisions of Sec.  201.104 to be severable, 
except that the requirement to maintain records related to broiler 
grower production for 5 years in Sec.  201.104(a) is not intended to be 
severable from either paragraph (b) or (c) of that section. Records 
pertaining to the disclosures required in Sec.  201.104(b) and (c) must 
be maintained and available to PSD for compliance and enforcement 
purposes.
    AMS considers the changes to Sec.  201.1--Terms defined, to be 
inseverable, inasmuch as the newly defined terms in that section are 
necessary for the clear application of the provisions of new Sec. Sec.  
201.102 and 201.104. The new definitions clarify the fundamental 
application of the rule to live poultry dealers, and cannot be severed 
from the policy effect of the rule.

VI. Changes From the Proposed Rule

    After consideration of public comments, AMS determined to adopt the 
proposed changes with modification. This section provides an overview 
of how the final rule differs from the proposed rule. Additional 
discussion about AMS's consideration of public comments is presented in 
Section VII.
    Two significant changes between the proposed rule and the final 
rule pertain

[[Page 83224]]

to the application of the new disclosure requirements and the placement 
of the new requirements within 9 CFR part 201. Under the proposed rule, 
AMS proposed additional disclosures that all live poultry dealers would 
be required to furnish to poultry growers with whom dealers make 
poultry growing arrangements. AMS also proposed to establish additional 
disclosure requirements for live poultry dealers who use a poultry 
ranking system to calculate grower payments. However, comments received 
noted that the proposed rule was largely based on research into the 
broiler industry and would be extremely difficult for turkey companies 
to implement due to differences between turkey and chicken production. 
AMS subject matter experts analyzed turkey production contracts from 
across the country and found more variability among them than in 
broiler contracts.\61\ The variability reflects the biological 
differences found in turkeys and longer placement times with growers, 
which can impact outcomes for producers.\62\ The variability in 
contracts results in less uniformity of grower compensation models in 
the turkey industry. Often, turkey grower compensation models are 
predicated on static square footage payments, and/or two-stage 
production, which reduce payment volatility and mitigate input 
variability. Much of the disclosed information would not be applicable 
or of significant value to turkey growers. While other turkey 
compensation models tend to rely on a relative ranking component 
similar to that for broilers, the benefit of disclosure is diluted, as 
discretionary dealer actions currently may have less impact on grower 
payments. As well, grower ranking systems account for a smaller 
percentage of grower payments.
---------------------------------------------------------------------------

    \61\ This corresponds with Hyaena, et. al., who state ``There is 
. . . more variation among production contracts with respect to 
division of risks and profits from growing turkeys than in the 
broiler industry.'' See M. Hayenga, T. Schroeder, J. Lawrence, D. 
Hayes, T. Vukina, C. Ward, and W. Purcell, ``Meat Packer Vertical 
Integration And Contract Linkages in the Beef and Pork Industries: 
An Economic Perspective'' (2003), available at http://econ2.econ.iastate.edu/faculty/hayenga/AMIfullreport.pdf (last 
accessed April 2023).
    \62\ Turkey growers may only produce two flocks per year while 
broiler growers may produce five or more. See Poultry Industry 
Manual (2013) available at https://www.aphis.usda.gov/aphis/ourfocus/animalhealth/emergency-management/CT_fadprep_Industry_Manuals.
---------------------------------------------------------------------------

    Other commenters stated the new disclosure requirements are largely 
meant for the broiler industry where most complaints arise. AMS has 
received few turkey grower complaints. Other (non-broiler chicken) 
poultry growers have similarly not expressed concerns regarding 
practices in their industry. AMS will continue to evaluate the 
presentation and operation of contracts and pay systems in the turkey 
industry, and other forms of poultry production to ensure growers can 
understand, evaluate, and compare contracts. However, AMS has 
determined that additional proposed disclosure requirements are not 
warranted for all live poultry dealers at this time.\63\ Thus, this 
final rule's new disclosure requirements cover only live poultry 
dealers engaged in the production of broiler chickens.
---------------------------------------------------------------------------

    \63\ AMS underscores that the principles of full and fair 
disclosure by live poultry dealers to avoid deceptive practices 
apply throughout the industry, including with respect to turkey 
growers. Although the specific disclosure mandates of this rule 
will, at this time, apply only to the broiler chicken segment, AMS 
intends to continue to monitor the entire industry.
---------------------------------------------------------------------------

    In the final rule, AMS did not revise Sec.  201.100 to require all 
live poultry dealers to provide certain additional disclosures to 
prospective or current growers. Instead, disclosure requirements for 
dealers engaged in broiler production are provided in new Sec.  
201.102--Disclosures for broiler production--which applies exclusively 
to live poultry dealers engaged in the production of broilers. The 
final rule adds language in Sec.  201.102(a) clarifying that in 
addition to complying with the existing requirements in Sec.  201.100, 
live poultry dealers engaged in the production of broilers must comply 
with additional disclosure requirements in new Sec.  201.102.
    The proposed rule in Sec.  201.100(a) would have required a live 
poultry dealer engaged in the production of broilers seeking to renew, 
revise, or replace an existing broiler growing arrangement or to 
establish a new broiler growing arrangement that does not contemplate 
modifications to existing housing specifications to provide both the 
broiler growing arrangement and the Disclosure Document to the grower 
at least 7 calendar days before the dealer executes the broiler growing 
arrangement. Several commenters from the grower and advocacy sectors 
said that this time period was inadequate, and urged AMS to require 
that the documents be provided 14 days or 30 days in advance of the 
broiler growing arrangement's execution, to enable adequate time for 
growers to review and act upon the information provided in the 
documents. AMS also identified ambiguity in whether 7 days was business 
days or calendar days.
    This final rule revises the timing in Sec.  201.102(a)(1) to 
require that live poultry dealers provide growers with the required 
documents at least 14 calendar days before the live poultry dealer 
executes the broiler growing arrangement, provided that the grower may 
waive up to 7 calendar days of that time period. AMS is making this 
change in response to some grower comments stating that growers need 
additional time to adequately review the documents. A central purpose 
of the Disclosure Document is to improve the understanding of 
production agreements to thwart deception, and adequate time to review 
the document is essential to the rule fulfilling its purpose. The 7-day 
waiver addresses other grower commenter concerns related to continuity 
of production. AMS does not wish to inadvertently insert unnecessary 
time delays into the grower's planning process during contracting, in 
particular as this provision exclusively addresses the circumstance 
where the grower is not contemplating modifications to the farm housing 
specifications. The final rule seeks to maximize the grower's ability 
to determine the length of time necessary to review the documents, 
whether that be a full 14 calendar days or a shorter time period if the 
grower determines that is more appropriate. The rule revises the review 
period to 14 calendar days, but provides growers the option to waive 7 
of those days if they prefer. Seven calendar days remains the minimum 
review time to provide growers with a guaranteed time to review the 
documents and thus protects growers from coercion by live poultry 
dealers--a risk also identified by commenters. Absent the provision, 
live poultry dealers could press growers to waive their entire review 
period rights. In AMS's estimation, a 14-calendar-day period is useful 
to some growers to review and have the time to act on the documents in 
the circumstance of no contemplated housing modification, and that a 7-
calendar-day period is minimally sufficient to enable growers to review 
the Disclosure Documents, and reduce the potential for coercive 
behavior where growers so choose that shorter time period.
    Where a live poultry dealer contemplates modifications to the 
housing specifications--such as in the circumstance of a new or 
additional capital investment or a modification to the housing 
specification--this rule provides the grower with significantly more 
time to review the contract and the Disclosure Document than current 
practice. Currently, growers commonly do not receive their contract 
until after a capital investment has occurred. In this rule, by 
requiring notice to the

[[Page 83225]]

grower at the same time as the new housing specification, growers 
receive the critical information embedded in the contract and 
Disclosure Document before the grower decides to engage in any 
construction or borrowing to make the necessary housing modifications. 
Capital investments generally take months, not days, and the grower is 
well positioned to control his or her review of the documents in the 
course of making any decisions regarding whether to engage in 
borrowing, construction, or contracting in relation to the potential 
broiler growing arrangement.
    Under proposed Sec.  201.214, AMS proposed to establish 
recordkeeping and disclosure requirements for all live poultry dealers 
who use a poultry grower ranking system to calculate grower payments. 
Again, AMS determined the disclosure requirements proposed in Sec.  
201.214 are not warranted for all live poultry dealers who use a 
poultry grower ranking system to calculate grower payments based on its 
analysis of poultry contracts and grower complaints, as previously 
discussed. Therefore, in the final rule, AMS modified the proposed 
requirements to apply exclusively to live poultry dealers engaged in 
the production of broilers who use a poultry grower ranking system to 
calculate grower payments, moved the requirements from proposed new 
Sec.  201.214 to new Sec.  201.104, and renamed the section 
``Disclosures for broiler grower ranking system payments.'' AMS also 
retained the requirements in Sec.  201.100(f) of the current 
regulations, which it had proposed to move to new Sec.  201.214 and 
modify in the proposed rule. AMS added language to Sec.  201.104(c) to 
indicate that in addition to complying with the requirements of Sec.  
201.100, live poultry dealers engaged in the production of broilers who 
use a poultry grower ranking system to calculate grower payments must 
provide additional information in accordance with new Sec.  201.104.
    To limit Sec. Sec.  201.102 and 201.104 in the final rule to 
broiler contracts, AMS added to Sec.  201.2 the definitions of broiler 
to mean any chicken raised for meat production, broiler grower to mean 
a poultry grower engaged in the production of broilers, broiler growing 
arrangement to mean a poultry growing arrangement pertaining to the 
production of broilers, and prospective broiler grower to mean a person 
or entity with whom the live poultry dealer is considering entering 
into a broiler growing arrangement.
    AMS proposed in Sec.  201.100(b)(5) to require live poultry dealers 
to include in the Disclosure Document the minimum number of placements 
on the grower's farm annually and the minimum stocking density of each 
flock. In the final rule, AMS moved this requirement to Sec.  
201.102(b)(5), which only applies to live poultry dealers engaged in 
the production of broilers. AMS also revised the introductory statement 
in Sec.  201.102(b)(5) of the final rule to add clarifying language.
    AMS proposed to require live poultry dealers to disclose a summary 
of all litigation with any poultry grower over the prior 6 years, as 
well as of all bankruptcy filings over the prior 6 years for the dealer 
and any parent, subsidiary, or related entity. However, commenters 
representing the poultry industry noted that the 6-year disclosure 
period associated with these requirements was inconsistent with other 
disclosure requirements covering the prior 5 years. Therefore, to 
ensure the uniformity of recordkeeping obligations and to reduce the 
burden on regulated entities, AMS revised Sec. Sec.  201.102(c)(1) and 
(2) to require live poultry dealers engaged in the production of 
broilers to disclose litigation with any broiler grower over the prior 
5 years, as well as bankruptcy filings in the prior 5 years by the 
dealer and any parent, subsidiary, or related entity.
    The proposed rule would have required live poultry dealers to make 
various financial disclosures to poultry growers, including a table 
showing ``average annual gross payments'' made to growers at all 
complexes owned or operated by the live poultry dealer for the previous 
calendar year, as well as to growers at the local complex. Poultry and 
meat trade associations suggested AMS require dealers to disclose 
average annual gross payments only for the grower's local complex. 
These commenters noted that complexes in different geographic areas 
face different economic conditions, arguing that information about 
payments at other complexes would not be useful and would potentially 
confuse growers. This final rule does not include the proposed 
requirement to disclose payment information for all complexes owned or 
operated by the dealer. This final rule does maintain the proposed 
requirement for live poultry dealers engaged in the production of 
broilers to disclose payment information only relating to the broiler 
grower's local complex at Sec.  201.102(d)(1).
    Both growers and live poultry dealers also requested that AMS 
provide more specificity on how to calculate average annual gross 
payments. While the proposed rule provided detail on calculations, the 
commenters felt the instructions lacked sufficient specificity to 
assure that live poultry dealers could comply and that poultry growers 
received adequate data on which to base business decisions. Therefore, 
AMS developed more in-depth instructions on how to calculate average 
annual gross payments, which are included in Form PSD 6100. This final 
rule provides that, if there are nine or fewer growers at a local 
complex, live poultry dealers will be required to report only the mean 
and one standard deviation from the mean of the average annual gross 
payment to growers at the local complex rather than average annual 
gross payments distributed by quintile. This modification from the 
proposed rule is necessary because disclosing average annual gross 
payments distributed by quintile in these circumstances would result in 
disclosure of the unique payment information of one or more growers, 
which AMS considers to be confidential business information.
    AMS added to Sec.  201.2 the definition of gross payments to mean 
the total compensation a poultry grower receives from the live poultry 
dealer, including but not limited to base payments, new housing 
allowances, energy allowances, square footage payments, extended lay-
out time payments, equipment allowances, bonus payments, additional 
capital investment payments, poultry litter payments, etc., before 
deductions or assignments are made.
    In the proposed rule, AMS requested comment on proposed disclosures 
regarding the financial health and integrity of the live poultry 
dealer, and whether those were adequate to enable growers to make sound 
business decisions. Commenters suggested that growers could utilize 
other information in addition to information specified in the proposed 
rule in making their business decisions. Specifically, commenters 
recommended that AMS also require disclosure of grower turnover data. 
Grower turnover rates are among the data growers may find valuable when 
making business decisions, as they relate to the risk of termination or 
non-renewal when contracting with a live poultry dealer. Just as 
growers will be able to rely on other required disclosures to 
contemplate their production and financial risks, this information 
would allow growers to compare the turnover rates of multiple live 
poultry dealers as a risk factor when making contracting decisions. 
Because grower turnover rates can be used in a manner similar to other 
required disclosures, AMS added a provision at Sec.  201.102(c)(5) of 
the final rule requiring live poultry dealers engaged in the production 
of broilers to

[[Page 83226]]

disclose average annual broiler grower turnover rates for the previous 
calendar year and the average of the 5 previous calendar years at both 
the company level and the local complex level. Instructions for how to 
calculate average annual broiler grower turnover rates are included in 
Form PSD 6100.
    AMS proposed requirements for several disclosures of specific data 
and information advising growers of their rights. AMS did not 
specifically propose to require live poultry dealers to disclose their 
policies on grower payment with respect to increased lay-out time, 
diseased flocks, natural disasters and other depopulation events, feed 
issues or outages, or policies on grower appeal rights and processes, 
although in the proposed rule, AMS asked whether the final rule should 
require disclosures on these types of topics. Multiple commenters 
suggested AMS include these disclosures. The commenters stated that 
these disclosures would aid growers in decision making and reduce 
confusion during times of disease or other disaster. Therefore, this 
final rule requires live poultry dealers engaged in the production of 
broilers to disclose policies and procedures on increased lay-out time; 
sick, diseased, or high early-mortality flocks; natural disasters, 
weather events, or other events adversely affecting the physical 
infrastructure of the local complex or the grower facility; other 
events potentially resulting in massive depopulation of flocks, 
affecting grower payments; feed outages including outage times; and 
grower complaints relating to feed quality, formulation, or 
suitability, as well as any appeal rights arising out of these events.
    The proposed rule proposed to exempt live poultry dealers, 
including all parent and subsidiary companies, slaughtering fewer than 
2 million live pounds of poultry weekly (104 million pounds annually) 
from the Disclosure Document requirements if the new, renewed, or 
replacement contract offered by one of these dealers does not include 
revisions to existing housing specifications that would require the 
grower to make new or additional capital investments. This final rule 
limits the proposed exemption to clarify that the exemption applies if 
the live poultry dealer engaged in the production of broilers that 
together with all companies controlled by or under common control with 
the dealer slaughter fewer than 2 million live pounds of poultry weekly 
(104 million pounds annually).
    The proposed rule would have required dealers to establish, 
maintain, and enforce a governance framework reasonably designed to 
audit the accuracy and completeness of the disclosures in the 
Disclosure Document, which must include audits and testing, as well as 
reviews of an appropriate sampling of Disclosure Documents by the 
principal executive officer or officers. AMS determined that the 
requirement in Sec.  201.102(f)(2) for the principal executive officer 
or officers to certify the governance framework and the accuracy of the 
Disclosure Document adequately covers the intended requirement for 
officers of this level to be focused on the effectiveness of the 
governance framework. AMS concluded that this level of detail about the 
audit process for the Disclosure Document was not necessary, because 
AMS finds the certification requirement regarding the governance 
framework to be sufficient to ensure a reasonable level of accuracy of 
these statements. The company will still need to maintain a governance 
framework for ensuring the reliability of the statements, which the 
certification attests to. The principal executive officer will need to 
tailor the framework to the particular levels of complexity of the 
company and its poultry business, its approach to internal controls, 
and other factors such as its track record of regulatory compliance, to 
ensuring the accuracy of statements.
    In some circumstances, audit, testing, and reviews by senior 
officers may be necessary to ensure compliance, but that may not be the 
case in all circumstances. The requirements of this final rule place 
the opportunity--and the responsibility--on the principal executive 
officer to tailor the needs of the compliance program to the 
particulars of the business and its own compliance culture, as 
reflected in the governance framework. A ``reasonably designed'' 
framework depends on the particular facts and circumstances of the 
poultry company and its growers, with larger, more complex processors 
adopting more comprehensive systems appropriate to the scope of their 
operations. AMS will evaluate the effectiveness of the governance 
framework in part through examining the reliability of producing 
accurate disclosures but may also examine a dealer's internal controls 
and other factors relevant to the facts and circumstances of the 
dealer, such as its recent track record of compliance with relevant 
laws and regulations.
    AMS will investigate questions of statement inaccuracy and may take 
enforcement actions against companies that do not maintain sufficient 
governance frameworks. Violations may result in issuance of a Notice of 
Violation or referral to the Attorney General of the United States for 
prosecution pursuant to Section 404 of the P&S Act, 7 U.S.C. 224. 
Growers may also bring private cases in response to inaccurate or 
misleading disclosures under the Act or under other laws. Therefore, 
AMS removed the requirement proposed in Sec.  201.100(f)(1)(i) for 
audit, testing, and reviews of an appropriate sampling of Disclosure 
Documents by the principal executive officer or officers.
    The proposed rule would have required dealers to include a 
statement on the Disclosure Document's grower signature page advising 
growers that a dealer's failure to deliver the document within the 
required timeframe, as well as false or misleading statements or 
material omissions within the Disclosure Document, may violate Federal 
and State laws, and that such violations could be determined to be 
unfair, unjustly discriminatory, or deceptive and unlawful under the 
Act. The proposed statement further informed growers that allegations 
of such violations could be reported to AMS's PSD. The final rule 
retains the required advisory statements; however, they have been 
modified to inform growers they may submit complaints to USDA's Farmer 
Fairness portal at https://www.usda.gov/farmerfairness or by telephone 
at 1-833-DIAL-PSD (1-833-342-3773) if they suspect a violation of the 
Act or any other Federal law governing fair and competitive markets, 
including contract growing, of livestock and poultry.
    The proposed rule would have required live poultry dealers to 
obtain a poultry grower's signature to verify delivery of the 
Disclosure Document. Live poultry dealers noted that there may be 
instances in which obtaining a grower signature is not possible, such 
as grower unavailability or refusal to sign. AMS recognizes there is no 
mechanism to require growers to sign for receipt of the Disclosure 
Document. Commenters said it is appropriate in these instances to have 
other means available for the live poultry dealer to verify delivery of 
the Disclosure Document to the grower. AMS agrees it is necessary to 
have alternative methods of compliance. Therefore, this final rule 
allows flexibility for live poultry dealers engaged in the production 
of broilers to have alternative means to prove delivery and to 
demonstrate that best efforts were used to obtain grower receipt. In 
those circumstances, this final rule does not require a specific method 
of delivery but requires dealers to obtain and maintain evidence that 
the live poultry dealer

[[Page 83227]]

delivered the Disclosure Document to the grower or prospective grower 
in the required timeframe and that best efforts were used to obtain 
grower receipt.
    Based on its experience, AMS expects live poultry dealers to engage 
in personal communications with the growers in the course of the 
contracting process, and so expects that best efforts include personal 
communication with growers in the course of delivering the Disclosure 
Document and seeking grower receipt. Where a grower refuses to sign or 
has made him or herself unavailable to the live poultry dealer, 
alternative documentation includes proof of delivery and statements or 
affidavits to support the communication and grower's refusal to sign 
receipt, or the circumstances of the grower's unavailability. AMS 
expects unavailability to be a rare circumstance requiring exceptional 
justification, given the nature of the contracting process between live 
poultry dealers and growers. The proof of delivery and best-efforts 
requirement, as an alternative, provide the best assurance possible in 
those circumstances that the grower receives and is able to evaluate in 
a timely manner the Disclosure Document. The grower receipt 
requirement, and this alternative, is important to AMS achieving the 
purposes of the rule because it minimizes the risk that live poultry 
dealer may deliver the Disclosure Document through means that may, in 
practice, not be read or noticed by the grower under the time frames 
provided, and so obstruct the purposes of ensuring the grower can 
evaluate the information before the grower makes significant decisions. 
AMS notes that grower and advocacy commenters supported the retention 
of the grower receipt requirement principally for those purposes.
    The proposed rule would have required live poultry dealers to make 
several disclosures to poultry growers but did not include the exact 
language and wording they should use. Numerous commenters from the 
grower and live poultry dealer sectors said that these provisions 
should be in plain and unambiguous language to avoid discrepancies in 
interpretation among the various parties, regulators, and courts. One 
purpose of the Disclosure Document is to improve the understanding of 
production agreements to thwart deception; thus clear, concise, and 
understandable language is necessary. Therefore, this final rule adds a 
new Sec.  201.102(g)(3) to the final rule to require live poultry 
dealers engaged in the production of broilers to present the 
information in the Disclosure Document in a clear, concise, and 
understandable manner for growers. Paragraph Sec.  201.102(g)(3) also 
notes that dealers may refer to Form PSD 6100 for further instructions 
on the presentation of information and certain calculations.
    Some commenters also indicated a need to ensure growers who are not 
native speakers of English can understand the disclosures. As noted by 
multiple commenters, non-native speakers of English are engaged in 
poultry growing. For example, in the early 2000s, large numbers of 
first-generation immigrant Hmong people, many of whom had been farmers 
in their native Laos, moved from urban areas in California, Minnesota, 
and North Carolina to the Ozark region in and around southwest Missouri 
and started growing poultry. Pew Research Center studies show that the 
English proficiency of the Hmong population in the U.S. in 2019 was 
only 68% and, among foreign-born Hmong, English proficiency is just 
43%.\64\ Data supports the concerns expressed by commenters regarding 
providing poultry growers information in a manner growers are able to 
understand. AMS agrees that providing documents in the language growers 
best understand ensures fairness and reduces the risk of deception. 
Therefore, AMS added new Sec.  201.102(g)(4) to the final rule to 
require that live poultry dealers must make reasonable efforts to 
ensure that growers are aware of their right to request translation 
assistance and to assist the grower in translating the Disclosure 
Document. This must be provided at least 14 calendar days before the 
live poultry dealer executes the broiler growing arrangement that does 
not contemplate modifications to the existing housing specifications 
(provided that the grower may waive up to 7 calendar days of that time 
period). Where modifications to the existing housing specifications are 
contemplated, it must be provided when the live poultry dealer provides 
the grower with the Disclosure Document. The timing requirement aligns 
with the provision of the Disclosure Document by the live poultry 
dealer as set forth in Sec.  201.102(a) as discussed above. Although 
they are not required to do so, nothing in the rule prevents companies 
from providing a translation, provided it is complete, accurate, and 
not misleading.
---------------------------------------------------------------------------

    \64\ Abby Budimen, ``Hmong in the U.S. Fact Sheet,'' Pew 
Research Center's Social & Demographic Trends Project (May 24, 
2022), available at https://www.pewresearch.org/social-trends/fact-sheet/asian-americans-hmong-in-the-u-s/ (last accessed April 2023).
---------------------------------------------------------------------------

    The final rule makes several other changes to the definitions 
proposed in Sec.  201.2 of the proposed rule. It revises the 
definitions of grower variable costs, growout, and growout period and 
changes the latter two terms to poultry growout and poultry growout 
period.
    The proposed rule would have defined grower variable costs as 
``those costs related to poultry production that may be borne by the 
poultry grower, including, but not limited to, utilities, fuel, water, 
labor, repairs and maintenance, and liability insurance.'' Commenters 
representing the grower sector shared concern that the definition would 
mandate that the costs listed were the only ones to potentially be 
borne by the grower. Commenters stressed that these costs are often the 
subject of negotiation between grower and live poultry dealer, with 
some costs being paid by the live poultry dealer. Therefore, AMS 
modified the definition in Sec.  201.2 of the final rule to replace the 
words ``including, but not limited to'' with the words ``which may 
include, but are not limited to.'' While this does not substantively 
change the legal standard, this modification emphasizes that these are 
examples of costs, yet still retains a definition that allows the 
listed costs to be treated as grower variable costs under a poultry 
growing arrangement if the parties choose to contract for them in some 
other manner.
    AMS also proposed to define growout as ``the process of raising and 
caring for livestock or poultry in anticipation of slaughter'' and 
growout period as ``the period of time between placement of livestock 
or poultry at a grower's facility and the harvest or delivery of such 
animals for slaughter, during which the feeding and care of such 
livestock or poultry are under the control of the grower.'' However, a 
commenter said the references to ``livestock or poultry'' in the 
proposed definition of growout period may have unintended consequences 
across other segments of the protein industry that do not use 
tournament pay systems, as the definition of livestock in the Act 
includes ``cattle, sheep, swine, horses, mules, or goats.'' Therefore, 
in the final rule, AMS modified the definitions of these two terms to 
remove references to livestock. In addition, AMS revised these terms to 
refer to poultry growout and poultry growout period to clarify that it 
intends these definitions to apply only in the poultry context for the 
purposes of this rule.
    AMS also made a few minor changes for clarification purposes. One 
change is found in Sec.  201.104(a), substituting the word ``these'' 
for ``such'' in reference to poultry growing ranking system records.

[[Page 83228]]

The change was made to add specificity for the records that are 
required to be maintained by live poultry dealers. Another change was 
made in Sec.  201.102(b)(8), substituting the word ``statement'' for 
``sentence''. This is a clarifying change to both maintain uniformity 
in the language used throughout the regulatory text and to ensure 
dealers understand the entire statement provided by 201.102(b)(8) must 
be disclosed to growers.
    Table 1 summarizes key differences between the proposed rule and 
the final rule.

                        Table 1--Key Differences Between the Proposed Rule and Final Rule
----------------------------------------------------------------------------------------------------------------
             Provision                           Proposed rule                      Changes to final rule
----------------------------------------------------------------------------------------------------------------
Applicability......................  All proposed requirements related to   Creates new section Sec.   201.102--
                                      disclosures and contract terms are     Disclosures for broiler production
                                      in Sec.   201.100--Disclosures and     covering requirements for live
                                      records to be furnished poultry        poultry dealers engaged in the
                                      growers and sellers (existing          production of broilers, while
                                      section with proposed revision of      retaining requirements in current
                                      heading).                              Sec.   201.100 for all live poultry
                                                                             dealers.
                                     Sec.   201.100(a) All live poultry     Sec.   201.102(a) Changes
                                      dealers must provide Live Poultry      requirements to apply only to live
                                      Dealer Disclosure Document and         poultry dealers engaged in the
                                      related documents to prospective or    production of broilers.
                                      current poultry growers.              Adds wording to emphasize that these
                                                                             requirements apply in addition to
                                                                             the existing requirements in Sec.
                                                                             201.100(a) for live poultry dealers
                                                                             engaged in the production of
                                                                             broilers.
                                     Removes Sec.   201.100(f)--Grouping    Retains Sec.   201.100(f).
                                      or ranking sheets of existing rule.
                                     Sec.   201.100(a)(1) When no           Sec.   201.102(a)(1) Changes the
                                      modifications to housing               timing to 14 calendar days,
                                      specifications are contemplated, a     provided that the grower may waive
                                      live poultry dealer must provide the   up to 7 calendar days of that time
                                      poultry growing arrangement and the    period.
                                      Disclosure Document at least 7 days   Conforming changes made to the
                                      before the live poultry dealer         prominent disclosures to be
                                      executes the poultry growing           provided the grower and to receipt
                                      arrangement.                           by growers. Sec.
                                                                             201.102(b)(6)(i), Sec.
                                                                             201.102(g)(4).
                                     Sec.   201.100(h) Clarifies that the   Sec.   201.100(b) Revises wording to
                                      right to discuss the terms of the      emphasize that the right for
                                      poultry growing arrangement offer      poultry growers or prospective
                                      also applies to prospective poultry    poultry growers to discuss the
                                      growers and to the accompanying        terms of the poultry growing
                                      Disclosure Document.                   arrangement offer applies to the
                                                                             Disclosure Document if that
                                                                             document is applicable.
                                     Sec.   201.100(i)(2) All live poultry  Sec.   201.102(h) Moves requirements
                                      dealers must include minimum annual    to Sec.   201.102 and revises them
                                      flock placements and minimum           to apply only to live poultry
                                      stocking density in contract.          dealers engaged in the production
                                                                             of broilers.
                                     All provisions related to disclosures  Renumbers section and revises
                                      upon flock placement or settlement     heading to Sec.   201.104--
                                      are in proposed new Sec.   201.214--   Disclosures for broiler grower
                                      Transparency in poultry grower         ranking system payments.
                                      ranking pay systems.
                                     Sec.   201.214(b) All live poultry     Sec.   201.104(b) Changes
                                      dealers who use a poultry grower       requirements to apply only to live
                                      ranking system to calculate grower     poultry dealers engaged in the
                                      payments must provide certain          production of broilers.
                                      disclosures upon flock placement.
                                     Sec.   201.214(c) All live poultry     Sec.   201.104(c) Changes
                                      dealers who use a poultry grower       requirements to apply only to live
                                      ranking system to calculate grower     poultry dealers engaged in the
                                      payments must provide certain          production of broilers.
                                      disclosures upon settlement.          Clarifies that these dealers also
                                                                             must comply with the existing
                                                                             grouping or ranking sheet
                                                                             requirements in retained Sec.
                                                                             201.100 and that disclosures need
                                                                             not show the names of other
                                                                             growers.
                                     Sec.   201.214(c)(1) Live poultry      Sec.   201.104(c)(1) Removes
                                      dealers who use a poultry grower       requirements duplicated in retained
                                      ranking system to calculate grower     Sec.   201.100(f), leaving only the
                                      payments must provide the grower a     requirement for grouping or ranking
                                      copy of a grouping or ranking sheet    sheets to show each grower's
                                      showing the grower's precise           housing specification as applicable
                                      position for that period. This sheet   exclusively to live poultry dealers
                                      does not need to show the names of     engaged in the production of
                                      other growers, but must show their     broilers.
                                      housing specification and the actual
                                      figures the grouping or ranking for
                                      each grower in the group during the
                                      period is based on.
                                     Terminology throughout rule refers to  Updates terminology to specifically
                                      poultry, poultry growers, poultry      refer to broilers, broiler growers,
                                      growing arrangements, prospective      broiler growing arrangements,
                                      poultry growers, and live poultry      prospective broiler growers, and
                                      dealers.                               live poultry dealers engaged in the
                                                                             production of broilers where
                                                                             necessary to describe which
                                                                             entities must comply with new
                                                                             requirements.
Required Disclosures Following the   Sec.   201.100(c)(1) Live poultry      Sec.   201.102(c)(1) Live poultry
 Cover Page (Sec.   201.102(c)).      dealers must disclose summary of       dealers engaged in the production
                                      litigation with any poultry grower     of broilers must disclose summary
                                      over the prior 6 years.                of litigation with any broiler
                                     Sec.   201.100(c)(2) Live poultry       grower over the prior 5 years.
                                      dealers must disclose summary of      Sec.   201.102(c)(2) Live poultry
                                      bankruptcy filings by dealer and any   dealers engaged in the production
                                      parent, subsidiary, or related         of broilers must disclose summary
                                      entity over the prior 6 years.         of bankruptcy filings by dealer and
                                                                             any parent, subsidiary, or related
                                                                             entity over the prior 5 years.
                                     Not in proposed rule.................  Sec.   201.102(c)(4) Adds
                                                                             requirement that live poultry
                                                                             dealers engaged in the production
                                                                             of broilers must include
                                                                             description of policies,
                                                                             procedures, and appeal rights in
                                                                             Disclosure Document.

[[Page 83229]]

 
                                     Not in proposed rule.................  Sec.   201.102(c)(5) Adds
                                                                             requirement that live poultry
                                                                             dealers engaged in the production
                                                                             of broilers must include grower
                                                                             turnover rate data in Disclosure
                                                                             Document.
Financial Disclosures (Sec.          Sec.   201.100(d)(1) As part of        Removed from final rule.
 201.102(d)).                         required financial disclosures, live
                                      poultry dealers must provide 1 year
                                      of average annual gross payments to
                                      growers for all complexes the dealer
                                      owns or operates.
                                                                            Sec.   201.102(d)(1) Revises
                                                                             paragraph to specify that live
                                                                             poultry dealers engaged in the
                                                                             production of broilers must only
                                                                             calculate average annual gross
                                                                             payments for growers at the local
                                                                             complex distributed by quintiles
                                                                             for complexes with 10 or more
                                                                             growers, and for complexes with
                                                                             nine or fewer growers, must
                                                                             calculate the mean payment and one
                                                                             standard deviation from the mean.
Small Live Poultry Dealer Financial  Sec.   201.100(e) A live poultry       Sec.   201.102(e) Revises provision
 Disclosures (Sec.   201.102(e)).     dealer, including all parent and       to provide that exemption applies
                                      subsidiary companies, slaughtering     for live poultry dealers engaged in
                                      fewer than 2 million live pounds of    the production of broilers if the
                                      poultry weekly (104 million pounds     dealer together with all companies
                                      annually) is exempt from Disclosure    controlled by or under common
                                      Document requirements if contract      control with the dealer slaughters
                                      does not contemplate revisions to      fewer than 2 million live pounds of
                                      existing housing specifications that   broilers weekly (104 million pounds
                                      would require poultry grower to make   annually).
                                      capital investments.
Governance and Certification (Sec.   Sec.   201.100(f)(1)(i) Live poultry   Removed from final rule.
  201.102(f)).                        dealer governance framework must
                                      include audits, testing, and review
                                      of sample of Disclosure Documents.
Receipt by Growers (Sec.             Sec.   201.100(g)(1) Disclosure        Sec.   201.100(g)(1) Adds language
 201.102(g)).                         Document must include grower           to statement regarding grower
                                      signature page containing specific     rights to state that growers may
                                      statement regarding grower rights      report potential violations to USDA
                                      related to document.                   and DOJ portal at https://www.farmerfairness.gov. or by phone
                                                                             at 1-833-DIAL-PSD (1-833-342-3773)
                                                                             and obtain further information on
                                                                             rights and responsibilities under
                                                                             the Act at www.ams.usda.gov.
                                     Sec.   201.100(g)(2) Live poultry      Sec.   201.102(g)(2) Adds provision
                                      dealers must verify grower receipt     allowing live poultry dealers
                                      by obtaining grower's dated            engaged in the production of
                                      signature on signature page of         broilers to obtain alternative
                                      Disclosure Document.                   documentation to evidence delivery
                                                                             and that best efforts were used to
                                                                             obtain grower receipt.
                                     Not in proposed rule.................  Sec.   201.102(g)(3) Adds
                                                                             requirements for live poultry
                                                                             dealers engaged in the production
                                                                             of broilers to ensure that the
                                                                             Disclosure Document is written in
                                                                             clear, concise, and understandable
                                                                             manner for growers.
                                     Not in proposed rule.................  Sec.   201.102(g)(4) Adds
                                                                             requirement that the dealer must
                                                                             make reasonable efforts to ensure
                                                                             that growers are aware of their
                                                                             right to request translation
                                                                             assistance, and to assist the
                                                                             grower in obtaining a translation
                                                                             or understanding the Disclosure
                                                                             Document at least 14 calendar days
                                                                             before executing a growing
                                                                             arrangement that does not
                                                                             contemplate modifications to the
                                                                             existing housing specifications
                                                                             (provided that the grower may waive
                                                                             up to 7 calendar days of that time
                                                                             period). Where modifications to the
                                                                             existing housing specifications are
                                                                             contemplated, it must be provided
                                                                             when the live poultry dealer
                                                                             provides the grower with the
                                                                             Disclosure Document.
                                     Not in proposed rule.................  Adds definitions for broiler,
                                                                             broiler grower, broiler growing
                                                                             arrangement, and prospective
                                                                             broiler grower.
                                     Not in proposed rule.................  Adds definition for gross payments.
                                     Grower variable costs is defined as    Revises definition to refer to costs
                                      those costs related to poultry         ``which may include, but are not
                                      production that may be borne by the    limited to'' the listed costs
                                      poultry grower, including, but not     rather than ``including, but not
                                      limited to, utilities, fuel, water,    limited to,'' these costs.
                                      labor, repairs and maintenance, and
                                      liability insurance.
Terms Defined (Sec.   201.2).......  Growout is defined as the process of   Revises definition to refer to term
                                      raising and caring for livestock or    as poultry growout and exclude
                                      poultry in anticipation of slaughter.  livestock.
                                     Growout period is defined as the       Revises definition to refer to term
                                      period of time between placement of    as poultry growout period and
                                      livestock or poultry at a grower's     exclude livestock.
                                      facility and the harvest or delivery
                                      of such animals for slaughter,
                                      during which the feeding and care of
                                      such livestock or poultry are under
                                      the control of the grower.
----------------------------------------------------------------------------------------------------------------


[[Page 83230]]

VII. Comment Analysis

    AMS received 504 comments on the proposed rule, some with multiple 
signatories. Comments received were generally more supportive of the 
proposed rule than opposed. Many commenters generally agreed with the 
proposed rule's justification and implementation. These commenters 
stated that the proposed rule would be helpful because it would provide 
for fairer treatment of growers and enable growers to better 
understand, evaluate, and compare contracts among dealers, enhancing 
growers' ability to bargain efficiently. Commenters stated further that 
the proposed rule would reduce the power of large corporations in the 
industry, improve public trust in agriculture, and increase 
transparency regarding food products.
    Other commenters were generally critical of the proposed rule. 
These commenters expressed general disagreement with AMS proposing a 
rule at all, arguing the current system is fair and efficient and that 
the tournament system rewards growers for efficiency, innovation, and 
raising the best birds possible. Several commenters stated the proposed 
rule is not fair and would result in a less efficient industry because 
it would reward less productive growers, disincentivize hard work, and 
add more paperwork.
    The public comments are summarized by topic below and include AMS's 
responses.

A. Proposed Definitions

    AMS proposed to revise Sec.  201.2 containing relevant definitions 
by removing the paragraph designations within the section, reorganizing 
the definitions alphabetically, and adding definitions for new terms 
used in the proposed rule. In addition, to ensure a common 
understanding of the use and meaning of certain terms already used in 
the regulations and included in the revisions, AMS proposed to 
incorporate the statutory definitions for those terms.
Grower Variable Costs
    AMS proposed defining grower variable costs as ``those costs 
related to poultry production that may be borne by the poultry grower, 
including, but not limited to, utilities, fuel, water, labor, repairs 
and maintenance, and liability insurance.'' \65\
---------------------------------------------------------------------------

    \65\ Liability insurance may be a fixed cost for many growers, 
but we include it here because that may not be so in all 
circumstances, while the purpose of this rule is to provide enhanced 
information to all growers.
---------------------------------------------------------------------------

    Comment: Some commenters shared concern that the definition of 
grower variable costs creates the impression that it is a regulatory 
requirement or expectation that the costs listed therein are to be 
borne by the grower, thereby harming growers' ability to negotiate 
those terms. Commenters stressed that these costs are sometimes the 
subject of negotiation between grower and live poultry dealer, with 
some costs being paid by the live poultry dealer.
    AMS response: AMS modified the definition of grower variable costs 
to replace the words ``including, but not limited to'' with the words 
``which may include, but are not limited to.'' The modification in the 
definition, in particular the use of the term ``may,'' underscores that 
the requirement to provide transparency for any grower costs, including 
those listed in the definition, do not create a mandate upon the live 
poultry dealer or grower with respect to who bears any of the specific 
listed costs. In many, if not most contracts today, based on AMS's 
experience, the listed examples would be considered grower variable 
costs.\66\ But the rule does not prevent the parties from negotiating 
other arrangements, such as the live poultry dealer accepting 
responsibility for the payment of those cost items. This approach is 
consistent with the rule's general approach of enhancing transparency.
---------------------------------------------------------------------------

    \66\ See Jennifer Rhodes, Extension Educator, et al, University 
of Maryland, ``Broiler Product Management for Potential and Existing 
Grower,'' Tables 1 and 2, available at Poultry Budgets, Enterprise 
Budgets, Agricultural and Resource Economics, North Carolina State 
University Extension, https://cals.ncsu.edu/are-extension/business-planning-and-operations/enterprise-budgets/poultry-budgets/ (last 
accessed April 2023). Also see Dan L. Cunningham and Brian D. 
Fairchild, University of Georgia Cooperative Extension, ``Broiler 
Production Systems in Georgia Costs and Returns Analysis 2011-
2012,'' Bulletin 1240, and Tomislav Vukina, ``Vertical Integration 
and Contracting in the Poultry Sector,'' Journal of Food 
Distribution Research (July 2001).
---------------------------------------------------------------------------

    AMS considered whether to remove the list of potential variable 
costs, as requested by the commenter. AMS rejected that approach 
because it poses a risk of complexity or confusion in compliance, as 
live poultry dealers may not know which types of grower variable costs 
are generally required to be disclosed under most contracts today. AMS 
notes that the listing of any particular grower variable cost does not 
prevent the parties from contracting for other arrangements regarding 
who bears the burden of any particular grower variable costs.
Growout and Growout Period
    AMS proposed to define growout as the process of raising and caring 
for livestock or poultry in anticipation of slaughter and growout 
period as the period of time between placement of livestock or poultry 
at a grower's facility and the harvest or delivery of such animals for 
slaughter, during which the feeding and care of such livestock or 
poultry are under the control of the grower.
    Comment: A meat and poultry industry trade association made up of 
processors commented that the references to ``livestock or poultry'' in 
the proposed definition of growout period may have unintended 
consequences across other segments of the protein industry that do not 
use tournament pay systems, as the definition of livestock in the Act 
includes ``cattle, sheep, swine, horses, mules, or goats.'' The 
commenter stated that it is not aware of uses of the tournament system 
in the production of these species and AMS has not provided any facts 
to suggest that those species have a growout period as the term would 
be employed in the poultry industry. The commenter recommended AMS 
revise this definition to eliminate ``livestock'' and review all 
definitions to avoid unintended consequences for other protein 
segments.
    AMS response: This final rule modifies the proposed definitions for 
growout period and growout to apply only to poultry. The references to 
livestock in the proposed definitions were offered to provide a more 
generally applicable definition but are not needed at this time and are 
therefore removed. To improve clarity, we also changed the proposed 
terms growout and growout period in Sec.  201.2 to instead refer to 
poultry growout and poultry growout period, respectively.
Housing Specifications
    AMS proposed to define housing specifications as a description of--
or a document relating to--a list of equipment, products, systems, and 
other technical poultry housing components required by a live poultry 
dealer for the production of live poultry.
    Comment: A poultry industry trade association commented that the 
proposed definition of housing specifications is unnecessarily vague 
and lends itself to multiple interpretations. The commenter said there 
are endless combinations of equipment, products, systems, and other 
technical poultry housing components that could result in dealers 
having to organize dozens of housing specifications, adding significant 
complexity for the dealer, and creating confusion for the grower. The 
commenter stated that because farms are built with the technology in 
use at the time, the housing types and technology

[[Page 83231]]

in use generally correlate with the age of the facility.
    To simplify the categorization of housing specifications in 
Disclosure Documents and settlement sheets, the commenter recommended 
that AMS revise the definition to clarify that live poultry dealers are 
permitted to devise their own categories of housing specification for 
the purposes of the Disclosure Documents and settlement sheets, which 
will allow dealers to prepare and present data based on the types of 
housing that their growers use to raise birds for them. The commenter 
noted, at the least, AMS should revise the definition to narrow the 
housing specification to key elements of housing, namely, the type of 
ventilation (for example, curtain or tunnel ventilation) and whether 
the house is a brood and growout house or only accommodates the growout 
stage.
    AMS response: AMS does not agree and will not revise the proposed 
definition of housing specifications in response to this comment. The 
definition does not limit dealers' ability to categorize poultry 
housing. Dealers are free to list the minimum or required equipment or 
technical specifications that would qualify under a given housing 
specification category.
Poultry Grower Ranking System
    AMS proposed to define poultry grower ranking system as a system 
where the contract between the live poultry dealer and the poultry 
grower provides for payment to the poultry grower based upon a 
grouping, ranking, or comparison of poultry growers delivering poultry 
during a specified period.
    Comment: Several commenters argued that the proposed definition of 
poultry grower ranking system lacks sufficient flexibility. These 
commenters stated that the regulations appear to contemplate only two 
contract types--flat payment or a tournament system--and do not 
encompass the many forms of contracting in use in today's market, let 
alone innovative contracting arrangements.
    Comments recommended that AMS revise the definition to exclude from 
the scope of the proposed rule poultry grower compensation systems 
where there is a fixed base pay, regardless of how any incentive-based 
bonus may be calculated. They recommended revising the definition of 
poultry grower ranking system to mean ``a system where the contract 
between the live poultry dealer and the poultry grower provides for 
base payment to the poultry grower based upon a grouping, ranking, or 
comparison of poultry growers delivering poultry during a specified 
period.''
    AMS response: AMS has fully considered the applicability of 
``poultry grower ranking system'' to a wide range of possible 
compensation systems and intends for the relevant provisions of this 
rule governing comparisons to be applied broadly. AMS recognizes that 
certain designs of grower comparisons may provide more desirable 
outcomes for contracting participants in different circumstances, and 
in issuing this final rule, AMS is creating transparency in payment 
systems. However, commenters' recommendation would limit the 
disclosures of this rule only to those instances of variable base pay, 
even when comparison rankings affect performance pay in a manner that, 
under current conditions, is opaque and misleading to the grower. 
Addressing this widespread deceptive practice is squarely the purpose 
of this final rule.
    The definition was developed to be consistent with the approach set 
forth in current Sec.  201.100(f)--Growing or ranking sheets, that has 
been in place since 1989,\67\ and provides transparency to growers who 
are paid based on the live poultry dealer's grouping or ranking of 
poultry growers delivering poultry during a specified period.
---------------------------------------------------------------------------

    \67\ 54 FR 16356, April 24, 1989.
---------------------------------------------------------------------------

    AMS does not agree that it is necessary or appropriate to 
distinguish between types of ranking systems for the purposes of this 
rule. Commentors asserted that fix-based pay systems that included 
bonuses for better rankings are distinguishable from systems that have 
a variable base pay established by the grower's ranking. Their proposal 
would limit the disclosures of this rule to those instances of variable 
base pay, even when there are other comparison rankings. In AMS's view, 
any comparison of growers is a ranking system because when growers are 
compared to each other, the basis for grower payment is changed. No 
longer is payment based only upon the intrinsic work of one particular 
grower. Instead, payment is based upon a relative outcome between 
growers, where similarities or differences between them become 
especially important. For example, under any system of grower ranking, 
comparative information about inputs may illuminate and magnify 
differences where those differences can impact performance and payment.
    In particular, AMS rejects the suggested limitation of grower 
ranking systems either to the calculation of base-pay-plus-incentive 
payment or entirely to base pay. In either circumstance, growers are 
exposed to comparisons in the context of performance payments, which 
could make up a sizable, if not an overwhelming, portion of their 
compensation and be subject to significant variability for reasons 
outside of their control or awareness. Regardless of what type of 
ranking system is used, growers are entitled to know the reasons behind 
payment differences that may relate to inputs or other important 
differences affecting the outcome because that information is necessary 
to avoid deception for the reasons described throughout this final 
rule.
    AMS recognizes that payment systems may evolve and that parties may 
wish to innovate in payment systems to the extent those systems are 
transparent and free of potential deception. Transparency is fully 
compatible with such innovation because it encourages a responsible, 
accountable form of that innovation. The rule's required disclosures 
regarding input differences provide growers with the information they 
need to be able to adjust to any input differences that may exist, 
including in advance of input delivery and over time when comparing 
outcomes of a series of growouts. Accordingly, AMS is not changing the 
definition of poultry grower ranking system as proposed based on these 
comments. Poultry companies and growers should contact AMS to discuss 
questions about compensation systems.
    AMS provides an estimate of the value of improved transparency in 
the regulatory analysis section.
Other Comments on Definitions
    Comment: Several non-profit organizations suggested AMS add several 
new definitions to Sec.  201.2. First, the commenters noted that the 
proposed rule, as well as current regulations under the Act, appear to 
use the term ``facility'' to refer to a poultry grower's poultry houses 
collectively, rather than individually. Therefore, they recommended 
that AMS add a definition for poultry house to allow for clarity in 
circumstances where it needs to refer to individual poultry houses. 
Second, the commenters noted that the proposed rule uses the term 
``tournament system'' in a manner that appears to be synonymous with 
``poultry grower ranking system.'' Therefore, they recommended that AMS 
define tournament system to be synonymous with poultry grower ranking 
system.
    AMS response: This rule applies at the farm level and therefore 
does not require specification of a separate term to refer to an 
individual poultry house

[[Page 83232]]

beyond that already provided by housing specification. In addition, the 
term ``tournament system'' does not appear in the rule text itself. 
Therefore, AMS made no changes to the definition of poultry grower 
ranking system in the final rule.

B. Applicability

    AMS proposed to revise Sec.  201.100(a) to require a live poultry 
dealer to provide certain documents to a prospective poultry grower 
when the live poultry dealer seeks to establish a poultry growing 
arrangement, or to a current poultry grower when a live poultry dealer 
seeks to modify an existing poultry growing arrangement. AMS proposed 
to apply this Disclosure Document requirement to live poultry dealers 
in all segments of the poultry production industry. Poultry is defined 
in section 182(6) of the Act to include chickens, turkeys, ducks, 
geese, and other domestic fowl. AMS requested comments on whether the 
disclosure requirements should apply to all segments of the poultry 
production industry, or if the requirements should be limited to 
broiler and turkey production.
    Comment: Comments received stated that the disclosure requirements 
should only apply to contractual agreements within the tournament 
system of growing poultry and noted the disclosures are largely meant 
for the broiler industry, where many of the complaints arise.
    An association representing the turkey industry noted the 
provisions of the proposed rule were not based on substantial research 
into the turkey industry and asserted many of the provisions would be 
difficult or impossible for turkey companies to implement, citing 
differences in turkey growing cycles, flock densities, bird gender 
distributions, and other factors dissimilar to those involved in 
broiler production.
    AMS response: As discussed previously, AMS subject matter experts 
analyzed turkey production contracts from across the country and found 
more variability than in broiler contracts. The variability reflects 
the biological differences found among turkey breeds and longer 
placement times of turkeys with growers that can impact payments to 
producers. AMS has not received many complaints from turkey growers. 
Similarly, other (non-broiler chicken) poultry growers have not 
expressed concerns regarding practices in their industry. AMS 
determined it is appropriate at this time to limit the scope of the 
disclosure requirements in this rule to apply only to broiler 
production under a poultry growing arrangement.
    This final rule contains a new section Sec.  201.102 containing 
these disclosure provisions and specifying that they apply exclusively 
to live poultry dealers engaged in the production of broilers, while 
maintaining the current requirements at Sec.  201.100, which continue 
to apply to all live poultry dealers. This rule also makes conforming 
changes to Sec.  201.2 to define broiler as ``any chicken raised for 
meat production,'' broiler grower as ``a poultry grower engaged in the 
production of broilers,'' broiler growing arrangement as ``a poultry 
growing arrangement pertaining to the production of broilers,'' and 
prospective poultry grower as ``a person or entity with whom the live 
poultry dealer is considering entering into a broiler growing 
arrangement.'' This final rule further clarifies that the right of 
current or prospective poultry growers to discuss the terms of a 
poultry growing arrangement offer applies to the Disclosure Document in 
circumstances that require dealers to provide this document. All 
poultry growers are protected by the Act's prohibitions on deceptive 
practices, and AMS has the authority to address instances or 
circumstances where poultry growers are not provided sufficient 
information to make informed decisions on poultry growing arrangements 
or changes thereto, including additional capital investments.
    Because this final rule limits all the new disclosure requirements 
to broiler production, this rule modifies the proposed requirement for 
live poultry dealers to include in their contracts the minimum number 
of flock placements to be delivered to growers annually and the minimum 
stocking density of those placements, applying it exclusively to live 
poultry dealers engaged in the production of broilers. This final rule 
also changes the proposed requirement in Sec.  201.214 to apply 
exclusively to live poultry dealers engaged in the production of 
broilers who use a poultry grower ranking system to calculate grower 
payments. AMS retains the current grouping or ranking sheet 
requirements for all live poultry dealers in Sec.  201.100(f) of the 
current rule.
    Comment: Several commenters said the rule should apply to pullet 
and breeder hen growers as well as broiler growers because pullet and 
breeder hen production is also controlled by live poultry dealers.
    AMS response: Although live poultry dealers may control pullet and 
breeder hen production, those birds are typically raised for egg and 
chick production and not for slaughter purposes. The Act's poultry 
provisions cover only poultry raised for slaughter. Because there is no 
provision for doing so under the Act, AMS is not making this rule 
applicable to pullet and breeder hen production.

C. Disclosure Document and Letter of Intent

    AMS proposed to amend Sec.  201.100 to revise the list of 
disclosures and information live poultry dealers must provide to 
poultry growers and sellers with whom dealers make poultry growing 
arrangements. Currently, when a live poultry dealer offers an 
arrangement with a poultry grower, the dealer must furnish a true 
written copy of the growing arrangement. In the proposed rule, AMS 
proposed to require a live poultry dealer who seeks to establish a new 
growing arrangement; renew, revise, or replace an existing arrangement; 
or enter an arrangement with a poultry grower or prospective poultry 
grower that will require original capital investment to also provide a 
Disclosure Document that contains specific information. When the 
arrangement requires an original capital investment or modifications to 
existing housing specifications that could require the poultry grower 
to make an additional capital investment, AMS proposed to require the 
dealer to provide a letter of intent that can be relied upon by the 
grower to obtain additional capital investment.
Utility of Information Provided
    Comment: AMS asked whether the information in the proposed rule's 
required disclosures would help poultry growers make informed business 
decisions and better understand poultry growing arrangements, or 
otherwise better address deceptive practices faced by poultry growers. 
Most commenters supported requiring the Disclosure Document information 
as proposed, saying the information will help poultry growers make more 
informed business decisions and reduce risks of deception. However, 
some commenters said the rule will be costly and will confuse poultry 
growers. These commenters stated that relevant information is already 
provided to growers and the additional proposed disclosures would not 
be helpful.
    AMS response: AMS does not agree with the comments received in 
opposition to the proposed information disclosures. Requirements for 
disclosing information to broilers are not new to live poultry dealers. 
The current regulations at Sec.  201.100 already require disclosures 
from live poultry dealers.

[[Page 83233]]

This final rule expands the information that live poultry dealers are 
required to provide to boiler growers. AMS's experience in reviewing 
live poultry dealers' records suggest that live poultry dealers already 
keep records of most of the information that the final rule would 
require them to disclose. Although the final rule does impose 
additional costs on live poultry dealers, the additional costs 
associated with the disclosures consist primarily of assembling the 
information and distributing it to growers. AMS expects that the 
additional costs that live poultry dealers would face will amount to 
$2.43 million in the first year and $6.04 million over ten years.
    AMS expects that the benefits or utility of the information 
disclosed to broiler growers will outweigh the costs of producing and 
distributing the information. AMS estimated the benefits to broiler 
growers from reduced revenue uncertainty to be $2.7 million in the 
first year and $26.9 million over ten years. Comments received from 
growers indicated that with additional information, they might have 
made different business decisions with regard to poultry growing 
arrangements.\68\ Further, the information provided in the disclosures 
should not confuse those currently in the business of growing broilers, 
provided it is explained in clear language. Prospective broiler growers 
are expected to benefit from the disclosed information as they more 
fully appreciate and consider aspects of the business that need their 
careful attention. Accordingly, AMS made no changes to the rule as 
proposed based on these comments.
---------------------------------------------------------------------------

    \68\ Comments on Proposed Rule: Transparency in Poultry Grower 
Contracting and Tournaments, (Aug. 2022), https://www.regulations.gov/comment/AMS-FTPP-21-0044-0479 (See, for 
instance, Background section in this rulemaking, which cites 
comments from numerous growers about how they lacked important 
information to make informed growing decisions and about how. 
required disclosure of such information would greatly benefit them. 
Moreover, integrators typically already collect such information for 
their own use without disclosing it to growers.).
---------------------------------------------------------------------------

Partial Exemption for Small Dealers
    In proposed Sec.  201.100(e)--Small live poultry dealer financial 
disclosures--AMS proposed to exempt live poultry dealers who, in 
conjunction with any parent and subsidiary companies, slaughter fewer 
than 2 million live pounds of poultry weekly (104 million pounds 
annually) from the requirement to provide the Disclosure Document under 
proposed Sec.  201.100(a)(1). As proposed, the exemption would apply 
only if the new, renewed, or replacement contract offered by one of 
these dealers does not include revisions to existing housing 
specifications that would require the grower to make new or additional 
capital investments. AMS requested comments on the proposed partial 
exemption, including whether AMS should consider other approaches, such 
as different thresholds, for applying the small live poultry dealer 
partial exemption.
    Comment: Some commenters said they opposed the proposed rule's 
partial exemption from the disclosure requirements for live poultry 
dealers that slaughter fewer than 2 million live pounds of poultry 
weekly because it would exempt almost half of the live poultry dealer 
industry from these requirements, arguing that growers and flocks 
involved with small dealers could suffer the same disadvantages as 
others in the industry without receiving the benefits of the rule. 
These commenters noted that, according to AMS's analysis, the exemption 
would apply to 47 out of 89 live poultry dealers.
    AMS response: The total production volume exempted, rather than the 
number of live poultry dealers, provides a better picture of the extent 
to which portions of the industry will be affected by the exemption. 
The exemption pertains to only 0.20% of total broiler production volume 
and 2.0% of total broiler contracts, as calculated for broiler firms 
filing an annual report with PSD in 2021.\69\ In Sec.  201.102(e) of 
the final rule, AMS maintains the partial exemption for small live 
poultry dealers but revises the language originally proposed to clarify 
that the partial exemption applies to a live poultry dealer engaged in 
the production of broilers that, together with all companies controlled 
by or under common control with the live poultry dealer, slaughters 
fewer than 2 million live pounds of broilers weekly (104 million pounds 
annually).
---------------------------------------------------------------------------

    \69\ All live poultry dealers are required to annually file PSD 
form 3002 ``Annual Report of Live Poultry Dealers,'' OMB control 
number 0581-0308. The annual report form is available to the public 
at https://www.ams.usda.gov/sites/default/files/media/PSP3002.pdf.
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    Comment: A meat industry trade association said the partial 
exemption for small live poultry dealers would result in a non-level 
playing field based on a live poultry dealer's size. A poultry industry 
trade association asserted if the need for the rule is valid, then no 
live poultry dealer should be exempt. This commenter expressed concern 
that the exemption could result in poultry growers leaving larger live 
poultry dealers that comply with the rule to join smaller live poultry 
dealers that do not need to comply. One commenter representing the 
turkey sector indicated it had no objection to this provision. One 
poultry grower commenter said small live poultry dealers should not be 
exempt, but that there should be a revenue threshold tailored to small 
dealers because of the expense of recordkeeping.
    AMS response: In the spirit of the Regulatory Flexibility Act, AMS 
is attempting to fit regulatory and informational requirements to the 
scale of the businesses, organizations, and governmental jurisdictions 
subject to regulation.'' AMS intends for the exemption to reflect the 
fact that deceptive practices are less likely to be observed among 
smaller live poultry dealer operations in AMS experience. The exemption 
is also expected to ease the regulatory compliance burden on live 
poultry dealers with lower production volume, as described in the 
previous comment response. Based on AMS's experience, smaller operators 
tend not to compete directly with the larger live poultry dealers, 
often have smaller grower pools, generally dictate less complicated or 
expensive housing requirements, and use different business models.\70\ 
These smaller dealers tend to fall into two types. In the first type, 
these smaller operators rely on growers whose facilities have been used 
in production for many years and who are not usually required to make 
changes. The growout services they require of their growers are 
commonly more intermittent. In the other type, specialized operators--
often start-ups or companies that focus on certain high-end products--
serve discrete markets where dealers often have higher profit margins, 
which reduces the need for ongoing grower financial investment on the 
part of growers to achieve greater efficiency, and as a result rely 
less on certain poultry growout arrangements that have been associated 
with the types of deception addressed by this rule. Neither commonly 
employs contracts or practices that require growers to invest in 
particularized housing specifications--a key reason why the small 
operator exemption does not include those who do. Also, neither tends 
to deploy the degree of dealer discretion in the provision of inputs or 
other operational matters common to larger, more commoditized 
operations.

[[Page 83234]]

These simpler, more straightforward growing arrangements have less 
grower payment variability and fewer financial and other risks relating 
to dealer discretion in the operation of the poultry growing 
arrangement. As a result of the differences in these markets, growers 
for these smaller live poultry dealers tend to face reduced risk of 
deception. Current market realities would not, at present, seem to 
justify the effort and expense to develop the Disclosure Document 
required of larger business entities.
---------------------------------------------------------------------------

    \70\ For example, a small organic chicken company started in 
Virginia using old growout houses that were no longer suitable for 
use in larger operations. See Andrew Jenner, ``In Virginia, an 
organic chicken empire is growing--using old barns big poultry 
companies left empty,'' The Counter, (March 9, 2020) available at 
https://thecounter.org/organic-chicken-contract-farming-shenandoah-valley/ (last accessed April 2023).
---------------------------------------------------------------------------

    To ensure that this smaller business exception captures only the 
two types of smaller live poultry dealers discussed above, this rule 
only exempts smaller live poultry dealers from disclosure where no 
capital investments are contemplated. Based on AMS's experience, the 
need for original or additional capital investment on the part of the 
grower suggests the presence of the more intensive performance-based 
economic pressure from the live poultry dealer on the grower, which in 
turn characterizes a market where the dealer will exert greater 
discretion in the operation of the contract and where grower outcomes 
are more variable due to factors outside of their control and 
knowledge. The presence of capital investments also raise the risks to 
growers from any deception that may arise by subjecting growers to debt 
burdens and making it more difficult for them to change poultry-
processing companies. Under the regulation, smaller live poultry 
dealers face the same disclosure obligations as larger ones when 
dealing with a new poultry growing arrangement that will require an 
original capital investment or modifications to existing housing 
specifications that would reasonably require an additional capital 
investment.
    AMS rejects the argument that the exemption could result in poultry 
growers leaving larger live poultry dealers that comply with the rule 
to join smaller live poultry dealers that do not need to comply. The 
commenter does not provide evidence that this would occur in markets 
that, in AMS's experience, are structured differently and respond to 
different incentives. To the extent it did occur in one or more places, 
some dealers may also grow to become covered by the rule. Regardless, 
AMS will remain attentive to potential instances of deceptive practices 
across the poultry industry.
Changes to Requirements
    Comment: In the proposed rule, AMS asked what items might be added 
to or deleted from the Disclosure Document. Several industry commenters 
said AMS should not require disclosures for any item that would be 
included in the poultry grower contract arrangement, as providing 
information about these items in the Disclosure Document as well would 
be an unnecessary burden. A commenter noted the live poultry dealer's 
name, type of business, organization, principal business address, 
telephone number, primary internet website address, and the length of 
the term of the arrangement are already provided in dealer contracts. 
Several non-profit organizations said AMS should require disclosure of 
all possible variables that could affect a contract grower's settlement 
pay, along with whether and how the tournament ranking formula 
compensates for such variables. These commenters also said AMS should 
require additional disclosures for live poultry dealers proposing or 
requiring modification to existing infrastructure. A farm bureau 
commenter said AMS should add language preventing live poultry dealers 
from requiring name-brand equipment for an equipment mandate when 
poultry housing is modified, unless the live poultry dealer can 
demonstrate the mandate is scientifically justified.
    AMS response: Together, the Disclosure Document and production 
agreement will ensure growers are better informed of their obligations 
and risks. The Disclosure Document refers to and highlights information 
also contained in the production agreement to emphasize selected 
important information contained there. Requiring name and contact 
information assures the grower the Disclosure Documents pertain to the 
poultry growing arrangement in question, highlights points of contact 
and their contact information, and underscores certain basic 
information in the contract, such as its length of term. Providing such 
information, which is readily available to the live poultry dealer and 
already included in the contract itself, is not an overly burdensome 
requirement.
    AMS recognizes that the Disclosure Document cannot list all 
potential variables in poultry production nor properly assess the 
industry burden of disclosing how the tournament formula compensates 
for each of those variables. However, AMS has targeted the requirements 
to disclosure of variables most frequently cited by industry commenters 
and what the agency understands to be most useful to growers to assess 
their risks, in the context of the dependent nature of their 
contractual relationship with live poultry dealers. This includes 
disclosures at tournament settlement of information regarding inputs 
and housing specifications to enable growers to assess the relationship 
between inputs and housing specifications. AMS intends to monitor the 
market and may examine in the future whether any additional information 
may be useful to help growers understand what factors affect tournament 
outcomes, whether located in the Disclosure Document or in settlement 
disclosures.
    This final rule does not require additional disclosures beyond the 
requirements of the Disclosure Document for live poultry dealers 
proposing or requiring modification to existing infrastructure. Nor are 
we addressing whether requiring name brand equipment without scientific 
justification is permissible or not, as that would fall outside the 
scope of this transparency rule. However, AMS is sensitive to grower 
concerns in these areas and notes that equipment limitations are 
subject to review under additional capital investment criteria in 
current Sec.  201.216. Additionally, AMS is considering future 
rulemaking to address capital improvement programs in poultry growing 
contracts, as explored in the Advanced Notice of Proposed Rulemaking 
``Poultry Growing Tournament Systems: Fairness and Related Concerns.'' 
(See 87 FR 34814; June 8, 2022.) Accordingly, AMS is making no changes 
to this transparency rule as proposed based on these comments.
    In related comments, grower groups expressed a desire for a 
disclosure that communicates information about the rate of grower 
turnover, or grower churn, for live poultry dealers. AMS agrees that 
knowing the dealer's recent history with respect to grower churn would 
give current and prospective growers a decision-useful data point with 
which to evaluate the stability of the live poultry dealer's grower 
roster, which may serve as an imperfect but adequate proxy for grower 
satisfaction. Some dealers may be prone to engage in practices that 
growers broadly dislike, creating dissension between growers and 
dealers, and often resulting in contract termination and/or litigation 
between the parties, which is reflected in the turnover rate. 
Accordingly, in response to comments on the proposed rule, we modified 
the proposal by adding the requirement in Sec.  201.102(c)(5) of the 
final rule that dealers must disclose average annual broiler grower 
turnover rates for the previous calendar year and the 5 previous 
calendar years at a company level and a local complex level.

[[Page 83235]]

Burdens to Dealers
    Comment: In the proposed rule, AMS asked what burdens or challenges 
dealers could face in collecting and disseminating information to 
include in the Disclosure Document and whether these burdens would 
require dealers to modify their business model. Multiple poultry 
industry commenters said live poultry dealers would need to develop new 
recordkeeping systems, hire additional employees, and implement 
archival systems to maintain the required records under the rule, 
leading to increased administrative costs. Commenters argued these 
burdens will make the U.S. poultry industry less competitive in the 
global marketplace. An academic institution said large poultry 
companies may choose to increase prices for consumers to recoup 
administrative costs associated with the rule but noted the large 
poultry companies have benefited from their market power and have been 
making record profits despite global disruptions.
    AMS response: AMS does not agree that the recordkeeping required 
will lead to meaningfully increased administrative costs. Further, AMS 
does not expect any cost increases from the rule, including 
recordkeeping costs, to impact consumer chicken prices because the 
increases in costs are immeasurably small compared to industry 
revenues. AMS notes in the Regulatory Impact Analysis that Chicken 
sales in the U.S. for 2019 were approximately $58.6 billion and that 
the total quantified cost of Sec. Sec.  201.102 and 201.104, including 
recordkeeping costs is estimated at $3.4 million when it is greatest in 
the first year, or 0.0006 percent of revenues.
    In USDA's extensive experience with live poultry dealer business 
practices indicates most of this information is already routinely 
collected by live poultry dealers. The information contained in the 
Disclosure Document is designed to aid poultry growers in making 
business decisions by allowing growers to better understand, evaluate, 
and compare contracts. Information relating to performance and payments 
of all growers at a particular complex is useful to growers in reducing 
deceptive practices and allows growers to make more informed business 
decisions.
Timeline To Provide Disclosure Document
    Comment: AMS proposed in Sec.  201.100(a)(1) to require live 
poultry dealers to provide the Disclosure Document to current or 
prospective poultry growers at least 7 calendar days before executing a 
poultry growing arrangement in several circumstances. These disclosure 
requirements apply when the live poultry dealer seeks to renew, revise, 
or replace an existing arrangement or to establish a new arrangement 
that does not contemplate modifications to the existing housing 
specifications. Several commenters advocated for lengthening this 
timeline. These commenters said the 7-day timeline does not give 
growers enough time to review the contract and consult as needed with 
relevant entities. One of these commenters suggested AMS implement a 
14-day timeline, while another suggested a 30-day timeline.
    AMS response: AMS underscores the importance of giving growers the 
opportunity to meaningfully review and understand the disclosures, as 
that is an essential part of achieving the purposes of the rule to 
reduce deception and empower growers to make effective decisions. At 
the same time, we recognize the importance to both growers and dealers 
of keeping existing poultry houses in production. The time-based 
requirement of Sec.  201.102(a)(1) only applies when capital investment 
is not contemplated; other situations where required investment would 
expose growers to new risks have different requirements due to the 
necessary lending and investment process and those timelines (which 
commonly occur over several months and are more controlled by the 
grower's decisions around any lending and construction). In most cases, 
growers considering a new, renewed, revised, or replacement poultry 
growing arrangement that does not contemplate modifications to existing 
poultry housing already have a relationship with the live poultry 
dealer and know whether or not they wish to continue that relationship.
    AMS agrees with the comments from the grower and advocacy sectors 
that said at least 14 calendar days in advance of the broiler growing 
arrangement's execution would provide a more appropriate length of time 
for some growers to adequately review and act upon the information 
provided in the documents. At the same time, AMS recognizes that 
growers in some circumstances may be under pressure by dealers to 
execute a contract without fully considering its contents and 
implications. For instance, AMS is aware that some dealers currently 
provide only 3 business days for growers to review a contract. 
Furthermore, where a grower may be switching dealers without a capital 
investment, dialogue can be expected to be ongoing. In addition, sec. 
208 of the Act gives poultry growers 3 business days after a poultry 
growing arrangement is executed to cancel the arrangement.
    AMS also recognizes that broiler growers have an interest in 
continuity of production, and does not wish to inadvertently insert 
unnecessary time delays into the grower's planning process during 
contracting, in particular as this provision exclusively addresses the 
circumstance where the grower is not contemplating modifications to the 
housing specification of the grow house. Lengthy waiting periods as 
suggested by some commenters may result in delayed placements and idle 
farms, and may also expose both dealers and growers to other financial 
risks relating to changing economic circumstances.
    The final rule seeks to maximize the grower's ability to determine 
the length of time necessary to review the documents. It provides a of 
full 14 calendar days of notice unless the grower elects to waive 7 
calendar days of the period. It also retains the 7-calendar-day minimum 
review period to mitigate the potential for coercive behavior. Growers 
expressed that they need more time to review the disclosure, which is a 
valid concern in some situations, but we are concerned that the 
additional time might prevent other growers from receiving timely 
placements in other situations, while the default is now a 14-day 
period for disclosure, we are allowing growers to elect to reduce that 
period to 7 calendar days for their convenience. Because we think live 
poultry dealers may apply undue pressure if the rule permitted a period 
of less than 7 calendar days, AMS is not permitting growers to waive 
notice entirely. Accordingly, this final rule revises Sec.  
201.102(a)(1) to require that live poultry dealers provide growers with 
the required documents at least 14 calendar days before the live 
poultry dealer executes the broiler growing arrangement, provided that 
the grower may waive up to 7 calendar days of that time period.
    Comment: A poultry industry trade association said AMS should 
require live poultry dealers to furnish the Disclosure Document at the 
initial signing of a poultry growing arrangement, and then on a 
periodic basis, such as every year.
    AMS response: AMS designed the proposed rule to specifically 
prevent deception at the time of contracting and thus intends for 
disclosure information to be tied to the production contract. That is, 
a new disclosure is required whenever production contracts change, 
without regard to how much time has passed since any prior disclosures. 
This

[[Page 83236]]

gives the grower a chance to evaluate dealer disclosures in connection 
with the new, renewed, or revised contract before taking action on it. 
Requiring dealers to provide the Disclosure Document on a periodic 
schedule, regardless of whether changes are made to an existing 
contract, would be unnecessarily burdensome to dealers. Therefore, in 
the final rule, AMS maintains the requirement for live poultry dealers 
to furnish the Disclosure Document whenever production contracts change 
rather than on a periodic basis.
    Comment: A poultry industry trade association said AMS should 
provide additional clarity on how, and in what timeframe, live poultry 
dealers should communicate changes in disclosure information to 
growers. For example, this commenter asked whether a change to the 
placement or stocking density resulting from disease, weather, or 
changed economic demand would require the live poultry dealer to 
provide a new Disclosure Document and what the required timeframe would 
be for providing the document.
    AMS response: AMS requires that live poultry dealers provide a new 
Disclosure Document when a live poultry dealer seeks to renew, revise, 
or replace an existing broiler growing arrangement, or to establish a 
new broiler growing arrangement. This is important for providing 
growers with the information they need because it ties disclosure 
requirements to the production contract. As dealers must include 
placements and densities in the contracts, any changes to these terms 
would necessitate changes to the contracts, and thus the provision of a 
new Disclosure Document. The provision of such information up front is 
important for prospective growers, and for current growers that may be 
making a change based on a new housing specification, to understand, 
evaluate, and compare contracts. Updating disclosures when there are 
changes in the production contract provides similar protections for 
growers when contracts may change. To the extent that growers may not 
wish to accept the contract, for example, where they may consider 
growing for another live poultry dealer, the additional transparency at 
those times is useful. Additionally, while growers may not, as a 
practical matter, have a choice regarding certain changes to ongoing 
poultry production contracts, the additional transparency provided by 
the disclosures will enable growers to better plan their management of 
those contracts.\71\
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    \71\ See https://www.ftc.gov/news-events/news/press-releases/2022/09/ftc-chair-lina-m-khan-files-comment-supporting-proposed-usda-protections-poultry-farmers.
---------------------------------------------------------------------------

Additional Advisories
    Comment: In response to AMS's request for information regarding 
whether additional changes to the Disclosure Document would be 
appropriate, several non-profit organizations said AMS should require 
live poultry dealers that revise a signed contract to compensate 
poultry growers if the revisions lead to losses for the growers. The 
commenters said the point of the disclosures is to provide transparency 
about the arrangement; therefore, any changes to the arrangement at the 
expense of the poultry grower should be compensated or considered 
fraudulent.
    AMS response: The scope of this rule is transparency in agreements 
between live poultry dealers and poultry growers with whom they 
contract. AMS recognizes the issue raised by the commenters is a 
concern because growers rely upon the contract terms when entering the 
agreement, and it is problematic if subsequent revisions result in 
financial losses that presumably would not have occurred under the 
original terms. However, the remedy proposed by the commenters is not 
within the scope of this rule. If a live poultry dealer deceives a 
grower through a ``bait and switch'' agreement as described, remedies 
may exist through enforcement by USDA and DOJ, or in private actions by 
the grower in Federal or state court. Therefore, AMS made no changes to 
the rule as proposed based on these comments.
Readability of Disclosure Document and Provision in Additional 
Languages
    Comment: In the proposed rule, AMS asked whether the wording of the 
Disclosure Document was clear and what changes could be made to improve 
clarity. Several groups representing poultry growers said AMS should 
ensure the Disclosure Document and other disclosures are in plain 
language and understandable to a wide range of poultry growers. They 
said the language should also be unambiguous to avoid discrepancies in 
interpretation between the agency and other regulators, the courts, and 
live poultry dealers.
    AMS also asked whether there are circumstances in which live 
poultry dealers should be required to provide the Disclosure Document 
in a language other than English. Commenters representing both poultry 
growers and live poultry dealers supported providing disclosures in the 
preferred language of poultry growers who are not native speakers of 
English. A commenter said the grower or prospective grower should have 
the right to request that the dealer provide the Disclosure Document in 
their primary language and that all time limits be tolled until the 
dealer provides an adequate translation, noting the burden on non-
native English speakers to navigate the arrangement in English is 
significantly greater than the burden on a dealer to provide the 
information in the grower's language. Commenters noted the substantial 
number of farmers who speak languages other than English and stressed 
the importance of making sure language barriers do not prevent poultry 
growers from fully understanding the potential costs and benefits of a 
poultry growing arrangement. In addition, several commenters 
recommended that AMS provide educational outreach to non-English-
speaking communities in their native languages.
    AMS response: This rule is intended to promote transparency in 
poultry production contracting and give poultry growers and prospective 
poultry growers relevant information with which to make more informed 
business decisions. For the disclosure information to have value and be 
of use to a poultry grower, the poultry grower must have basic 
comprehension of the information's meaning so that the provision of 
this information can reduce the potential for deception. Accordingly, 
in response to comments, AMS added Sec.  201.102(g)(3), which requires 
live poultry dealers to present Disclosure Document information 
clearly, concisely, and understandably for growers. More generally, 
standard plain language practice is to write informational materials in 
plain, easy to understand language appropriate for the subject and for 
the intended audience. We expect dealers to ensure that growers can 
easily understand the disclosures, and in our examinations may test 
that to determine whether dealers are complying with Sec.  
201.102(g)(3). Further, in response to comments, AMS added a 
requirement in Sec.  201.102(g)(4) that in the event a prospective or 
current broiler grower notifies the live poultry dealer that they have 
limited proficiency in the disclosure's written language, or in the 
event the dealer is already aware of such limited proficiency, the live 
poultry dealer must make reasonable efforts to assist the grower in 
translating the Disclosure Document at least 14 calendar days before 
the live poultry

[[Page 83237]]

dealer executes the broiler growing arrangement, provided that the 
grower may waive up to 7 calendar days of that time period.\72\
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    \72\ As noted previously, Pew Research Center studies show that 
the English proficiency of the Hmong population in the U.S. in 2019 
was only 68% and among foreign born Hmong, English proficiency is 
just 43%. Abby Budimen, ``Hmong in the U.S. Fact Sheet,'' Pew 
Research Center, available at https://www.pewresearch.org/social-trends/fact-sheet/asian-americans-hmong-in-the-u-s/ (last accessed 
April 2023).
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    As noted by commenters, non-English speaking growers, including 
U.S. natives and immigrants, have played important roles in the poultry 
growing market in multiple localities. Grower groups have noted 
concerns over many years regarding non-English speaking growers' 
ability to understand and evaluate their contracts and the risks they 
are taking in poultry growing.\73\ The intention of this rule is to 
assist all broiler growers in understanding the information about their 
poultry growing arrangement. This includes providing the information to 
growers in a language with which they are familiar. Under this final 
rule, the live poultry dealer must make reasonable efforts to ensure 
that growers are aware of their right to request translation 
assistance, and to assist the grower in translating the Disclosure 
Document at least 14 calendar days before the live poultry dealer 
executes the broiler growing arrangement (provided that the grower may 
waive up to 7 calendar days of that time period). The timing aligns 
with the requirements on the live poultry dealer under Sec.  201.102(a) 
to provide the contract and Disclosure Document to the grower. 
Reasonable efforts include but are not limited to providing current 
contact information for professional translation service providers, 
trade associations with translator resources, relevant community 
groups, or any other person or organization that provides translation 
services in the broiler grower's geographic area. A live poultry dealer 
may not restrict a broiler grower or prospective broiler grower from 
discussing or sharing the Disclosure Document for purposes of 
translation with a person or organization that provides language 
translation services. Live poultry dealers, as parties regularly 
engaged in executing poultry growing arrangements, can be expected to 
be able to identify for growers affordable translation services in a 
timely manner, which will assist the grower in obtaining any necessary 
translation services quickly.
---------------------------------------------------------------------------

    \73\ Jess Anna Spier, ``Hmong Farmers: In the Market and on the 
Move,'' (January 1, 2007) Farmers Legal Action Group, available at 
http://www.flaginc.org/wp-content/uploads/2013/03/CLE_JAS.pdf last 
accessed 04/06/2023.
---------------------------------------------------------------------------

    AMS is requiring that live poultry dealers take reasonable efforts 
to ensure that growers are made aware of their right to request 
translation assistance so that growers can reasonably access the 
assistance with limited risks of prejudice or discrimination. AMS is 
not requiring dealers to provide a translation because it would be 
costly and could deter poultry companies from working with non-English 
speaking growers. Instead, the requirement to assist growers in 
obtaining translation services is a more cost-effective and flexible 
approach that conforms with existing regulatory requirements that 
protect growers' ability to access other services, such as accounting, 
financial, and legal advisors, that growers may engage to meet their 
needs in reviewing what can be multi-hundred-thousand or million-dollar 
investments and business risks. Accordingly, to ensure grower access to 
those services, Sec.  201.102(g)(4) prohibits any restriction on 
growers' ability to share the documentation with translation service 
providers. Furthermore, nothing in the rule prevents companies from 
providing a translation provided it is complete, accurate, and not 
misleading. Poultry dealers are strongly encouraged to do so.
    To preserve the minimum time period for grower review, AMS's 
requirement that live poultry dealers assist growers with accessing 
translation services must occur 14 calendar days before executing the 
poultry growing arrangement (provided that the grower may waive up to 7 
calendar days of that time period). AMS has aligned the translation 
timing with the general requirement that the Disclosure Document be 
provided 14 calendar days before executing the poultry arrangement to 
minimize complexity in the rule, provided that the grower may waive up 
to 7 calendar days of that time period. As discussed elsewhere in this 
final rule, the 14-day timing requirement only applies where no 
additional capital investment is being made. Where additional capital 
investments are being made the Disclosure Document must be delivered 
with the housing specification, which occurs before the capital 
investment. As noted elsewhere in this final rule, circumstances where 
no capital investments are being made tend to reflect continuity and an 
established relationship between the grower and the live poultry 
dealer, or circumstances where a grower is switching without capital 
investment. In either case, the dealer and grower can be expected to be 
in ongoing dialogue in the run up to the period before review, which 
should allow for more flexible timing by both parties.
    The suggestion that AMS provide educational outreach to non-
English-speaking communities in their native languages is noted, and 
while a provision for outreach is not included in this rule, AMS will 
publish educational materials online in multiple commonly spoken 
languages to provide a basic level of outreach, in addition to 
exploring more opportunities to provide additional educational 
outreach.
Other Improvements to Proposed Disclosure Regime
    Comment: In the proposed rule, AMS invited comments on what else 
USDA can do to improve the proposed disclosure regime, including 
whether AMS should provide more information about the scope of the 
definition of deception under the Act. Several non-profit organizations 
suggested AMS establish a definition of deception to give growers, 
regulated entities, and courts a clear understanding of the intent of 
the rule.
    AMS response: AMS is making no change based on comments received. 
While the particular facts and circumstances in any individual case 
will determine the application of the prohibition on deceptive 
practices under the Act, well- established principles of deceptive 
practices under the Act squarely cover the information required to be 
disclosed in this rule. Taking the formulation set forth in the 1983 
FTC Policy Statement on Deception, deception would require that the 
representation, omission, or practice be likely to mislead the grower, 
from the perspective of the grower acting reasonably in the 
circumstances, and be likely to affect their conduct or decision with 
regard to the poultry growing arrangement.\74\ AMS has crafted this 
rule to meet that standard in the prevention of deception: to provide 
information that is important to reasonable poultry growers' decisions 
relating to contracting and the operation of their contracts and that 
addresses representations, omissions, and practices that are likely to 
mislead growers. Accordingly, AMS finds no need to further define 
deception in this rule.
---------------------------------------------------------------------------

    \74\ FTC Policy Statement on Deception, Oct. 14, 1983 (Appended 
to Cliffdale Associates, Inc., 103 F.T.C. 110, 174 (1984)), 
available at https://www.ftc.gov/system/files/documents/public_statements/410531/831014deceptionstmt.pdf.
---------------------------------------------------------------------------

    AMS notes, also, that additional concepts, formulations, or 
applications of deception may be presented in a separate rulemaking. 
Other deceptive

[[Page 83238]]

practices are outside the scope of this disclosure-based rulemaking.

D. Disclosure Document Advisories

    In proposed Sec.  201.100(b)(6), (7), and (8), AMS proposed the 
Disclosure Document contain specific verbatim advisories. The 
advisories would summarize provisions of the poultry grower's poultry 
growing arrangement, the grower's right to carefully read the 
Disclosure Document and all accompanying material, and the grower's 
right to share the document with certain others for counsel. The 
Disclosure Document advisories would describe the requirement that the 
live poultry dealer furnish a copy of the Disclosure Document and 
growing arrangement a minimum of 14 calendar days before the dealer 
executes the growing arrangement, provided that the grower may waive up 
to 7 calendar days of that time period. When the live poultry dealer 
seeks to offer or impose new or additional housing specifications that 
could lead the poultry grower to make a capital investment, the 
advisories would describe the requirement to provide the Disclosure 
Document simultaneously with a copy of the growing arrangement, any new 
or modified housing specifications that require original or additional 
capital investment, and a letter of intent. The advisories would also 
include a provision explaining that the information is not verified by 
USDA, and that false or misleading statements or material omissions by 
the live poultry dealer in the disclosure could constitute a violation 
of Federal law, State law, or both. Inaccurate information provided in 
disclosure to growers, as well as other bait-and-switch tactics, such 
as making a material policy change but not through a new or revised 
contract, would be covered under this section. This is designed to help 
growers understand that conduct which violates the rule is a violation 
of sec. 202(a) of the Act and may result in a notice of violation from 
USDA or prosecution by the Department of Justice and that, furthermore, 
growers may be able to tap additional remedies for misrepresentations 
in these disclosures under the Act and other laws as well.
Statement of Grower's Rights
    Comment: Several non-profit organizations suggested AMS should add 
a requirement that dealers provide in the Disclosure Document USDA 
contact information that would allow current or prospective poultry 
growers to obtain further guidance regarding their rights and 
protections.
    AMS response: AMS agrees with this comment, and has amended the 
proposed requirements for the Disclosure Document to include the 
Packers and Stockyard Division hotline number, along with the address 
for the AMS complaint portal, which was included in the proposed rule. 
AMS has additionally included a reference to the AMS website where live 
poultry dealers and growers may access further information about rights 
and responsibilities under the Act. Providing this contact information 
to growers will signal AMS's intent to enforce the rule and further 
facilitate growers' ability to contact USDA regarding potential 
violations.
    Comment: AMS received several comments about the provision allowing 
poultry growers to discuss their arrangements with business associates. 
A non-profit organization suggested that the rule should ensure a 
grower's right to speak freely about their contracts. Several 
commenters said the rule should increase transparency by explicitly 
permitting poultry growers to discuss poultry growing arrangement 
offers and Disclosure Documents with anyone.
    AMS response: AMS continues to agree growers must be able to 
consult with the entities listed in Sec.  201.100(b) about entering 
into, renewing, and operating under such contracts because those 
parties are essential for assisting growers in appreciating the legal, 
financial, and operational risks that they may face. Moreover, the 
Disclosure Documents provide critical information that is core to their 
ability to provide that assistance. However, adding to the particular 
entities listed in Sec.  201.100(b) is outside the scope of this 
rulemaking. AMS will monitor whether non-disclosure requirements are 
impeding the ability of growers to make the most efficient use of the 
Disclosure Documents, including whether such non-disclosure agreements 
impede the ability of growers to seek and obtain better offers from 
competing live poultry dealers. Accordingly, AMS will monitor and 
evaluate whether rulemaking to expand the entities listed in Sec.  
201.100(b) is needed, but made no changes to the rule as proposed based 
on these comments.
    Comment: Several live poultry dealers said the verbatim advisories 
required by the proposed rule on the right to obtain counsel on a 
contract from certain trusted advisors and the right to seek redress 
from AMS for violations of the Act are unnecessary because they 
distract from the clear terms of the contract and do not require 
contractual provisions to be effective. These commenters suggested AMS 
engage in targeted educational outreach, work with State agriculture 
extension services, and coordinate with other industry stakeholders as 
an alternative to these advisories.
    AMS Response: Based on AMS's experience, some growers may not be 
aware of their rights under the Act or may be confused, intimidated, or 
misled about asserting those rights where contracts include 
confidentiality clauses. The mandated disclosures promote transparency 
and allow growers to better understand, evaluate, and compare contracts 
among dealers. This minimizes the risk of deception in the contracting 
process by ensuring growers know they have the right to understand and 
evaluate offered contracts by seeking business, legal, and financial 
counsel from the entities listed in Sec.  201.100(b). It is true that 
certain information provided by State extension services, USDA 
resources, and other poultry growers under contract with the same live 
poultry dealer can help growers assess the feasibility and operation of 
new or revised poultry growing arrangements. Grower commenters at 
listening sessions, however--in response to rulemaking proposals--have 
reported to USDA they are not sure their contracts allow them to seek 
advice from others. Growers should be assured that seeking such 
guidance is not prohibited, regardless of confidentiality clauses in 
offered contracts. Further, AMS agrees that educational outreach is 
valuable to the industry and intends to continue and enhance efforts in 
those areas. Educational outreach, however, is not a replacement for 
legal protection. This rule provides this protection by requiring 
inclusion of the advisory disclosures in the Disclosure Document. 
Accordingly, AMS made no change to the proposed rule based on these 
comments.
    Comment: A poultry industry trade association said AMS should omit 
requirements that are irrelevant to determining grower income, such as 
the requirement to provide information about general rights and 
obligations under the Act.
    AMS Response: AMS does not agree that disclosures should focus only 
on grower income. Each of the disclosure elements required in this 
final rule will have a meaningful impact on growers' ability to 
understand and evaluate the production agreement. At earlier listening 
sessions and competition workshops, USDA heard from growers that 
certain information is critical to their decision making and ultimate 
success, and they have urged AMS to

[[Page 83239]]

require dealers to provide this information. For example, growers have 
told us that knowing the live poultry dealer's policies related to the 
sale or transfer of a poultry growing operation before they enter a 
contract and make associated capital investments would help them 
evaluate the long-range risks of doing so. In another example, growers 
knowing the dealer's policy regarding feed outages will be better 
prepared to avoid such situations or react appropriately in a timely 
manner to minimize the impact of an outage on the flock. While having 
such information forestalls confusion, misunderstanding, and 
unnecessary delays for growers, live poultry dealers also benefit from 
providing such information by avoiding potentially misleading or 
deceptive communications and by maximizing business outcomes 
efficiently. Accordingly, AMS made no changes to the rule as proposed 
in response to this comment.
    Comment: A poultry industry trade association said AMS should 
clarify what constitutes a ``material omission'' or ``misleading 
statement'' for the purposes of proposed Sec.  201.100(b)(8) and asked 
whether an incorrect forecast or an unforeseen market change not 
contemplated by a disclosure would be considered ``misleading.''
    AMS Response: The sufficiency and reliability of disclosures depend 
heavily on the facts and circumstances. Moreover, contract causes of 
action are, in general, a function of State law, and State courts may 
have different standards for interpreting ``material omission'' and 
``misleading statement.'' The law around ``material omissions'' or 
``misleading statements'' is a well-established part of the law of 
deception under the Act, the FTC Act, and other relevant Federal and 
State disclosure laws. AMS made no changes to the rule as proposed 
based on this comment.
    Comment: A meat industry trade association said AMS should modify 
the rule to consider proprietary and confidential information that 
would be provided to potential growers who would not necessarily end up 
with a business relationship with the live poultry dealer.
    AMS response: AMS has already explained why the information in the 
Disclosure Document does not give rise to confidential or propriety 
business information.
Recommendations for Additional Advisories
    Comment: Multiple commenters urged AMS to establish that it would 
be a violation of the Act for a live poultry dealer to threaten to 
retaliate against a poultry grower who installs a feed scale to verify 
the accuracy of feed deliveries, and that live poultry dealers should 
have to disclose this right in the Disclosure Document. One commenter 
said this right is important because the tournament system values the 
growers' feed-to-weight conversion ratio, and if a live poultry dealer 
reports having provided a higher amount of feed than was actually 
provided, the grower is improperly penalized for having a lower ratio.
    AMS response: This issue is outside the scope of this rule. This 
rule focuses on providing enhanced transparency to poultry growers and 
does not address retaliation and related matters. In addition, AMS has 
proposed a rule that would address retaliation against producers 
including poultry growers.\75\ AMS is also considering additional steps 
to address unfair practices as set forth in the June 8, 2022, Advanced 
Notice of Proposed Rulemaking ``Poultry Growing Tournament Systems: 
Fairness and Related Concerns.'' Therefore, AMS made no changes to the 
rule as proposed based on this comment.
---------------------------------------------------------------------------

    \75\ Agricultural Marketing Service, ``Inclusive Competition and 
Market Integrity,'' Proposed Rule, Oct. 3, 2022, 87 FR 60010, 
available at https://www.federalregister.gov/documents/2022/10/03/2022-21114/inclusive-competition-and-market-integrity-under-the-packers-and-stockyards-act.
---------------------------------------------------------------------------

    Comment: Multiple commenters said the Disclosure Document should 
include a warning about the dangers of breathing dust and ammonia, as 
well as information about how poultry growers can protect themselves 
and their employees from these dangers. Several of these commenters 
said AMS should provide a fact sheet on respiratory health hazards. 
Similarly, a commenter said AMS should require disclosures to farmers 
and to the public of what goes into the feed for poultry, saying 
poultry growers could be irreparably harmed by handling dangerous 
chemicals and consumers could be harmed by ingesting these chemicals.
    AMS response: This issue is outside the scope of this rule. The 
rule focuses on transparency regarding the financial risks and benefits 
of raising poultry under a poultry growing arrangement. AMS does not 
discount the commenters' concerns here and recognizes there are risks 
associated with growing poultry that are not directly financial. Nor 
does AMS discount the possibility that deception and unfair practices 
may extend to injuries beyond promises of financial gain. Because this 
comment is outside the scope of the rule, AMS made no changes to the 
rule based on these comments. AMS, however, encourages all potential 
and current poultry growers to educate themselves on the various health 
and safety risks associated with growing poultry.

E. Financial Disclosures

    AMS proposed to require live poultry dealers to provide various 
financial disclosures to poultry growers, including disclosure of 
bankruptcy filings, grower terminations, and grower payment history and 
projections.
Disclosure of Bankruptcy Filings
    AMS proposed in Sec.  201.100(c)(2) to require the Disclosure 
Document to contain a summary of bankruptcy filings in the prior 6 
years for the live poultry dealer and any parent, subsidiary, and 
related entity.
    Comment: Several poultry and meat industry trade associations 
argued that the requirement to disclose past bankruptcy filings is 
unnecessary. For example, a commenter said bankruptcy filings are rare 
among live poultry dealers and are already public if interested parties 
wish to obtain them. Another commenter noted that this information 
would be difficult to maintain for larger companies with multiple 
subsidiaries and said it is unclear why disclosing a live poultry 
dealer's bankruptcy history would be relevant to determining a poultry 
grower's earnings under a contract, or why this requirement is for a 6-
year period rather than 5 years as with other disclosure requirements 
in the rule.
    AMS response: The financial stability of a dealer is a relevant 
factor for prospective growers to consider. Dealers or complexes that 
are underperforming financially may be subject to closure or reduced 
production levels, resulting in negative effects on grower revenue and 
potential contract termination. For example, numerous grower contracts 
were terminated as a result of the Pilgrim's Pride bankruptcy in 2008. 
Had those growers understood the financial state of the company and the 
risk to their operations, they may have elected to work with a 
different dealer, not entered the business at all, or taken other 
measures to protect themselves from the risk of financial loss. In 
addition, because corporate relationships may not be known to growers, 
the public nature of filings may be inadequate to effectively 
communicate this type of risk. However, to improve the uniformity of 
recordkeeping for this disclosure regime in the final rule, and in 
response to comments, AMS has elected to adjust the bankruptcy 
information reporting period required by Sec.  201.102(c)(2) to 5 
years.

[[Page 83240]]

Grower Termination and Bankruptcy Disclosures
    In the proposed rule, AMS asked if it should require dealers to 
disclose the contractual grounds for termination or suspension of the 
poultry growing arrangement.
    Comment: Several commenters suggested AMS should require live 
poultry dealers to disclose the contractual grounds for termination or 
suspension of the poultry growing arrangement. These commenters said it 
is important for poultry growers to know the circumstances under which 
the company can terminate the contract and leave the grower without 
income because growers make a substantial investment under the contract 
arrangement.
    AMS response: Current regulatory requirements adequately cover this 
issue. Under existing regulations at Sec.  201.100(c)(1), live poultry 
dealers are required to provide growers a copy of their contract that 
includes, among other things, ``the duration of the contract and 
conditions for the termination of the contract by each of the 
parties.'' Existing regulations at Sec.  201.100(h) also require live 
poultry dealers to provide terminated growers with written notice, 
including the reason for termination and appeal rights. This 
information is shared between dealers and individual contracted growers 
only, and is not part of the Disclosure Document required of broiler 
dealers under Sec.  201.102. AMS made no changes to the current 
regulations based on these comments.
    Comment: In other responses to AMS's request for input about 
contract terminations, multiple non-profit organizations asked AMS to 
require live poultry dealers to disclose the annual percentage of 
contracts they terminated over a certain period. The commenters said 
these disclosures would give growers a sense of the nature of the 
contract relationship, as well as the range of contract cancellation 
risks. One commenter noted this information is necessary for growers to 
determine the likelihood of failure. One commenter also suggested AMS 
require dealers to provide information about the most common reasons 
for termination. This commenter further suggested that live poultry 
dealers should include a summary of the average rate of bankruptcies 
among growers who have worked with that dealer over the past 5 years, 
as well as information on the most common reasons why growers may have 
filed for bankruptcy.
    AMS response: In the proposed rule, AMS had not required live 
poultry dealers to provide information about grower turnover rates. 
However, AMS agrees with commenters' suggestions that disclosures 
related to the rates of contract termination and non-renewal with a 
live poultry dealer could help current and prospective poultry growers 
better assess the stability of the dealer's contract relationships. In 
requesting disclosure of bankruptcy and litigation, AMS was seeking to 
capture the risk that might arise from termination or unstable 
relationships. Grower turnover rates are, in AMS's views, a useful 
metric to assess those risks, as well as to assess grower satisfaction 
with the dealer. In AMS's experience regulating the industry, grower 
turnover rates commonly reflect changes to poultry sales in the 
wholesale and retail marketplace, as well as general live poultry 
dealer grower management practices. Local turnover rates might stem 
from regional management practices, local agent practices, or changes 
in local agricultural or even labor markets. Local turnover rates may 
also reflect company-wide policy and management of poultry production, 
suggesting that growers need to understand and compare both local 
complex and company-wide grower turnover history in order to evaluate 
offered poultry growing arrangements.\76\ As such, grower turnover 
rates provide information that is similar to, but also more holistic, 
than bankruptcy or litigation, and assist the grower in evaluating the 
risk of termination or an unstable or unsatisfactory relationship.
---------------------------------------------------------------------------

    \76\ In a case involving Arkansas growers, Judge Higginson wrote 
``[c]iting a downturn in the poultry industry, PPC terminated its 
contracts with the Growers and filed for bankruptcy.'' Growers v. 
Pilgrim's Pride Corp. (In re Pilgrim's Pride Corp.), 706 F.3d 636, 
638 (5th Cir. 2013). In a case involving terminated Florida growers, 
a Pilgrim's Pride executive was reported to have testified that 
``terminating the contracts (was) necessary and the best option . . 
. slowing or stopping operations at Pilgrim's Pride plants is 
expected to save the company $250 million this year,'' from 
``Pilgrim's Pride cut growers based on production factors,'' Meat + 
Poultry (March 11, 2009).
---------------------------------------------------------------------------

    Accordingly, AMS has added a requirement to incorporate broiler 
grower turnover rates at the local complex and company level into the 
Disclosure Document. This information will allow growers to compare the 
turnover rates of multiple live poultry dealers as a risk factor when 
making contracting decisions. Section 201.102(c)(5) is added to the 
final rule and requires live poultry dealers engaged in the production 
of broilers to disclose average annual broiler grower turnover rates 
for the previous calendar year and the average of the 5 previous 
calendar years at both the company level and the local complex level.
    AMS is requiring grower turnover rates for the previous year and 
the average of the 5 previous years at both the complex and company 
level, whereas it is requiring dealers to provide previous-year average 
grower payment information only at the complex level and not at the 
company level (as in proposed Sec.  201.100(d)(1)). AMS is adopting 
this distinction because company-wide grower turnover metrics provide 
the grower with an important picture of termination or other risks that 
may arise from company decision-making relating to sales market 
fluctuations--for example, if a dealer terminates growers quickly in 
response to sales changes. Complex level turnover rates are also 
important to growers because they are likely to provide insight into 
how the company, and in particular its local agents, interact with 
growers. AMS developed detailed instructions for how to calculate 
average annual broiler grower turnover rates, which are included in 
Form PSD 6100, to facilitate ease of compliance by live poultry 
dealers.
    As explained in the previous comment response, live poultry dealers 
are required to provide individual terminated growers with written 
notice, including the reason for termination and the grower's appeal 
rights. However, AMS has determined that this final rule should not 
require dealers to explain the reasons for terminations of other grower 
contracts on a complex- or company-wide basis in the Disclosure 
Document. AMS knows through experience working with the industry that 
poultry dealers and growers can have widely different perspectives on 
the causes and circumstances for contract terminations. Similar to a 
grower's evaluation of a dealer's bankruptcy or litigation history, 
growers can consider grower turnover rates when evaluating offered 
contracts, but live poultry dealers cannot reasonably be expected to 
convey the varying reasons that may be the basis for terminating 
contracts as that would at a minimum be burdensome and may in some 
circumstances reveal proprietary business information or create 
litigation risks to the company.
    AMS also does not agree that dealers should be required to furnish 
information about the rates and causes for grower bankruptcies. AMS 
does not expect live poultry dealers to know all the rates or reasons 
for individual growers' personal or business decisions to file for 
bankruptcy, which may or may not have anything to do with the poultry 
growing arrangement. Accordingly, no changes to the rule as

[[Page 83241]]

proposed were made on the basis of these comments.
Facilitating Harmful Coordination by Integrators
    In the proposed rule, AMS asked whether certain types of financial 
disclosures could facilitate harmful coordination by integrators and, 
if so, how this risk could be mitigated.
    Comment: A non-profit organization said the large market share held 
by a few large companies, along with the existence of specialized data 
companies that service large integrators, has already led to harmful 
coordination to reduce both contract grower payments and wages for 
poultry industry workers. This commenter said the solution to avoid 
harmful coordination by integrators would be for USDA to work with DOJ 
to crack down on anticompetitive practices, rather than to limit 
disclosure of information to prospective and current contract growers.
    AMS response: AMS is committed to working with DOJ to curb illegal 
trade practices, including antitrust violations, but antitrust 
violations are not the only behavior regulated by the Act. This rule is 
focused on providing enhanced transparency to current and prospective 
poultry growers because of the persistent challenges they have faced 
for many years with respect to their poultry growing arrangements. 
Enhancing transparency and reducing information asymmetry through this 
rule will allow growers to better understand evaluate, and compare 
contracts to reduce deceptive practices. AMS made no changes to the 
rule as proposed based on this comment.
Effect of Financial Disclosures on Lending System
    In the proposed rule, AMS requested comment on the effect the 
proposed financial disclosures would have on the lending system and on 
the provision of credit to growers.
    Comment: A non-profit organization said poultry growers finance the 
barns they use through loans, which are often guaranteed through USDA's 
Farm Services Agency (FSA) or the Small Business Administration (SBA). 
According to this commenter, when growers are unable to pay their loans 
because of inadequate pay from the tournament system, taxpayers end up 
paying for them. This commenter said FSA should use the information 
disclosed under the proposed rule to refuse to guarantee loans unless 
the contract terms are at least as long as the life of the loan.
    AMS response: AMS noted in the proposed rule that FSA has 
recognized repayment reliability concerns related to informational 
asymmetries and their effect on poultry grower payments and total 
revenues. Under the loan repayment program, FSA assesses the 
``dependability'' of poultry production contracts and requires 
contracts to provide assurance of the grower's opportunity to generate 
enough income to ensure repayment of the loan by incorporating 
requirements such as a minimum number of flocks per year or similar 
quantifiable requirements.\77\
---------------------------------------------------------------------------

    \77\ USDA Farm Service Agency, Guaranteed Loan Making and 
Servicing 2-FLP (Revision 1) pp.8-86 (October 2008). https://www.fsa.usda.gov/internet/FSA_fFile/2-flp.pdf; accessed 1/3/2022.
---------------------------------------------------------------------------

    The commenter's request that FSA require contract length match 
repayment term is outside the scope of this rulemaking. However, AMS is 
committed to working with FSA and SBA on poultry industry lending 
practices. AMS made no changes to the rule as proposed based on this 
comment.
Disclosure of Grower Payment History and Projections
    In Sec.  201.100(d) (1), (2), and (3) of the proposed rule, AMS 
proposed to require the Disclosure Document to contain two tables. One 
table would show the average annual gross payments, in U.S. dollars per 
farm facility square foot, to poultry growers for the previous calendar 
year for all complexes owned or operated by the live poultry dealer. 
The second table would show the average annual payments, in U.S. 
dollars per farm facility square foot, to poultry growers at the local 
complex. The proposed rule also specified how the tables should be 
organized and how values should be calculated.
    Under the proposed rule, if a live poultry dealer modified the 
building specifications such that the grower would be required to make 
additional capital investment, or the tables of payment history would 
not accurately represent projected grower annual payments, the live 
poultry dealer would be required to provide additional information. The 
dealer would be required to provide tables presenting projections of 
average annual gross payments to growers under contract with the 
complex, and having the same housing specifications, for the term of 
the poultry growing arrangement, at five quintile levels expressed as 
dollars per farm facility square foot. Dealers would further be 
required to explain why the payment history information would not 
accurately represent projected future payments.
    AMS asked whether the proposed grower payment history and 
projection disclosures were adequate to enable growers to make sound 
business decisions.
    Comment: Several grower groups and State attorneys general 
indicated support for the proposed grower payment history information 
and projection disclosures. Commenters said the information should 
increase transparency for growers and that having information about 
real growers' outcomes in the region would help potential growers make 
decisions about entering into poultry growing arrangements. Commenters 
said that reporting average grower pay in quintiles helps prospective 
growers understand and compare income variations and evaluate their own 
income variation risk accordingly. On commenter explained that having 
realistic payment information would allow farmers to plan financing 
more accurately and avoid such predicaments as revenue shortfall in the 
face of equipment replacement and repair costs.
    AMS Response: AMS notes widespread support among commenters for the 
utility of the proposed disclosures for growers. In this industry as 
well as many others, past performance is a commonly relied-upon 
predictor of future performance. As explained in this section and 
elsewhere in this document, dealer discretion with respect to 
production inputs, and grower discretion with respect to flock 
management decisions and applied skills, are also determinative factors 
in grower outcomes. Thus, historical payment data and future 
projections become the baseline upon which growers can evaluate 
likelihood of their success or failure under poultry growing 
arrangements.
    Comment: A number of industry groups said providing the disclosures 
would impose significant costs on dealers but would be of little value 
to poultry growers.
    AMS response: As detailed in the Regulatory Impact Analysis below, 
AMS has determined that except for the first year that the rule is 
effective, the benefits of this rule to growers exceed costs to 
dealers. Benefits include reduced uncertainty in the broiler grower's 
revenue stream, reduced risk of retaliation and potential for fraud and 
deception, and more optimal allocation of capital and labor resources, 
leading to improved efficiencies across the entire industry. First-year 
costs to live poultry dealers--following the effective date of

[[Page 83242]]

the rule--include expenses for setting up new reporting and 
recordkeeping processes, which will decrease in succeeding years. 
Additionally, in economic terms, AMS expects total costs to the 
industry from the rule--as with total benefits--will be very small in 
relation to the total value of industry production. Significant 
benefits in the form of decision-making tools will nevertheless accrue 
to individual growers given the opportunity to understand, evaluate, 
and compare contract data provided by live poultry dealers in 
Disclosure Documents pertaining to their poultry growing arrangements.
    Comment: One commenter said that the disclosures would be of little 
value to growers because past economic performance is not a reliable 
predictor of future economic conditions. The commenter asserted that 
the grower's income is determined as specified in the contract and 
driven primarily by the grower's skill and care.
    AMS Response: AMS acknowledges that items specified in the 
contract, and the grower's skill and care, play important roles in 
grower performance. However, the live poultry dealer determines many 
items not specified in the contract that significantly impact the 
grower's income, such as how many flocks a grower receives annually and 
the number of birds in those flocks. In addition, in tournament 
systems, the grower's skill and care are supposed to be rewarded in 
reference to the skill and care provided by other growers settling with 
them under relative performance payment contracts. The disclosed 
information provides a history of past grower performances representing 
the range of skill and care of the pool of growers with whom they will 
be settled, and who operate under the same contract at the same 
complex. This information will provide the potential grower a firmer 
basis for forming performance expectations than a copy of the contract 
and a self-estimation of their skill and commitment in isolation. It is 
true that past economic performance may not always be a reliable 
predictor of future economic conditions. For example, past economic 
performance could not have predicted U.S. economic conditions following 
unanticipated events like a worldwide pandemic, foreign conflicts, 
social upheaval, or an avian flu epidemic. Nevertheless, past economic 
performance is commonly used in many industries to help predict and 
plan for future economic performance.
    Actual payment information from the recent past illustrates how a 
live poultry dealer wields its discretion in the contract. It offers 
one of, if not the, best pieces of available information to provide 
growers with a reasonable range of what their incomes may be, 
reflecting the range of grower skills and other factors present in the 
marketplace.\78\ Further, providing only the average, or no information 
regarding variability, is deceptive in the face of payment 
variability--a significant complaint that AMS has received over the 
years from growers. Based on AMS's experience monitoring these markets, 
payments to growers frequently encompass a wide range above and below 
the mean payment level, as well as significant variation between 
specific contracts and grower pools.
---------------------------------------------------------------------------

    \78\ Forecasts of a variable are often based on past values of 
that variable. J.C. Brocklebank, D.A. Dickey, and B.S. Choi, SAS for 
Forecasting Time Series (2018): 23.
---------------------------------------------------------------------------

    In data drawn from a 2011 nationally representative sample of 
broiler growers, the mean payment received by contract growers was 5.77 
cents per pound, but 10 percent of growers earned at least 7.02 cents 
per pound, while 10 percent earned less than 4.32 cents per pound.\79\ 
While the data reported above range across all growers and all 
contracts, payments also range widely for specific contracts and grower 
pools.\80\ Presenting payment history information broken out by 
quintiles (or, for very small complexes, by mean and standard 
deviation) gives insight into the variability of cash flow within 
recent years. As commenters pointed out, not even the best economic 
models can predict the future with a high degree of certainty, so 
presenting recent payment information broken out by quintiles (or, for 
very small complexes, mean and standard deviation) to share the range 
of performance is designed to enable growers to evaluate whether their 
potential earnings would be sufficient to meet personal and business 
financial obligations, as well as to better handle risk and improve 
farm management. The rule also recognizes that economic conditions may 
vary, and so provides the opportunity for live poultry dealers to 
explain why any future projections may differ from past outcomes.
---------------------------------------------------------------------------

    \79\ James M. MacDonald, ``Technology, Organization, and 
Financial Performance in U.S. Broiler Production.'' U.S. Department 
of Agriculture Economic Research Service, Economic Information 
Bulletin No. 126 (June 2014).
    \80\ Charles R. Knoeber and Walter N. Thurman. ``Testing the 
Theory of Tournaments: An Empirical Analysis of Broiler Production. 
''Journal of Labor Economics 12 (April 1994). Armando Levy and 
Tomislav Vukina. ``The League Composition Effect in Tournaments with 
Heterogeneous Players: An Empirical Analysis of Broiler Contracts.'' 
Journal of Labor Economics 22 (2004).
---------------------------------------------------------------------------

    Comment: Several commenters representing poultry industry interests 
expressed concerns that any data on potential future payments is 
misleading to growers, given the number of factors that affect payments 
and the role of a grower's own skill.
    AMS response: Grower skill does play a role in flock performance 
and therefore per-flock payments. The projection quintiles required in 
this rule are specifically designed to capture a wide range of grower 
performance. Therefore, the bulk of variability in future projections--
and presumably the reason for offering projections in lieu of 
historical information in the first place--would be due to anticipated 
changes in dealer-controlled factors such as flock placement frequency 
and flock density, changes in production needs, and changes to the 
length of grower contracts. The supposition that payment disclosures 
would be misleading would only be true to the extent that dealers 
supply misleading data related to factors they control. To do so would 
be deceptive and a violation of the Act. Accordingly, AMS made no 
changes to the rule as proposed based on these comments.
    Comment: Several poultry and meat industry trade associations 
requested that AMS require only grower payment history information for 
the grower's complex rather than for all complexes owned by the live 
poultry dealer. These commenters noted that complexes in other 
geographic areas face different economic conditions, such as cost of 
living, labor costs, and State and local taxes, arguing that payment 
information for these complexes would not be useful to poultry growers 
and would potentially confuse them.
    AMS response: Payment history for complexes in other geographic 
areas may be useful to growers in some circumstances, in particular, in 
areas with only one or two live poultry dealers where there may not be 
the ready availability for growers to compare what they might earn from 
providing poultry growout services.\81\ However, some factors may vary 
regionally, such as labor costs, which could reduce the usability of 
the information. This rule does not require payment information for 
complexes in other geographic areas. Therefore, in the

[[Page 83243]]

final rule, AMS removed the proposed requirement in Sec.  201.100(d)(1) 
that live poultry dealers provide grower payment history information 
for all complexes they own, instead requiring in Sec.  201.102(d)(1) 
that live poultry dealers engaged in the production of broilers provide 
only tables showing average annual gross payments to broiler growers at 
the local complex.
---------------------------------------------------------------------------

    \81\ In the last available survey of local markets (2011), 
MacDonald and Key found that about one quarter of contract growers 
reported that there was just one live poultry dealer in their area; 
another quarter reported two; another quarter reported three; and 
the rest reported four or more. James M. MacDonald, Technology, 
Organization, and Financial Performance in U.S. Broiler Production, 
EIB-126, U.S. Department of Agriculture, Economic Research Service, 
June 2014: 30, https://www.ers.usda.gov/webdocs/publications/43869/48159_eib126.pdf?v=0.
---------------------------------------------------------------------------

    Comment: A poultry industry trade association urged AMS not to 
require future projections, saying it would be difficult for dealers to 
accurately make such projections, given that they depend in part on the 
economic climate and on other factors that cannot reasonably be 
foreseen. This commenter said if AMS requires projections, they should 
be qualified and exempt from certifications. A trade association 
suggested disclosure should include a disclaimer that past income does 
not guarantee future results and that income will be governed by the 
terms of the contract, the party's performance, and additional factors 
neither party has control over.
    AMS response: AMS intends for live poultry dealers to make and 
disclose assumptions relating to projections, allowing poultry growers 
to better assess the context behind them. This final rule does not 
require disclosure of projections to include a disclaimer that past 
performance is not likely to reflect future results but does not 
prohibit it either. AMS will carefully monitor the use of disclaimers 
to prevent confusion and deception. To the extent that a disclaimer is 
provided in a manner that helps the growers understand that past income 
is not a contractual guarantee to the grower of such income, it may be 
acceptable. But such a disclaimer is not required, as the Disclosure 
Document should already clearly differentiate between past income and 
future projections that are made because past performance is not likely 
to reflect future results. AMS underscores that a live poultry dealer 
may not disclaim or absolve itself of any obligation to disclose 
information required to be disclosed in this rule, waive any liability 
under this rule, or confuse or discourage growers from reviewing the 
disclosures set forth under this rule.
    Additionally, in the final rule, AMS has clarified that 
certifications by principal executives are made with respect to the 
sufficiency of the governance framework for delivering accurate and 
reliable disclosures, rather than to the specific accuracy of 
disclosures to particular growers because, as discussed elsewhere, such 
a certification is more appropriate with respect to the role of the 
principal executive in providing the necessary governance and controls 
to reasonably provide for accuracy in disclosures.
    Comment: Commenters from both the grower and live poultry dealer 
sectors requested more specificity on how to calculate average annual 
gross payments. Although the proposed rule provided detail on 
calculations, commenters stated the instructions lacked sufficient 
specificity to assure that live poultry dealers could comply and that 
poultry growers would receive adequate data on which to base business 
decisions.
    AMS response: In response to commenters' request for specificity on 
how to calculate average annual gross payments, AMS developed detailed 
instructions for how to calculate average annual broiler grower 
turnover rates, which are included in Form PSD 6100. AMS also added a 
definition in Sec.  201.2 for gross payments, which means the total 
compensation a poultry grower receives from the live poultry dealer, 
including, but not limited to, base payments, new housing allowances, 
energy allowances, square footage payments, extended lay-out time 
payments, equipment allowances, bonus payments, additional capital 
investment payments, poultry litter payments, etc., before deductions 
or assignments are made.
    Comment: Multiple commenters asked AMS to require the Disclosure 
Document to include a maximum percentage variance from the base pay 
rate under the contract. These commenters said this information would 
give growers a better idea of the true range of potential incomes.
    AMS response: The disclosure of payment quintiles or mean and 
standard deviation provides substantially more data points useful to 
assess payment variance and range of potential outcomes compared to 
maximum percentage variance, as quintiles show pay broken down into 
five bands. Live poultry dealers will report only a mean and standard 
deviation if there are nine or fewer growers, which provides a measure 
of expected outcome and expected volatility around that outcome. The 
base price and the maximum variance would not give an expected outcome 
or volatility measure, nor would it provide context useful to establish 
probabilities of where a grower would fall in the range. While AMS 
understands that growers have expressed concerns regarding the maximum 
variability of pay from the base pay, the financial disclosures in 
Sec.  201.102(d) provide objectively more data points and create a more 
appropriate context for assessment compared to a maximum variance. 
While outside the scope of this rule, AMS is considering other changes 
to the poultry grower payment systems. See June 2022 Advance Notice of 
Proposed Rulemaking on ``Poultry Growing Tournament Systems: Fairness 
and Related Concerns.'' \82\ Therefore, AMS has not required in this 
final rule disclosure of maximum percentage variance from the base pay 
under the contract in the financial disclosures.
---------------------------------------------------------------------------

    \82\ Agricultural Marketing Service, USDA, ``Poultry Growing 
Tournament Systems: Fairness and Related Concerns,'' 87 FR 34814, 
June 8, 2022, available at https://www.federalregister.gov/documents/2022/06/08/2022-11998/poultry-growing-tournament-systems-fairness-and-related-concerns.
---------------------------------------------------------------------------

Grower Variable Costs
    Proposed Sec.  201.100(d)(4) would have required the live poultry 
dealer to provide a summary of the information it collects or maintains 
relating to grower variable costs inherent to poultry production, or 
costs that may be borne by the grower. AMS asked whether the proposed 
rule listed the appropriate items regarding grower variable costs that 
dealers should list and disclose to growers. AMS asked whether it 
should require dealers to disclose, for example, information about 
costs related to compliance with environmental regulations, energy, 
water, and waste disposal and whether the timing of housing upgrades is 
reasonably predictable enough for those costs to be included in grower 
variable costs during the poultry growing arrangement.
    Comment: Several farm bureau commenters suggested AMS consider 
variable costs in different regions, as these costs vary from region to 
region rather than being a ``one size fits all'' disclosure. These 
commenters also said the rule should require disclosure of all 
information a dealer intends to collect, and that all information 
should be housed in an encrypted system and not subject to Freedom of 
Information Act requests to protect the privacy of the grower. A live 
poultry dealer said different farms would have different views on which 
variable costs are inherent in poultry production, offering as examples 
labor and insurance costs. A poultry industry trade association said it 
is inappropriate for a live poultry dealer to be required to collect, 
produce, or certify the accuracy of information about grower variable 
costs, arguing that growers are responsible for understanding and 
controlling their costs of production. A poultry grower said AMS should 
require live poultry dealers to disclose variable costs including 
livestock, housing upgrades,

[[Page 83244]]

financing costs, and any cost related to environmental compliance.
    AMS response: Growers benefit from the disclosure of this 
information on a local or regional level because it will better enable 
them to analyze the potential profitability of their poultry growing 
arrangement or changes thereto. Such information may be available to 
growers through market research services or in some cases USDA 
resources, but to the extent that live poultry dealers have this 
information, it would facilitate growers' ability to access it and, 
consequently, also reduce information asymmetry, which creates risks in 
the contracting process. Based on AMS's experience auditing and 
investigating live poultry dealers, and the observation that dealers 
provide grower allowances from time to time, such as for energy, AMS 
knows that many live poultry dealers already are cognizant of factors 
affecting local and regional cost structures. This rule does not 
require live poultry dealers to collect the information, but rather 
requires that information be disclosed to growers if live poultry 
dealers do in fact collect it. AMS encourages dealers to disclose the 
information at the most granular level that is reasonable and will work 
with live poultry dealers to address questions during implementation. 
No changes to the rule as proposed were made in response to these 
comments.
    Comment: Multiple commenters requested that AMS take action to 
prevent growers from having to bear the costs of environmental 
compliance and waste disposal, saying that these costs are related to 
the system of production the live poultry dealers dictate and should 
not be treated as grower variable costs.
    AMS response: The contractual distribution of liabilities related 
to environmental compliance and waste disposal are outside the scope of 
this rule. To the extent that the costs of environmental compliance and 
waste disposal are grower variable costs under particular poultry 
growing arrangements, they should be disclosed by the live poultry 
dealer under the requirement to disclose information relating to grower 
variable costs. Therefore, AMS made no changes to the rule as proposed 
based on these comments.
    Comment: Several non-profit organizations said AMS should impose a 
recordkeeping requirement to ensure that live poultry dealers cannot 
skirt the rules on grower variable costs by failing to maintain 
information relating to these costs. A meat industry trade association 
said the proposed requirement to produce a summary of information the 
live poultry dealer collects or maintains relating to grower variable 
costs inherent in poultry production is arbitrary and capricious 
because it lacks a cost-benefit justification. The commenter said 
further that dealers may have concerns about sharing such data because 
they use it for confidential or proprietary business purposes, and that 
dealers are not the best source of information on grower variable costs 
since they do not experience such costs themselves. A poultry industry 
trade association commented that live poultry dealers do not 
systematically maintain all this information. Several non-profit 
organizations contended that poultry companies share detailed market 
and grower information with each other through private data collection 
firms.
    AMS response: The final rule adopts the proposal that requires live 
poultry dealers to include in Disclosure Documents a summary of 
information that is collected by live poultry dealers pertaining to 
grower variable costs. The grower variable cost information is general, 
not specific to an individual grower; thus, if a live poultry dealer 
collects this information, they will need to disclose a summary of it.
    Variable costs play a role in grower profitability, and 
understanding the information helps the grower manage cash flow. 
Improved grower cash flow management allows growers to continue in a 
productive capacity, benefiting live poultry dealers as well as 
themselves. These costs are directly attributable to grower production. 
AMS does not understand how summarized information related to these 
costs could be construed as confidential business information. The 
benefits of disclosing these costs to growers outweigh the potential 
business confidentiality issues.
    Often this type of information takes the form of sample cash flow 
budgets or similar documents, which live poultry dealers can use to 
show differences in variable costs between housing specifications, 
allowing growers to assess differences in fixed costs against changes 
in variable costs. In balancing the live poultry dealer burden against 
the grower benefits, AMS sought to ensure growers have access to this 
type of information to the extent that dealers collect it. For growers 
contracted with dealers who do not collect this information, there are 
other resources via the extension service and producer organizations 
that may be able to provide similar types of information. Section 401 
of the Act provides for recordkeeping requirements of this type; no new 
requirements are necessary for this provision.
    This type of information has value to many dealers, and AMS does 
not want to discourage its collection with inflexible requirements. AMS 
will investigate failures to provide these summaries where data is 
collected. Accordingly, no changes to the rule as proposed were made in 
response to these comments.
    Comment: One commenter asked whether grower variable cost 
information has been used collusively, suggesting that AMS and DOJ 
investigate this information and that poultry growers receive access to 
it.
    AMS Response: Whether live poultry dealers have used grower 
variable cost information collusively is outside the scope of this 
final rule, and AMS has made no changes to the rule as proposed based 
on this comment.
Informational Service Contact Information
    Comment: Poultry grower groups expressed support for the proposed 
rule's requirement that the Disclosure Document include current contact 
information for the State university extension service office or county 
farm advisor's office that can provide information about poultry grower 
costs and poultry farm financial management in the grower's geographic 
area. Other commenters from the poultry industry said this information 
is already provided and should not be mandated by regulation.
    AMS response: The Act affords growers the right to understand, 
evaluate, and compare contracts among dealers to inhibit deceptive 
practices. Access to any information about poultry grower costs and 
farm financial management can help growers make informed business 
decisions and avoid their being misled regarding the advisability of 
offered contracts. Based on its experience with record reviews, AMS is 
aware and appreciates that some dealers already include the required 
contact information in their contracts, and wants all growers to have 
access to the same information. Further, the additional burden to 
dealers associated with providing this information is small, as 
described in the costs section of the Regulatory Impact Analysis below. 
Accordingly, AMS made no changes to the rule as proposed based on these 
comments.
Other Financial Disclosures Not Currently Included
    Comment: A State farm bureau commenter said that companies should 
disclose any requirements for a poultry

[[Page 83245]]

grower to make additional capital investments and whether the grower is 
being paid enough to cover these costs. According to the commenter, 
requiring these disclosures are important because equipment and housing 
upgrades typically benefit the live poultry dealer at the expense of 
the poultry grower.
    AMS response: The Act requires all poultry growing contracts to 
contain the following language: ``additional large capital investments 
may be required of the poultry grower or swine production contract 
grower during the term of the poultry growing arrangement or swine 
production contract.'' 7 U.S.C. 197a (b)(1). Additionally, Sec.  
201.102(d)(2) of this rule requires live poultry dealers to provide a 
new Disclosure Document, which includes revenue projections, when 
``housing specifications are modified such that an additional capital 
investment may be required.'' The required revenue projections are 
intended to help growers and their business advisers evaluate the 
proposed capital improvements to determine feasibility of the contract. 
With adequate information, growers should be capable of determining 
whether the projected revenues are likely adequate to cover the costs 
of capital improvements. Dealers, for whom there is a potential 
conflict of interest, should not be expected to advise growers about 
whether projected revenues will cover capital improvement costs. AMS 
agrees with the concerns raised by growers and has addressed them.

F. Other Disclosures

Sale-of-Farm Disclosures
    In proposed Sec.  201.100(c)(3), AMS proposed to require the live 
poultry dealer to include in the Disclosure Document a statement that 
describes the dealer's procedures regarding the potential sale or 
reassignment of the poultry grower's facility. AMS requested comment on 
whether the proposed sale-of-farm policies are adequate to ensure 
transparency and effective grower decision making.
    Comment: Poultry grower groups expressed support for requiring live 
poultry dealers to include a statement regarding the potential sale or 
reassignment of the poultry grower's facility. These commenters stated 
significant financial harm comes from dealers revoking the contract for 
a grower's farm, making it unsellable. Poultry industry groups opposed 
the sale-of-farm disclosures, contending the requirement does not have 
any bearing on how much a grower can expect to earn, is not feasible 
because a dealer must consider numerous factors when deciding to offer 
a poultry growing arrangement to a successive buyer of a farm, and 
would require disclosure of confidential information about dealer 
business practices.
    AMS response: The ability to exit an industry or a particular farm 
location for whatever reason is an important factor in understanding 
and evaluating a contractual relationship. Although a dealer's sale-of-
farm policies may not affect the grower's immediate earnings from 
poultry production, those policies could very well affect the value of 
the grower's capital investment upon retirement, for example if the 
grower anticipating retirement is unable to sell the farm to a 
prospective poultry grower at a fair price. A grower considering a 
poultry growing arrangement must not be deceived into believing they 
would be free to transfer their operations to prospective buyers or 
heirs if the live poultry dealer would not be willing to consider 
offering a poultry growing arrangement to the grower's successor. Thus, 
growers need to understand dealers' policies regarding sale or transfer 
of the farm and poultry growing operation before entering contracts 
with dealers and before encountering future scenarios where they choose 
or are forced to exit poultry farming. Growers informed of dealers' 
policies and procedures will have the opportunity to develop a coherent 
exit strategy.
    Markets become more competitive with lower hurdles for participants 
to enter and exit an industry. If extra profits are to be made, new 
entrants will be attracted. If profits are too low, some participants 
will exit the industry. Greater transparency into the relevant factors 
that live poultry dealers use to evaluate entry and exit from the 
industry will aid both growers and live poultry dealers by providing 
additional certainty to growers about the conditions under which they 
can enter and exit. This will enable growers to better align their 
sale-of-farm choices to the needs of live poultry dealers. More 
information about the conditions to exit the industry allows growers to 
understand, evaluate, and compare contracts, preventing deceptive 
practices.
    AMS does not require that dealers establish a policy and procedure 
where no consistent policy or procedure truly exists in practice. 
However, when there is in fact no policy or procedure --an assertion 
which AMS may scrutinize to ensure compliance with the rule--the lack 
of such a policy and procedure should be disclosed. Similarly, where 
the dealer looks to certain facts and circumstances in practice to 
evaluate sale-of-farm circumstances, those facts and circumstances 
should be disclosed as the dealer's policies and procedures. AMS 
recognizes that dealers must consider a number of factors when deciding 
whether to offer a poultry growing arrangement to a grower's successor, 
and that not every factor may be known at the time the original grower 
is offered a contract. The rule simply requires dealers to accurately 
disclose their policies or procedures as a safeguard against grower 
deception. Thus, in the final rule AMS is maintaining the sale-of-farm 
disclosure requirement.
    Finally, AMS is not requiring the disclosure of dealers' 
potentially sensitive confidential business information, such as 
expansion or reduction strategies. However, to the extent that a 
grower's ability to exit, including through retirement, depends upon 
such factors at any given time, the implications of those factors 
should be disclosed. Accordingly, AMS made no changes to the rule based 
on these comments.
Policies and Procedures Disclosures
    AMS requested comment on whether it should require live poultry 
dealers to disclose policies and procedures for determining whether a 
disaster or sick flock was caused by the dealer or grower, and how a 
grower is compensated under each of these scenarios. It further sought 
comment on whether it should require disclosure of sick-flock risk when 
a dealer maintains policies that do not remove sick flocks from the 
tournament.
    Comment: Multiple commenters suggested AMS include requirements for 
disclosing live poultry dealer policies on dealing with sick or 
diseased flocks, natural disasters, and other depopulation events, as 
well as policies on grower appeal rights and processes. These 
commenters cited the inherent risk of disease spread among confined 
poultry, the potential for growers to face financial impact from 
depopulation events outside of their control, and the effects of low-
quality inputs on tournament performance. Several commenters also 
expressed the need for clarity regarding processes to address issues 
such as feed quality or delivery timing discrepancies.
    AMS response: AMS notes the significant impact on grower 
performance and resulting incomes due to sick or diseased flocks, 
natural disasters, and other depopulation events, e.g., the COVID-19 
pandemic, avian influenza, weather events, or other possibly impactful 
events outside the grower's control. Although the event itself is not 
under the dealer's control,

[[Page 83246]]

the dealer may have and apply formal company policies to management of 
those events. For example, a dealer may follow a company policy of 
increased layout time or special treatment for sick, diseased, or high 
early-mortality flocks. However, growers may be unaware of these 
policies, in which case they have agreed to grow poultry for the dealer 
without fully receiving key information. Dealers are in the best 
position to inform growers about both the disastrous events that may 
occur in connection with poultry growing and how the dealers' policy 
decisions in those situations will impact growers' income. Without up-
front clarity about this information, the dealers' practices may be 
deceptive. AMS has in the past received a range of complaints regarding 
differential treatment between growers under the same live poultry 
dealer in these circumstances. If dealers disclose their formal 
disaster response policies--or the lack of such policies--to growers, 
growers can be better prepared for the possibility that they may be 
impacted differentially in certain situations. Such transparency is 
intended to mitigate potential deception.
    The types of disclosures requested by the commenters will provide 
critical information up front to growers and safeguard against such 
deception. Therefore, this final rule adds a provision at Sec.  
201.102(c)(4) requiring live poultry dealers engaged in the production 
of broilers to disclose their policies and procedures to address key 
events to growers. These events include: increased layout time; sick, 
diseased, or high early-mortality flocks; natural disasters, weather 
events, or other events adversely affecting the physical infrastructure 
of the local complex or the grower facility; other events that could 
result in significant flock depopulation, affecting grower payments; 
feed outages, including outage times; and grower complaints relating to 
feed quality, formulation, or suitability; as well as any appeal rights 
arising out of these events. The policies and procedures that live 
poultry dealers disclose and implement may vary. For example, a live 
poultry dealer may establish an adjusted calculated payment to growers 
due to sick, diseased, or high early mortality flocks, or the dealer 
may have a policy that clarifies an appeals process. AMS does not 
require that dealers establish or follow any one policy and procedure, 
but does require dealer's accurate disclosure and implementation of any 
such policy or procedure as a safeguard against grower deception. Live 
poultry dealers that modify or replace a disclosed policy would be 
required to provide new disclosures to remain compliant with the rule.
    Comment: A commenter recommended that AMS require live poultry 
dealers to disclose both their own animal welfare policies and those of 
the relevant industry trade groups to give poultry growers a more 
holistic view of their obligations when entering into the contract and 
to reduce potential animal welfare concerns.
    AMS response: To the extent live poultry dealers seek to 
incorporate animal welfare and other special growout requirements, such 
as for sustainability or other premium products, those obligations 
would need to be reflected in the contract if they are to be enforced, 
and under current regulations must be provided to the grower before 
entering into the poultry growing arrangement. The Disclosure Document 
does not seek to reproduce the entire contract. Instead, it will 
highlight aspects of the contract or poultry growing arrangement that 
are generally not disclosed or are presented in ways that may be 
misleading or otherwise create risks of deception. The information in 
the Disclosure Document will allow growers to analyze the profitability 
and financial risks of the poultry growing arrangement. If animal 
welfare and other special growout requirements give rise to 
profitability and financial risks, they would be considered variable 
costs for growers and are required to be disclosed in accordance with 
the variable cost disclosure requirements of this rule. In addition, 
the disclosures of average annual gross payments to broiler growers 
would also aid growers in identification of profitability and financial 
risk holistically, which would incorporate impacts from animal welfare 
policies and procedures. Accordingly, AMS made no changes to the rule 
in response to this comment.
Legal Disclosures
    In proposed Sec.  201.100(c)(1), AMS proposed to require the live 
poultry dealer to disclose in the Disclosure Document a summary of 
litigation over the prior 6 years between the live poultry dealer and 
any poultry grower. This summary would include the nature of the 
litigation, the party that initiated the litigation, a brief 
description of the controversy, and any resolution to the litigation. 
AMS also requested comment on whether legal violations or other matters 
that could call into question the financial integrity of the live 
poultry dealer should be disclosed.
    Comment: Poultry grower groups and State attorneys general 
expressed support for the proposed requirement for live poultry dealers 
to disclose a summary of litigation with any poultry grower in the 
previous 6 years. Commenters indicated that access to live poultry 
dealers' ongoing and previous litigation would increase transparency in 
the poultry industry and lead to more economic stability for growers. 
Several commenters also suggested requiring disclosure of additional 
litigation, such as litigation accusing the dealer or any of its 
growers of poultry mistreatment; litigation by employees; litigation 
the dealer has been subject to from DOJ, USDA, or other Federal 
agencies; and litigation brought against corporate successors and 
assignees of the dealer.
    Multiple poultry industry commenters raised concerns about the 
litigation disclosure requirement, including that it is overly broad 
and does not consider the merits of the litigation or the reality that 
cases with little or no merit often settle. Several industry commenters 
also noted the proposed 6-year period for litigation disclosures is 
inconsistent with other disclosure periods in the rule, suggesting AMS 
should limit this period to 5 years.
    AMS response: AMS agrees that disclosure of litigation between the 
live poultry dealer and other poultry growers is an important piece of 
information for growers. AMS does not agree that this disclosure is 
overly burdensome because it is known by the company and may be 
disclosed in other contexts. The litigation disclosure is important for 
appreciating the financial and performance risks that growers may face, 
as litigation reflects the company's approach to compliance and 
performance as they relate to treatment of growers. AMS is unconvinced 
litigation related to animal welfare issues and employees is correlated 
with grower risks and treatment. For grower disclosure purposes AMS 
sees advantages in limiting this disclosure to grower and live poultry 
dealer actions. Similar to the reasoning above, adding governmental 
actions would likely capture controversies unrelated to grower risks 
and treatment, and where overlap exists, very often a private case will 
run parallel to a government case. No changes were made to the rule 
based on these comments.
    However, to improve the uniformity of recordkeeping for this 
disclosure regime, this final rule changes the period for which a 
dealer's litigation must be summarized to 5 years, instead of 6 years 
as originally proposed. Because contracts and grower relationships 
evolve over time, litigation

[[Page 83247]]

history covering the prior 5 years would provide information related to 
the most current contracts and contract terms. Requiring additional 
disclosures regarding litigation beyond a 5-year period would be overly 
burdensome and costly to dealers.
    Comment: A poultry grower group and an individual said AMS should 
require disclosure of any past government investigations, charges, 
arrests, or convictions of a dealer or its growers or agents for 
violations of animal-welfare-related law, such as State laws against 
animal cruelty, neglect, or abandonment.
    AMS response: While a live poultry dealer's compliance with animal 
welfare-related laws could be relevant to the financial risks of the 
poultry growing, AMS does not agree that these additional suggested 
disclosures are necessary. AMS is not presently aware of such a pattern 
or practice of intentional or reckless noncompliance with animal 
welfare standards and makes no changes to the proposed rule based on 
these comments.
Grower Appeals
    Comment: Multiple commenters representing poultry growers 
recommended that AMS require live poultry dealers to maintain an 
appeals process for growers to report any issues that affect how their 
flocks perform or how their pay is calculated. They also recommended 
the Disclosure Document disclose the details of the dealer's appeals 
process, including the method for submitting an informal appeal of a 
live poultry dealer's contract performance and how these appeals will 
be resolved. The commenters said such requirements would increase 
fairness and transparency for poultry growers.
    AMS response: As described in the preceding comment summaries, this 
final rule requires disclosure of live poultry dealers' policies and 
procedures regarding certain matters or circumstances, including any 
grower rights to challenge or appeal dealer determinations arising from 
those matters or circumstances. This final rule also requires dealers 
to disclose policies regarding growers' appeals procedures if they 
exist. AMS supports the creation of appeals policies; however, 
mandating their creation is outside the scope of this rulemaking. 
However, if a dealer has no such policies or procedures, this should be 
disclosed. Understanding whether and how growers may report issues 
affecting flock performance, or to challenge or appeal dealer 
determinations will aid growers in decision making and reduce confusion 
that may arise in times of disease or other disaster, or from 
uncertainty or the exercise of discretion by live poultry dealers and 
their agents in the field.
    Accordingly, in response to comments, AMS added a provision in 
Sec.  201.102(c)(4) of this final rule that requires live poultry 
dealers engaged in the production of broilers to disclose their 
policies and procedures on a number of specific matters or 
circumstances and to disclose any policies regarding grower appeal 
rights and processes arising out of these matters or circumstances.
Other Comments About Disclosures
    Comment: Several organizations representing poultry growers 
suggested AMS require other types of disclosures that would provide 
more transparency for current and prospective poultry growers. These 
commenters said AMS should require live poultry dealers to prominently 
disclose the risk of entering a poultry contract in that area if there 
are fewer than three options. Some commenters suggested AMS should 
alert poultry growers to the business risks proposed by regional 
monopsony and provide integrator options within a 50-mile radius of the 
prospective or current poultry grower's facility.
    AMS response: AMS does not agree that further warnings are needed 
at this time, as the required disclosures aim to give poultry growers 
the information needed to understand the risks of entering into a 
poultry growing arrangement in any market, including where there are 
only a small number of dealers. No changes to the rule were made in 
response to these comments.
    Comment: Some commenters said a live poultry dealer should be 
required to disclose known health risks associated with birds that the 
live poultry dealer has supplied, the expected pre-slaughter mortality 
rate of the birds based on the live poultry dealer's experience with 
similar growers, the most common causes of pre-slaughter death, and 
other aggregated health data known to the dealer.
    AMS response: AMS is maintaining without change in the final rule 
the proposed requirement that live poultry dealers disclose known flock 
health impairments. AMS does not agree with comments that disclosure of 
an expected mortality rate or information about the causes of pre-
slaughter death or other aggregated health data should be included. The 
expected mortality rate is not data a dealer can readily determine, and 
the benefit to growers is not clear. This final rule requires live 
poultry dealers to include in the Disclosure Document contact 
information for local extension service offices that may be able to 
provide the type of information commenters seek. No changes to the rule 
as proposed were made based upon this comment.
    Comment: A commenter urged AMS to require disclosure of any 
poultry-welfare advocacy campaign launched against the live poultry 
dealer in the previous 6 years, along with a summary of the types of 
animal health and welfare-related complaints lodged against either the 
dealer or its growers. This commenter also recommended that AMS require 
dealers to disclose their animal health and welfare policies in pre-
contract disclosures, saying that such policies affect potential grower 
earnings. The commenter stated further that health and welfare policy 
and litigation disclosure would let prospective growers make informed 
decisions about legal and reputational risk and potential animal 
suffering they might face.
    AMS response: It would be difficult for AMS--and possibly even for 
live poultry dealers--to determine what constitutes an animal welfare 
campaign or whether such a campaign has any validity. Presumably, such 
campaigns launched against live poultry dealers, including any 
associated litigation, are highlighted in the public media and 
available to interested growers. Whether or how such campaigns should 
be disclosed to growers is not contemplated in this final rule, which 
focuses on the information AMS knows to be essential for informed 
grower decision making.
    Most live poultry dealers require growers to follow prescribed 
animal welfare guidelines or policies, and dealers must include those 
policies in the poultry growing contracts if growers are to be held 
accountable for them. To minimize additional burden on live poultry 
dealers, the final rule requires the Disclosure Document to highlight 
only that contract information AMS finds to be most essential to grower 
decision making related to poultry grower contracting to ensure those 
provisions are transparent for growers. Under Sec.  201.102 of the 
final rule, growers are provided with the Disclosure Document 
simultaneously with the offered poultry growing arrangement, and 
growers are given adequate time to review both prior to entering into 
or renewing contracts.
    Accordingly, AMS made no changes to the proposed disclosure 
requirements based on this comment.

G. Governance and Certification

    The proposed rule included provisions on governance and 
certification in Sec. Sec.  201.100(f) and (g).

[[Page 83248]]

AMS proposed to create a new Sec.  201.100(f) to require live poultry 
dealers to establish, maintain, and enforce a governance framework that 
is reasonably designed to ensure the accuracy and completeness of the 
Disclosure Document, and to ensure that live poultry dealers comply 
with all their obligations under the Act and its regulations. This 
proposed framework included audits and testing, as well as reviews of 
an appropriate sampling of Disclosure Documents by the principal 
executive officer or officers. AMS also proposed to require officers of 
the live poultry dealer's company to certify that the company complies 
with the governance framework requirement and that the Disclosure 
Document is accurate and complete. In addition, AMS proposed to require 
live poultry dealers to include a signature page in the Disclosure 
Document containing a statement informing current and prospective 
growers of the potential for violations. The live poultry dealer would 
be required to obtain a grower's dated signature on the signature page 
and to retain a copy of the dated signature page for 3 years following 
expiration, termination, or non-renewal of the poultry growing 
arrangement.
    In the proposed rule, AMS invited comments on whether the proposed 
governance structure is appropriate and sufficient for ensuring the 
accuracy of information provided in the Disclosure Document, whether it 
is appropriate for dealers, and whether there were other ways it could 
sufficiently ensure the completeness and accuracy of the Disclosure 
Document. AMS also invited comments on whether it should collect 
disclosure data and, if so, how it might use such data to enhance 
compliance and accuracy and monitor for possibly deceptive practices. 
AMS also proposed to require the principal executive officer or 
officers of the live poultry dealer's company to certify accuracy and 
compliance and to require dealers to obtain a poultry grower's dated 
signature to show receipt.
Governance Structure Adequacy for Accurate Information
    Comment: Several commenters suggested USDA conduct audits, with 
some commenters also suggesting the audits be random or unannounced. 
These commenters indicated conducting audits would help ensure that 
live poultry dealers make accurate disclosures.
    AMS response: AMS agrees that regular compliance reviews are 
important tools to ensure compliance with the Act and regulations 
thereunder. Regular AMS audits and compliance reviews encourage live 
poultry dealers to put in place the oversight and internal procedures 
necessary to ensure compliance. Audits and compliance reviews may also 
enhance compliance by catching problems at an early stage, before they 
become violations that result in larger scale impacts. They also 
enhance AMS's familiarity with industry practices, which enables more 
effective regulatory guidance and enforcement. AMS already conducts 
regular reviews of live poultry dealers' compliance with regulations 
under the Act--as reported in AMS's Packers and Stockyards Division 
Annual Report--and AMS intends to incorporate compliance with this 
final rule into those existing regular audits.\83\ Currently, a portion 
of those compliance reviews are unannounced. Therefore, AMS made no 
changes to the proposed rule based on these comments.
---------------------------------------------------------------------------

    \83\ U.S. Department of Agriculture, Agricultural Marketing 
Service--Packers and Stockyards Division. (2020). P&SP 2020 Annual 
Report. Retrieved from https://www.ams.usda.gov/sites/default/files/media/PackersandStockyardsAnnualReport2020.pdf.
---------------------------------------------------------------------------

Governance Structure Burden on Dealers
    Comment: Poultry industry commenters expressed concern about the 
necessity and costs of the proposed governance structure and its 
potential for creating liability issues. For instance, commenters noted 
that live poultry dealers already are required to meet fair dealing 
requirements under the Act and have incentive to provide accurate 
information to current or potential growers, making the proposed 
provisions redundant. Commenters asserted the proposed scheme would 
take away dealer flexibility to implement compliance programs that meet 
their needs. Commenters also state that the ``principal executive 
officer or officers'' of many companies are remote from day-to-day 
responsibilities related to the information proposed for inclusion in 
the Disclosure Document and are thus not in a position to certify it. 
Commenters suggested that AMS underestimated the costs of the proposed 
governance framework because it did not take into account its 
requirement that firms evaluate their obligations under all regulatory 
requirements contained in the Act rather than just those contained in 
the proposal. An industry association asserted the agency cannot point 
to an authority within the Act that allows it to impose a ``burdensome 
and unnecessary governance and audit framework'' on live poultry 
dealers. This commenter also argued the proposed governance 
requirements are arbitrary and capricious as they reflect a fundamental 
lack of understanding of the management structure and governance of 
live poultry dealers.
    AMS response: Section 401 of the Act requires every poultry dealer 
to ``keep such accounts, records, and memoranda as fully and correctly 
disclose all transactions involved in his business.'' Under the Act, 
the Secretary may ``prescribe the manner and form in which such 
accounts, records, and memoranda as fully and correctly disclose all 
transactions involved in his business.'' The proposed rule requires 
that poultry dealers disclose important information to growers to 
prevent deception. Information furnished by dealers under the rule must 
be accurate and complete. In order to ensure that dealers can provide 
such required information accurately and continuously, AMS prescribes 
that dealers must at minimum establish a reasonably designed underlying 
governance framework and processes. Without such an established 
framework and processes, dealers would be providing this information to 
growers in an inconsistent manner that would increase the likelihood of 
inaccuracy and incompleteness and hence increase deception.
    In building on longstanding, existing requirements under the Act to 
maintain books and records, AMS recognizes that additional steps are 
necessary owing to the more complex disclosure process contemplated by 
this final rule and the reliance that growers will place on it in 
avoiding deception. To help strike the right balance between stringency 
in the controls necessary to achieve accuracy and the flexibility 
necessary to accommodate diverse business operations, AMS takes note of 
the experience of--and mandates governing--other Federal regulatory 
agencies engaged in setting requirements for companies to provide 
disclosures to market participants that depend upon them. It also 
considers similar compliance mandates, such as the certification 
mandates set forth under the Sarbanes-Oxley Act of 2002 (section 302) 
and the provisions of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act of 2010 named after former Federal Reserve chairman Paul 
Volcker, commonly known as the Volcker Rule (section 619). In the case 
of those financial and market regulatory reforms, Congress and 
regulators saw it necessary to enhance the accountability of senior 
officers to achieve the goal of effective and reliable disclosure and 
compliance by larger companies for the benefit of smaller, more diffuse 
market

[[Page 83249]]

participants. Large-scale financial scandals highlighted the 
insufficiency of relying on generic fair dealing or liability 
requirements or other market-driven incentives to provide accurate 
information. Criminal and civil price fixing in the poultry sector, 
including a guilty plea in 2021 by one of the largest poultry 
processors and civil consent decrees relating to a conspiracy to 
suppress wages under Section 1 of the Sherman Act, 15 U.S.C. 1, and 
deception under the Packers and Stockyards Act,\84\ underscores the 
presence of similar risks in the poultry sector. The sizable imbalance 
of power between poultry processors and growers--including as reflected 
in the longstanding series of concerns around retaliation--further 
underscores the need for heightened accountability requirements set 
forth preemptively through a governance framework as provided for in 
this rule.\85\
---------------------------------------------------------------------------

    \84\ Plea Agreement: U.S. v. Pilgrim's Pride Corp., Feb. 23, 
2021, 20-cr-00330-RM, available at https://www.justice.gov/atr/case-document/file/1373956/download. Consent Decree: U.S. v. Cargill Meat 
Solutions. Corp., et al. (Sanderson Farms, Inc., Wayne Farms, LLC), 
July 25, 2022, 1:22-cv-01821-ELH, available at https://www.justice.gov/opa/pr/justice-department-files-lawsuit-and-proposed-consent-decrees-end-long-running-conspiracy.
    \85\ On the other hand, as they facilitate packers and live 
poultry dealers' control across the supply chain, contracts can 
shift certain risks onto or between producers. See, e.g., Michael 
Kades, ``Protecting Livestock Producers and Chicken Growers,'' 
Washington Center for Equitable Growth (May 5, 2022), available at 
https://equitablegrowth.org/research-paper/protecting-livestock-producers-and-chicken-growers/; Steven Y. Wu and James MacDonald, 
``Economics of Agricultural Contract Grower Protection 
Legislation,'' Choices, Third Quarter, 2015: 1-6, available at 
http://choicesmagazine.org/choices-magazine/theme-articles/current-issues-in-agricultural-contracts/economics-of-agricultural-contract-grower-protection-legislation; Department of Justice. ``Competition 
and Agriculture: Voices from the Workshops on Agriculture and 
Antitrust Enforcement in our 21st Century Economy and Thoughts on 
the Way Forward.'' May 2012. Available at https://www.justice.gov/atr/page/file/1534736/download; Mary K. Hendrickson, et al., ``The 
Food System: Concentration and Its Impacts,'' A Special Report for 
Farm Family Action Alliance, May 2021, available at https://farmaction.us/concentrationreport/; C. Robert Taylor, ``Harvested 
Cattle, Slaughtered Markets,'' April 27, 2022, available at https://www.antitrustinstitute.org/work-product/aai-advisor-robert-taylor-issues-new-analysis-on-the-market-power-problem-in-beef-lays-out-new-policy-framework-for-ensuring-competition-and-fairness-in-cattle-and-beef-markets/; Peter Carstensen, ``Buyer Power and the 
Horizontal Merger Guidelines: Minor Progress on an Important 
Issue,'' 14 U. Pa. J. Bus. L. 775 (2012), available at https://repository.law.wisc.edu/s/uwlaw/item/29746.
---------------------------------------------------------------------------

    The role of the governance framework required by this final rule is 
to ensure that the company has in place specific steps that it will 
take to comply with this rule. The governance framework is intended to 
be strict enough to achieve its intended compliance goal of ensuring 
accurate and reliable disclosures that are necessary for growers to 
understand, evaluate, and compare contracts and operational risk. Yet 
AMS also intended for the requirement to be flexible enough to provide 
a framework that works for differently situated businesses. To ensure 
they are flexible yet effective measures to promote accuracy in the 
provision of disclosures to growers, AMS included language in the rule 
providing that the governance framework should be ``reasonably 
designed'' to audit the required disclosures and ensure compliance with 
obligations under the Act. Consistent with other regulatory frameworks 
that ask for forward-looking statements in disclosures, such as the 
FTC's Franchise Rule and the Federal securities laws, AMS also intended 
for forward-looking projections to be subject to less stringent 
standards of precision and verification than past or present factual 
matters. For example, the assumptions or beliefs that form reasoned 
bases of the projections need to be accurately disclosed, reasonable, 
and then reasonably used to make the projections.\86\ Also consistent 
with the approach of other regulatory regimes with respect to internal 
controls, one goal of the governance provisions is to ensure that live 
poultry dealers adopt and follow processes that are appropriately 
tailored to the scope and nature of their operation.
---------------------------------------------------------------------------

    \86\ See generally 15 U.S.C. 78u-5(c); 17 CFR 229.303.
---------------------------------------------------------------------------

    However, AMS determined that the requirement in proposed Sec.  
201.100(f)(2) for the principal executive officer or officers to 
certify the governance framework and the accuracy of the Disclosure 
Document adequately covers the intended requirement for officers of 
this level to be focused on the effectiveness of the governance 
framework. AMS concluded that the level of detail in proposed Sec.  
201.100(f)(1)(i) about the Disclosure Document audit process was not 
necessary, particularly as AMS seeks to balance the need to ensure 
reliability of these statements with the burden on the principal 
executive officers with respect to particular details of the governance 
process. Therefore, AMS removed from the final rule the requirements 
proposed in Sec.  201.100(f)(1)(i) for principal executive officers to 
audit, test, and review an appropriate sampling of Disclosure 
Documents. AMS underscores that the accuracy of the information 
disclosed (including the reasonableness of the projections based on the 
honest and accurately disclosed assumptions) and the design and 
compliance with the governance framework (including the reasonableness 
of its design and compliance with it) remain fully enforceable under 
the final rule. AMS will also monitor implementation and expects to 
examine governance frameworks to assess their effectiveness in 
delivering accuracy and reliability of information to growers. In the 
event that information is found to be inaccurate or incomplete, AMS 
will investigate. Violations may result in issuance of a Notice of 
Violation or referral to the Attorney General of the United States for 
prosecution pursuant to Section 404 of the P&S Act, 7 U.S.C. 224. 
Growers may also bring private cases in response to inaccurate or 
misleading disclosures under the Act or under other laws.
Other AMS Actions To Ensure Completeness and Accuracy
    Comment: State attorneys general contended the proposed audit 
process does not go far enough, stating that the stipulation in 
proposed Sec.  201.100(f) that poultry processors establish a 
governance framework might present a problem by giving processors too 
much control over the governance structure. The State attorneys general 
recommended mandating either government or external auditor involvement 
in a company's audit and testing program, saying this step would 
increase the likelihood that the program is rigorous and that the 
financial disclosures provide useful and accurate information to 
poultry growers. The commenters also suggested strengthening the 
language in proposed Sec.  201.100(f) to provide clearer requirements 
for governance systems and increase live poultry dealer accountability 
to USDA and to State attorneys general for the initial years after 
their implementation. Poultry grower organizations urged AMS to be more 
specific about the procedures it will use to ensure the completeness 
and accuracy of the disclosure data, suggesting that the final rule 
should include more details on the auditing process to ensure accurate 
information and prevent circumvention by live poultry dealers. 
Commenters recommended measures such as specifying the minimum number 
of live poultry dealer audits USDA will conduct per year and requiring 
dealers to submit Disclosure Documents annually to PSD. Several 
commenters also mentioned other resources that might be a model for 
governance actions. A poultry industry trade association said AMS 
should simplify and clarify the requirements for a governance 
framework, including

[[Page 83250]]

providing details on what ``reasonably designed'' means and on how AMS 
will inspect the disclosure and auditing framework.
    AMS response: In establishing a governance framework, AMS sought to 
balance rigor in internal controls and audit systems so that growers 
receive reliable information with flexibility in design to accommodate 
compliance by live poultry dealers with different scales and types of 
operations. As discussed above, AMS took note of the approach of other 
regulatory frameworks \87\ that mandate disclosures and sought to 
tailor approaches to compliance to the particular circumstances of the 
poultry markets and risks relating to these markets. A ``reasonably 
designed'' framework depends on the particular facts and circumstances 
of the poultry company and its growers, with larger, more complex 
processors adopting more comprehensive systems appropriate to the scope 
of their operations. AMS will evaluate the effectiveness of the 
governance framework in part through examining how accurate and 
comprehensive the disclosures are, and may also examine a dealer's 
internal controls and other factors relevant to the facts and 
circumstances of the dealer, such as its recent track record of 
compliance with relevant laws and regulations.
---------------------------------------------------------------------------

    \87\ As noted above, AMS has looked to the certification 
mandates set forth under the Sarbanes-Oxley Act of 2002 (section 
302) and the provisions of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act of 2010 named after former Federal Reserve 
chairman Paul Volcker, commonly known as the Volcker Rule (section 
619).
---------------------------------------------------------------------------

    AMS views the governance framework as an essential element of 
enforceability, as it will provide a framework including an external 
audit that will strengthen the accuracy of internal processes. The 
governance framework does not in any way absolve the live poultry 
dealer of its obligations to provide accurate disclosures to comply 
with the rule's requirements, which are designed to correct deception 
against growers. Rather, the governance framework is intended to 
strengthen those obligations upfront before a disclosure failure 
occurs.
    Governance frameworks, as a general matter, are not novel. Publicly 
listed companies--which several of the largest live poultry dealers 
are--must already maintain a range of internal controls related to 
their audit and disclosure functions.\88\ The reasons why public-facing 
companies must maintain internal control regimes to ensure the quality 
of their disclosures are similar to why live poultry dealers that are 
subject to this rule must maintain a governance framework--to ensure 
that the disclosures to growers are reliable.
---------------------------------------------------------------------------

    \88\ ``Management's Reports on Internal Control Over Financial 
Reporting and Certification of Disclosure in Exchange Act Periodic 
Reports,'' SEC Release No. 33-8238 (June 5, 2003) (``SEC Final Rule 
2003,'' which required disclosure of material weakness and other 
assessments in annual reports for publicly traded securities).
---------------------------------------------------------------------------

    AMS also intends to improve compliance over time through compliance 
reviews, industry training, and other mechanisms, including enforcement 
where necessary. Repeated compliance violations may necessitate 
proportionate agency enforcement and deterrence actions. In most 
circumstances, and as would expected to be the case in the enforcement 
of good faith compliance with this final rule, AMS initially delivers a 
Notice of Violation that provides the live poultry dealer with the 
opportunity to engage with AMS around the nature of the violation and 
take compliance steps necessary to cure the violation before formal 
remedial actions are commenced. AMS also has provided, in this final 
rule and the associated form, additional detail regarding the methods 
for calculating certain disclosure data, which we believe will enhance 
completeness and accuracy of data.
AMS Collection of Disclosure Data
    Comment: In response to AMS's request for comments on whether it 
should collect disclosure data and how it might use such data to 
enhance compliance and monitor for potential deceptive practices, 
poultry grower groups and farmers unions expressed support for data 
collection. The commenters said this data would help inform producers, 
lenders, and regulatory authorities, given the industry's consolidation 
and geographic monopolistic environments. Commenters recommended AMS 
require dealers to annually disclose the data they are calculating and 
disclosing within the Disclosure Document, especially regarding grower 
incomes and grower cost. The commenters also suggested that USDA 
dedicate staff to analyzing this data in the context of industry 
consolidation and fair competition to identify patterns early on that 
may require corrective or enforcement action.
    AMS response: AMS agrees that data-driven approaches can be 
expected to provide valuable information for monitoring compliance with 
this rule and with other rules under the Act. AMS notes that it has the 
authority to request Disclosure Document data under existing 
requirements in the Act. AMS will further consider the extent to which 
some Disclosure Document data may be incorporated into annual report 
requirements to AMS. Thus, there is no need for this rule to contain a 
particular requirement for submitting the data to AMS. Therefore, AMS 
made no changes to the rule as proposed based on these comments.
Requirement of Dealers To Certify Documents
    Comment: Several poultry and meat industry trade associations urged 
AMS to omit the requirement for certification by an executive officer. 
One commenter argued that expecting this officer to be in a position to 
certify the required information is unreasonable because the principal 
officer or officers of many companies have responsibilities for many 
areas in addition to live poultry and contract with thousands of 
growers, and because much of the information produced in conjunction 
with a Disclosure Document would be maintained at the local poultry 
complex level with multiple layers of management between that level and 
the ``principal executive.'' Another commenter said a poultry grower 
could have recourse if an agreement made deceptive statements 
regardless of whether someone certifies the information and that 
including this requirement appears to be motivated by an effort to 
establish individual liability for what should be a commercial 
contracting issue.
    AMS response: AMS refers to the response provided earlier on the 
governance framework and the rationale for chief executive officer 
(CEO) certification. In multiple circumstances, Congress and regulators 
saw it necessary to enhance the accountability of senior officers to 
achieve the goal of effective and reliable disclosure and compliance by 
larger companies for the benefit of smaller, more diffuse market 
participants. CEOs set the ``tone at the top,'' which is critical for 
fostering a culture of compliance at companies.\89\ Additionally, AMS 
already requires signatures on required annual reports (see 9 CFR 
201.97), typically by the CEO or another high-ranking official, 
creating a precedent for the certification as proposed. In addition, 
CEOs may rely on sub-certifications by relevant officers

[[Page 83251]]

or senior officials, thus reducing the burden CEOs may face while still 
creating the appropriate level of executive engagement to underscore 
the importance of compliance and address any issues early and 
effectively. AMS agrees that recourse exists against live poultry 
dealers for deceptive practices under the Act and for violations of the 
final rule regardless of the certification. Violations may result in 
issuance of a Notice of Violation or referral to the Attorney General 
of the United States for prosecution pursuant to Section 404 of the 
Act, 7 U.S.C. 224. Growers may also bring private cases in response to 
inaccurate or misleading disclosures or bait-and-switch tactics under 
the Act or under other laws. The purpose of the governance framework 
and certification requirement is to minimize the need to rely on legal 
recourse in order to obtain accurate, reliable disclosure, and thus to 
enhance the reliability of the information provided to growers at the 
outset. Therefore, AMS made no changes to the rule as proposed based on 
these comments.
---------------------------------------------------------------------------

    \89\ See, e.g., William C. Dudley, ``Enhancing Financial 
Stability by Improving Culture in the Financial Services Industry,'' 
Federal Reserve Bank of New York, October 20, 2014, available at 
https://www.newyorkfed.org/newsevents/speeches/2014/dud141020a; 
Group of Thirty, ``Banking Conduct and Culture: A Call for Sustained 
and Comprehensive Reform,'' 2015, available at https://group30.org/publications/detail/166.
---------------------------------------------------------------------------

Requirement of Growers To Sign Documents
    Comment: Live poultry dealers noted that there may be instances in 
which obtaining a grower signature is not possible, such as grower 
unavailability or refusal to sign. These commenters indicated it is 
appropriate to have other means available for the live poultry dealer 
to verify delivery of the Disclosure Document to the grower in these 
instances.
    AMS response: AMS recognizes that some growers may not sign the 
form verifying that they received the Disclosure Document, for reasons 
unrelated to whether the live poultry dealer made reasonable efforts to 
obtain such signature. AMS intends to place the requirement for 
disclosure and delivery on the live poultry dealer, and not on the 
grower. If the grower refuses to sign the Disclosure Document, such 
decision should not affect whether the live poultry dealer has 
fulfilled its obligations. Accordingly, in the final rule, AMS revised 
the delivery verification provision in Sec.  201.102(g)(2) to allow 
live poultry dealers engaged in the production of broilers to obtain 
alternative documentation to evidence delivery and that best efforts 
were used to obtain grower receipt. The rule does not limit the mode of 
delivery, whether by regular mail, certified mail, registered mail, 
overnight mail, email, facsimile, or personal service, provided that 
the dealer obtains and maintains evidence that the grower or 
prospective grower received the Disclosure Document in the required 
timeframe and that best efforts were made to obtain grower receipt. AMS 
expects that best efforts will include personal communications with the 
grower. The revised provision requires live poultry dealers engaged in 
the production of broilers to document and certify in their records 
that delivery occurred, as well as by what method the delivery took 
place.

H. Contract Provisions on Variables Controlled by Live Poultry Dealer

    Current Sec.  201.100(c) specifies the contents of live poultry 
dealer contracts with poultry growers. This subsection requires dealers 
to specify the duration of the contract and conditions for its 
termination by each of the parties, all terms relating to the poultry 
grower's payment, and information about a performance improvement plan 
for the grower, if one exists. In the proposed rule, AMS proposed to 
redesignate Sec.  201.100(c) as Sec.  201.100(i) and amend it to 
require dealers to specify the minimum number of placements to be 
delivered to the grower's farm annually in each year of the contract, 
as well as the minimum stocking density of each placement. In the final 
rule, the existing requirements at Sec.  201.100(c) are retained for 
all live poultry dealers, while the minimum placement and stocking 
density requirements are at Sec.  201.102(h) and apply only to live 
poultry dealers engaged in the production of broilers.
Utility of Proposed Requirements in Addressing Need for Transparency
    Comment: Several live poultry dealers and industry groups expressed 
opposition to the proposed requirements to specify a minimum number of 
flocks annually and a minimum stocking density for each flock. These 
commenters contended that requiring these minimum values would make it 
harder to adjust supply chains for factors largely outside of the 
parties' control, take away dealer flexibility to adjust production 
plans as market conditions change, and lead to substantial costs 
associated with changing existing contracts to incorporate this 
requirement. A commenter suggested that the Disclosure Document provide 
tentative projections regarding flock placements rather than guaranteed 
minimums. Conversely, growers and grower groups expressed support for 
these guaranteed minimums, saying they would allow for more accurate 
and predictable income projections.
    AMS response: AMS intends for disclosure of these guaranteed 
minimums to improve the competitive environment for poultry growers by 
allowing growers to make decisions based on minimum flock offerings 
disclosed by different dealers. AMS recognizes that dealers may wish to 
adjust flock placements or density based on external factors, and this 
rule does not prevent such adjustments. The rule also does not prohibit 
setting guaranteed minimums that are lower than projected placements to 
allow for such adjustments. Indeed, should dealers wish to indicate 
that the guaranteed value is zero, this rule would not prohibit such a 
disclosure, provided that such disclosure is accurate and not 
misleading. The purpose of this rule is to provide the information that 
growers need regarding flock placements and density to enable them to 
make decisions regarding their farm operations and manage risks, and 
AMS underscores the views of growers, farm bureaus, and others that 
minimum flock placements and stocking density are valuable to growers. 
Minimum flock placements are different from tentative placements, in 
that they provide growers with information well in advance of the 
actual placements, which aligns better with longer-term obligations 
that farmers must make with respect to borrowing and capital 
investment, equipment investment, labor contracts, and other longer-
term arrangements on the farm. Therefore, AMS made no changes to the 
rule as proposed based on these comments.
Alternative Approaches
    Comment: Several non-profit organizations said that AMS should 
require disclosure of the maximum amount of money that could be added 
to or deducted from the contract's stated base price within the live 
poultry dealer's tournament ranking formula in addition to the 
guaranteed minimum placement number and stocking density of flocks, 
saying this information would be useful in allowing poultry growers to 
better predict their income based on the minimum flock placement and 
stocking density guarantees.
    AMS response: The poultry growing arrangement will dictate maximum 
pay variance to the extent it exists. Because additions and deductions 
from base pay are generally associated with deviations from average 
performance, the range of payments for individual settlements can 
fluctuate. That is, to the extent that a minimum and maximum exists, 
its occurrence is rarely observed. For the purposes of projection, the 
disclosure of payment quintiles or mean and standard deviation provided 
in Sec.  201.102(d) provides substantially more data points useful to 
assess payment variance

[[Page 83252]]

compared to maximum and minimum pay terms, as quintiles show pay broken 
down into five bands. Live poultry dealers will only report a mean and 
standard deviation if there are nine or fewer growers. This reporting 
will provide a measure of an expected outcome and an expected 
volatility around that outcome. The minimum and maximum pay terms would 
not give an expected outcome or volatility measure. AMS acknowledges 
some growers have expressed concerns about excessive pay variability. 
As noted above, AMS is considering rulemaking for the purpose of more 
direct changes to the poultry grower payment systems. That is outside 
of the scope of this rule. Therefore, AMS made no changes to the rule 
as proposed based on these comments.
    Comment: A farm bureau suggested AMS conduct additional rulemaking 
in relation to stocking density to account for changes in target 
weights after birds have been placed, citing examples of poultry 
growers who were stocked at an appropriate density but lost significant 
income after adjustments in bird pick-up timing. This commenter and 
other farm bureaus supported grower compensation for loss of income 
when target weights are modified after placement.
    AMS response: The issue raised by the commenters is a concern in 
that the growers relied on the contract terms when entering the 
agreement and subsequent revisions to target weights result in 
financial losses that presumably would not have occurred under the 
original terms. The remedy proposed by the commenters, however, is not 
within the scope of this rule, which is focused on increasing 
transparency in live poultry dealer communications with poultry 
growers. If a live poultry dealer deceives a grower through a ``bait 
and switch'' agreement as described, remedies may exist through 
enforcement by the USDA and DOJ, or in private actions by the grower in 
Federal court. AMS encourages growers to report specific instances of 
potential occurrences directly to AMS. Growers may also file a 
complaint at farmerfairness.gov or by calling 1-833-DIAL-PSD (1-833-
342-3773) if they suspect a violation of the Act or any other Federal 
law governing fair and competitive marketing, including contract 
growing, of livestock and poultry. Therefore, AMS made no changes to 
the rule as proposed based on these comments.
Other Comments About Contract Provisions
    Comment: A poultry grower group suggested AMS require live poultry 
dealers to provide enough flocks to allow poultry growers to pay their 
debts and be profitable. The commenter also suggested AMS require 
contracts with growers to extend to the term of the loan. Several 
farmers unions recommended that AMS modify the contract provisions to 
clearly state what recourse poultry growers have under the Act if live 
poultry dealers fail to meet the contract terms. A farm bureau noted 
that under the current contracting system, companies promise profits to 
entice growers into contracts that offer little or no guarantee for 
success or profit, and growers have limited clout to negotiate for 
better contract terms or treatment. This commenter explained that 
grower contracts are typically flock to flock with no commitments 
regarding future flocks, number of birds per flock, quality of birds 
placed, and feed delivered, and that they allow companies to cancel 
contracts at will. Instead, the commenter contended that contracts 
should last as long as the commitment the grower has with their 
financial institution. A poultry grower also recommended that the 
proposed rule require dealers to present contracts that endure for the 
entirety of a grower's loan to give growers more security when deciding 
to invest start-up capital and to remedy issues that arise when a 
dealer refuses to extend a contract unless a grower makes certain 
modifications.
    AMS response: AMS acknowledges these concerns raised by growers. As 
noted above, AMS is considering rulemaking for the purpose of more 
direct changes to the poultry grower payment systems. AMS also welcomes 
growers and others to contact us directly regarding these matters. 
Growers may file a complaint at farmerfairness.gov if they suspect a 
violation of the Act or any other Federal law governing fair and 
competitive marketing, including contract growing, of livestock and 
poultry. However, these items are outside the scope of this disclosure-
based regime, which focuses on increasing transparency in live poultry 
dealer communications with poultry growers, not on requiring contracts 
to include specific guarantees or establishing requirements related to 
their duration. Therefore, AMS made no changes to the rule as proposed 
based on these comments.

I. Transparency Requirements for Poultry Grower Ranking Systems

    AMS proposed to create a new Sec.  201.214--Transparency in poultry 
grower ranking pay systems (Sec.  201.104--Disclosures for broiler 
grower ranking system payments--in this final rule) specifying the 
recordkeeping and disclosure requirements for live poultry dealers 
using a poultry grower ranking system to calculate grower payments.
Recordkeeping and Maintenance
    AMS proposed in Sec.  201.214(a) to require live poultry dealers 
who calculate payments under poultry grower ranking systems to produce 
and maintain records showing how certain inputs were distributed among 
participants. In proposing these recordkeeping and maintenance 
requirements, AMS intended to ensure that USDA or any other party with 
the proper legal authority can collect records for review during an 
investigation or legal action. In the proposed rule, AMS proposed to 
require dealers to retain records relating to the distribution of 
inputs to tournament participants for 5 years. AMS invited comments 
about whether this record maintenance period is appropriate. AMS also 
requested comments on the burdens these recordkeeping requirements 
create for dealers.
    Comment: Groups representing poultry growers expressed support for 
a 5-year retention period for records, suggesting such record retention 
would allow for a higher degree of accountability and compliance 
enforcement in disputes over unfair distribution of inputs by live 
poultry dealers. These commenters contended burdens on dealers would be 
minimal, as records would be maintained electronically, and the 
industry already provides much of the required information to shared 
data collection services. A live poultry dealer argued that some 
information AMS proposed for dealers to provide is sensitive and 
proprietary, saying that, for example, grower payments may provide 
information about costs and live-side operations; breeder information 
might deal with strategic changes in breed or efforts to deal with 
chick health; and details about feed outages or other internal 
operations might reveal proprietary information that would adversely 
and unfairly impact the live poultry dealer's competitive position.
    AMS response: AMS agrees with the poultry grower commenters and 
retains 5 years as the appropriate length of time for record retention 
purposes for this

[[Page 83253]]

rule. Although most regulations under the Act provide for 2-year record 
retention, 9 CFR 203.4(c) allows for an extension of the record 
retention period when investigations or proceedings are underway. AMS 
is adopting a 5-year retention requirement here principally to enable 
PSD to enforce the disclosure requirements that provide growers with 
transparency into the past 5 years of revenues, which enables growers 
to see trends over time. To determine whether the required disclosures 
are accurate or not, PSD will need to be able to review at least 5 
years' worth of records.
    Regarding concerns about sensitive proprietary information raised 
by a live poultry dealer, proprietary information such as poultry 
genetics, poultry feed blends, trade secrets, or other proprietary 
information not contained in the grower contracts are not required to 
be disclosed and may thus remain restricted. Growers' need for relevant 
information with which to make informed decisions weighs heavily in 
favor of the disclosures specified in this final rule because they 
relate to the manner in which the poultry company treats growers under 
its poultry growing arrangements and enable broiler growers to monitor 
some aspects of the live poultry dealer's performance under the 
contracts. Moreover, the topics contemplated for disclosures to 
growers--such as grower compensation and policies and procedures on 
matters of interest to growers (sick chicks, feed complaints, sale of 
farm policies, etc.)--have limited proprietary value.
    Accordingly, AMS made no changes to the rule as proposed based on 
these comments.
Placement Disclosure
    AMS proposed in Sec.  201.214(b) to require live poultry dealers to 
provide certain information about the flock placed with the grower 
within 24 hours of its placement on the grower's farm. This information 
would include the flock's stocking density, expressed as the number of 
poultry per facility square foot; the names and ratios of breeds of the 
flocks delivered; the ratios of male and female birds in the flock if 
the sex of the poultry had been determined; the breeder facility 
identifier; the breeder flock age; information regarding any known 
health impairments of the breeder flock and of the poultry delivered to 
the poultry grower; and what, if any, adjustments live poultry dealers 
will make to grower pay to reflect any of these inputs. AMS requested 
comments on how well the proposed requirement to supply input 
information at the time of placement responds to grower requests for 
such information; whether the required information is useful to a 
grower's operation; what burdens or challenges dealers might encounter 
in collecting information for placement disclosures; and whether the 
placement disclosure requirement would affect live poultry dealers' 
business practices.
    Comment: Farm bureaus and groups representing poultry growers 
supported the requirement to supply input information after placement, 
saying the information is critical to poultry grower performance. 
Several groups suggested additional systems for complaints and appeals 
are needed, saying poultry growers often do not have a fair way to 
report and resolve issues and that transparency alone does not guard 
against circumstances in which growers consistently receive poor-
quality inputs or face repeated unfair treatment.\90\
---------------------------------------------------------------------------

    \90\ See, e.g., Campaign for Contract Agriculture, Rural 
Advancement Foundation International--USA, ``Comment on AMS-FTPP-21-
0044: Transparency in Poultry Grower Contracting and Tournaments'' 
(received Aug. 23, 2022), available at https://www.regulations.gov/comment/AMS-FTPP-21-0044-0479; Institute for Agriculture & Trade 
Policy, ``Comment on AMS-FTPP-21-0044: Transparency in Poultry 
Grower Contracting and Tournaments'' (received Aug. 1, 2022), 
available at https://www.regulations.gov/comment/AMS-FTPP-21-0044-0110; Stone Barns Center for Food & Agriculture, ``Comment on AMS-
FTPP-21-0044: Transparency in Poultry Grower Contracting and 
Tournaments'' (received Aug. 4, 2022), available at https://www.regulations.gov/comment/AMS-FTPP-21-0044-0139; Animal Welfare 
Institute, ``Comment on AMS-FTPP-21-0044: Transparency in Poultry 
Grower Contracting and Tournaments'' (received Aug. 1, 2022), 
available at https://www.regulations.gov/comment/AMS-FTPP-21-0044-0109.
---------------------------------------------------------------------------

    AMS response: Mandating particular systems for complaints and 
appeals would not be within the scope of this transparency rulemaking. 
However, AMS agrees that poultry growers should be aware of avenues for 
complaints and appeals where they exist. Consistent with AMS's 
experience regulating the poultry industry, commenter responses have 
identified circumstances where live poultry dealers commonly exercise 
higher levels of discretion with respect to the interaction between the 
dealers and the growers. In such circumstances, absent disclosures of 
policies and procedures that may exist, broiler growers are unable to 
understand and evaluate how live poultry dealers may handle those 
circumstances, which can and do affect growers' financial outcomes 
under the poultry growing arrangement. These circumstances--sick chicks 
and disasters, feed issues, and appeal procedures--were the subject of 
questions on which AMS requested comment in the proposed rule. 
Therefore, AMS added a new provision at Sec.  201.102(c)(4) of the 
final rule requiring live poultry dealers to disclose policies and 
procedures on increased layout time; sick, diseased, or high early-
mortality flocks; natural disasters; weather events, or other events 
adversely affecting the physical infrastructure of the local complex or 
the grower facility; other events potentially resulting in massive 
depopulation of flocks, affecting grower payments; feed outages 
including outage times; and grower complaints relating to feed quality, 
formulation, or suitability, as well as any appeal rights arising out 
of these events.
    In AMS's experience fielding and investigating grower complaints, 
some live poultry dealers will remove sick, diseased, and high early-
mortality flocks from the tournament settlement group and provide 
payment calculated separately. Similarly separate treatment will 
sometimes be made for instances of sick chicks, depopulation events, 
natural disaster, weather events, or other events affecting the 
physical infrastructure of the local complex or grower facility, as 
many live poultry dealers provided for during the COVID-19 pandemic or 
during the ongoing series of avian bird flu outbreaks.<SUP>91 92</SUP> 
However, these practices are not uniform and are not necessarily 
provided for in written contracts.\93\
---------------------------------------------------------------------------

    \91\ A typical practice in such circumstances is to pay growers 
based on their previous five flock average to ameliorate losses. One 
such circumstance is detailed in ``What lessons can poultry 
producers learn from extreme weather events? '' ThePoultrySite.com, 
March 02, 2022, available at https://www.thepoultrysite.com/articles/what-lessons-can-poultry-producers-learn-from-extreme-weather-events (last accessed April 2023).
    \92\ AMS's rule under Sec.  201.102 (c)(3) would require dealers 
to disclose to growers its policies and procedures, as well as any 
appeal rights arising from four types of important events, including 
``Natural disasters, weather events, or other events adversely 
affecting the physical infrastructure of the local complex or the 
grower facility.''
    \93\ A 2007 survey by USDA found that 17.9% of broiler contracts 
included specific provisions for catastrophic payments, see James 
MacDonald, ``The Economic Organization of U.S. Broiler Production,'' 
USDA Economic Information Bulletin 38 (June 2008).
---------------------------------------------------------------------------

    How live poultry dealers respond to feed outages, including outage 
times, as well as to grower complaints relating to feed quality, 
formulation, or suitability, also vary widely, and commonly depend to a 
high degree on the approach that field agents for live poultry dealers 
take in their particular complex. AMS has received a range of 
complaints over the years relating to differential treatment between 
growers within complexes relating to these concerns. Live poultry 
dealers have indicated in the past to AMS that they provide growers the 
opportunity to appeal the determinations or actions of

[[Page 83254]]

local agents, but such availability has not been consistent and is 
subject to a high degree of opacity.
    This rule provides up-front clarity for growers on how the live 
poultry dealer will deal with such circumstances. If live poultry 
dealers choose not to maintain such policies and procedures, growers 
would benefit knowing this up front during the contracting process.
    However, this rule is focused on providing transparency regarding 
the policies and procedures that live poultry dealers may have, whether 
formal or in practice. Requiring additional systems for complaints and 
appeals was not proposed and would not be a logical outgrowth of the 
proposed rule. In future rulemaking, AMS may consider additional steps 
to address the maintenance of certain policies or procedures.
    Comment: Several organizations suggested AMS require live poultry 
dealers to disclose input quality variables and feed discrepancies by 
house on each poultry grower's farm, preventing live poultry dealers 
from using averaging to hide variables and discrepancies on settlement 
sheets. The commenters said, with this addition, the placement and 
settlement disclosure requirements would give poultry growers more 
transparency in accessing information about their flocks, other inputs, 
and their performance in the context of their complex.
    AMS response: Per-house disclosure would represent a substantial 
increase in recordkeeping burden. In addition, this disclosure would 
likely provide only a minor benefit, as metrics relating to payment are 
required to be provided to poultry growers on a farm-wide basis, and 
facility-based input disclosures are thus likely to create confusion 
among growers. Accordingly, AMS is not requiring disclosure at the 
house level.
    Comment: Farmers unions and groups representing poultry growers 
expressed concern about variance in feed delivered to grower farms. 
These commenters urged AMS to require live poultry dealers to disclose 
information about the quantity and type of feed delivered throughout 
the flock's growout. Commenters said live poultry dealer errors in the 
type or amount of feed delivered, even with no feed disruption, can 
have significant ramifications for flock performance.
    AMS response: As discussed above, AMS recognizes the need to 
provide transparency to address risks of deception in circumstances 
where dealer discretion, opacity, and other information asymmetries are 
present in the poultry growing arrangement. As highlighted by the 
comments, growers have repeatedly expressed concerns regarding feed 
quality and type, as well as delivery and disruption thereof. Section 
201.102(c)(4)(v) and (vi) of the final rule requires disclosure of 
dealer policies and procedures relating to feed outages, including 
outage times, and grower complaints about feed quality, formulation, or 
suitability. Required disclosures also include policies and procedures 
around any appeals processes on such matters.
    AMS considered an option to require live poultry dealers to 
disclose the feed mix, or recipe, to growers, but determined this 
option is not appropriate because the feed mix varies at different 
stages of the growout and it is a closely protected formula, treated as 
proprietary information by live poultry dealers. Also, AMS determined 
that providing additional disclosures about feed delivered throughout a 
flock's growout would involve overwhelming complexity, particularly due 
to the dynamic nature of feed contents and quantities within a given 
growout period. Moreover, these disclosures would have limited 
usefulness.
    AMS acknowledges these commenters' concerns about transparency and 
responsiveness regarding feed quality and delivery issues and that 
particular instances of concern may arise but concludes that the 
potential benefits of the requested disclosures would not justify the 
costs.
    Ongoing disclosure of the actual feed mix and delivery, as noted 
above however, may be too burdensome given the proprietary and fluid 
set of practices that live poultry dealers use in providing feed. It 
may also be overbroad, as a focus on policies and procedures will 
provide information that growers need to better manage the specific 
risks they encounter, while providing greater flexibility for live 
poultry dealers to develop the systems that work best for their company 
and their growers. AMS will continue to monitor these areas and expects 
to use the additional transparency provided by the disclosures to 
develop more tailored educational, outreach, or regulatory responses.
    Comment: Several poultry industry representatives requested that 
AMS clarify what constitutes a health impairment requiring disclosure. 
A commenter said it is unclear whether AMS intended the provision 
requiring disclosure of health impairments to encompass impairments 
other than recognized and diagnosed poultry diseases, while another 
said the current proposal is vague enough to leave significant room for 
legal disputes over whether a condition affected a grower's 
compensation. Several animal welfare groups said AMS should strengthen 
the disclosure requirements related to health issues. A commenter said 
integrators should have to disclose known health impairments at least 
24 hours before the flock is placed with the grower, rather than within 
24 hours of placement, because earlier notice would give the grower 
more time to prepare and would ensure a fairer marketplace. This 
commenter also suggested requiring integrators to track disease and to 
inform other poultry growers with birds from the same facility of 
problems with birds from a particular breeding facility or hatchery, so 
the entire affected community of poultry growers will be better 
prepared for disease outbreaks. Other commenters suggested that AMS 
require additional health-related disclosures, including any known 
health issues present in the flock being delivered, such as infections, 
and any past veterinary care rendered to the chicks, saying these extra 
disclosures would better allow them to provide suitable veterinary care 
and may lead to better growth outcomes and fewer deaths.
    AMS response: AMS concluded that disclosure of known health 
impairments is the appropriate standard, and ``health impairments'' as 
generally understood provides an appropriate context for 
classification. AMS does not believe it is appropriate to limit the 
standard, as flock health impairments affect certain flocks, breeds, 
and growouts differently. Health impairments may affect growout 
management, performance, pay, or other relevant factors. Often, 
specific input deliveries may not be decided 24 hours in advance, as 
logistics, weather, transportation, and other factors may influence 
distribution. Therefore, AMS made no changes to the rule as proposed 
based on these comments.
    Comment: Multiple farmers unions and groups representing poultry 
growers said live poultry dealers should disclose a breeder flock 
identifier in addition to a breeder facility identifier. A commenter 
said growers could use this data to support an appeal if they are 
punished for poor growth after receiving a diseased or lower-quality 
flock and to obtain the breeder's flock-breeding methods.
    AMS response: AMS acknowledges the commenters' interest in the 
disclosure of breeder flock identifiers. However, it concluded that 
this additional information is not needed because individual breeder 
facilities are generally populated and depopulated all in and all out. 
Breeder facility identifiers would thus reflect the same information in 
breeder flock identifiers.

[[Page 83255]]

Therefore, AMS made no changes to the rule as proposed based on these 
comments.
    Comment: Numerous non-profit organizations requested that AMS 
require live poultry dealers to provide historical breed performance 
and best management practice recommendations disaggregated according to 
important factors, such as breeder flock age and flock pickup date, and 
to keep this data archived for 10 years.
    AMS response: Virtually all live poultry dealers provide manuals to 
growers outlining best management practices. In addition, historical 
performance is currently publicly available on breeder internet sites. 
Given the widespread availability of this information, AMS made no 
changes to the rule as proposed based on these comments. AMS may 
reevaluate in the event that industry practices shift away from 
voluntarily providing this information.
    Comment: Several non-profit organizations said AMS should require 
live poultry dealers to disclose data about the optimal pickup age for 
a flock's breed on flock placement sheets. Some of these commenters 
also suggested AMS should require integrators to disclose the average 
feed conversion efficiency of flocks hatched from breeder flocks of 
that age in addition to requiring disclosure of breeder flock age on 
delivery. The commenters said this requirement would allow poultry 
growers to compare their own performance to a more accurate flock 
efficiency performance expectation.
    AMS response: Weight, not number of days, is the target for bird 
harvest and is generally included in most settlements. As target weight 
is readily known to poultry growers, along with the average number of 
days to achieve the target, it is unnecessary to require this readily 
known information in the Disclosure Document. Accordingly, AMS is not 
requiring live poultry dealers to provide information related to the 
optimal pickup age for a flock's breed. While AMS is considering action 
targeting live poultry dealers who allow birds to stay in houses beyond 
their target weight, that falls outside the scope of this disclosure-
based regime. AMS further notes the commenters' views regarding the 
value of benchmarking performance but is not prepared at this time to 
adopt such a requirement in this rule. AMS also notes that USDA makes 
available a range of resources, in particular Extension expertise, to 
assist growers in better analyzing their performance utilizing 
different inputs, and notes the inclusion of contact information for 
USDA resources in the final rule.\94\ AMS will monitor implementation 
and may examine additional tools for assisting growers in improving 
their performance.
---------------------------------------------------------------------------

    \94\ See, e.g., Jennifer Rhodes, Extension Educator, et al, 
University of Maryland, ``Broiler Product Management for Potential 
and Existing Grower,'' Table 1 and 2, available at Poultry Budgets, 
Enterprise Budgets, Agricultural and Resource Economics, North 
Carolina State University Extension, https://cals.ncsu.edu/are-extension/business-planning-and-operations/enterprise-budgets/poultry-budgets/ (last accessed April 2023).
---------------------------------------------------------------------------

    Comment: Commenters representing the poultry industry said the 
information to be required on flock placement would burden live poultry 
dealers and is unnecessary because of a lack of evidence showing it 
would help poultry growers in managing their farms. Commenters also 
said providing stocking density information is not necessary because 
live poultry dealers will place flocks at the optimal density for the 
best return.
    AMS response: Broiler growers, farm bureaus, and many other 
commenters widely supported flock placement disclosures because these 
disclosures assist growers in planning and operating their farms, 
managing their financial risks, and negotiating with live poultry 
dealers over better contractual execution, among other reasons. AMS has 
concluded that, for live poultry dealers engaging in the production of 
broilers, the burden of providing the flock placement disclosures, 
including disclosures on stocking density, would be minimal and the 
benefit to broiler growers substantially outweighs the impact to 
dealers. Further, dealer decisions on stocking density may also be 
influenced by other factors beyond optimal returns to growers, such as 
responses to market changes, which mitigates in favor of providing 
additional transparency by live poultry dealers, the entities 
responsible for making those decisions.
    Comment: Several poultry and meat trade associations said live 
poultry dealers sourcing birds from a third party may not have access 
to some data the proposed rule would require them to disclose with 
placement, such as breeder flock age. Commenters also mentioned that 
third-party breeder operations might consider sourcing information to 
be proprietary or subject to a nondisclosure agreement, suggesting AMS 
address how live poultry dealers should make placement disclosures when 
they do not have required information or when law or contract prohibits 
them from providing it.
    AMS response: Based on AMS experience, under most poultry growing 
arrangement contracts, live poultry dealers are responsible for 
providing the birds to the growers. Live poultry dealers may also be 
expected to already have State contract law obligations relating to 
their performance under the contract. Based on AMS's experience, 
dealers sourcing chicks from third parties already monitor the inputs 
provided by those parties. Growers need to know the information being 
required in this rule, such as the breeder flock age and known health 
impairments of the breeder flock, and the live poultry dealer, not the 
grower, is best positioned--indeed, is the only party positioned--to 
require, via contract, that the third-party provide the information 
necessary to comply with the rule. Nor are the obligations especially 
burdensome. For example, regarding health impairments, AMS is requiring 
only disclosure of ``known health impairments'' of the breeder flock or 
of the poultry delivered, and the live poultry dealer has a range of 
ways to ask the third-party input supplier to provide that information, 
including contractual guarantees, indemnifications, attestations, or 
other means all of which are already commonly used in livestock 
transactions to ensure animal health and food safety.
    Whether the live poultry dealer is sourcing the inputs internally 
or via a contractual arrangement with a third party, it is ultimately 
the live poultry dealer that is providing the inputs to the grower 
under the poultry growing arrangement and is responsible for not 
engaging in a deceptive practice. AMS has discussed in other parts of 
this final rule why the information being requested about the inputs is 
not confidential or proprietary. Therefore, AMS made no changes to the 
rule as proposed based on these comments.
    Comment: Several industry groups opposed the requirement proposed 
in Sec.  201.214(b)(7) to disclose any adjustments the live poultry 
dealer intends to make due to the other factors covered in placement 
disclosures. One commenter said live poultry dealers would not be able 
to disclose adjustments at the beginning of a flock because it is 
impossible to predict the financial impact of factors that may affect 
live birds in advance. This commenter said it is more appropriate for 
live poultry dealers to make pay adjustments after a flock settles 
based on comparisons with historical data.
    AMS response: Some live poultry dealers may be unable to predict 
the exact financial impact of those factors in any specific flock 
delivery to a grower,

[[Page 83256]]

but these are contracted-for payments that should be legitimately based 
upon factors known to both parties. Otherwise, the live poultry dealer 
may deceptively manipulate the contract payments based on withheld 
information because the live poultry dealer controls all the tools used 
to calculate payments. Of course, live poultry dealers may be able to 
predict some of the financial consequences of a contract, or the live 
poultry dealer may want to create additional grower incentives specific 
to one flock that may take the form of a pay adjustment. In AMS's 
experience reviewing contracts, payment formulas can be complicated. 
However, AMS included the requirement to disclose any adjustments that 
may be made based on the factor in the settlement disclosure to help 
growers to recognize and manage risks, and to prevent adjustments that 
were opaque or pose risks of deception to the grower.
    The rule does not require any adjustments, and only requires live 
poultry dealers to disclose adjustments that can be known prior to 
placement and that the live poultry dealer could apply, for example a 
particular adjustment formula, process, or approach. The specific final 
amount of adjustment need not be predicted, but if the live poultry 
dealer knows that the inputs will likely result in payment being 
adjusted upward or downward in an unknown amount, and particularly if 
it knows how or under what conditions that will occur, it should 
disclose that information to a grower to allow the grower to better 
manage their growout strategies; plan for the payment they are 
expecting to receive upon settlement; and avoid being confused, misled, 
or otherwise deceived about how their performance under the contract 
will be compensated. Live poultry dealers remain free to make the 
actual contractually agreed upon adjustments after settlement based on 
flock performance. Therefore, AMS made no changes to the rule as 
proposed based on these comments.
    Comment: Groups representing poultry growers supported the proposed 
placement disclosure requirements. These commenters said the 
requirements would ensure more transparency by integrators and help 
growers in areas such as flock management and financial planning. A 
live poultry dealer said much of the proposed placement disclosure 
information pertains to factors that do not vary significantly from 
grower to grower, saying any natural variation in inputs is expected to 
even out over time and providing the information would place undue 
emphasis on single inputs rather than factors such as the grower's 
skill, dedication, and hard work.
    AMS response: Input variation has not been the subject of external 
study because of the proprietary nature of the data available, but it 
has been the source of repeated concerns raised by growers for many 
years.\95\ The persistence of these grower complaints suggests that 
making this information available to growers to measure, monitor, and 
adjust as they may see fit is worth the modest cost to live poultry 
dealers because it will reduce the opacity and risks of deception with 
respect to their payments. With that additional transparency, growers 
will be able to determine the relative emphasis to be placed on single 
inputs versus other factors, such as skill, dedication, or hard work, 
which may help them adjust their growout practices to match. To the 
extent variations do even out over time, growers will be in a better 
position to recognize those trends and make their own determinations on 
the importance of inputs versus other factors, thanks to this rule's 
enhancement of transparency tools. If input factors do not in fact vary 
significantly from grower to grower, the burden of disclosure by the 
live poultry dealer remains relatively light.
---------------------------------------------------------------------------

    \95\ See, e.g., Transcript, United States Department of Justice, 
United States Department of Agriculture, Public Workshops Exploring 
Competition in Agriculture: Poultry Workshop, May 21, 2010, Normal, 
Alabama; Leonard, Christopher, The Meat Racket (2014).
---------------------------------------------------------------------------

    Comment: Industry groups contended the placement disclosure 
requirements would impose a significant administrative burden, such as 
requiring capital investments to overhaul their software to provide the 
required data. One commenter said the discussion of input distributions 
in the preamble to the proposed rule relied on anecdotal reports rather 
than actual data or evidence, making the proposed provisions arbitrary 
and capricious.
    AMS response: AMS has conducted an extensive cost-benefit analysis 
for this rule, available under the regulatory analyses section below, 
and believes that the burden of compliance is relatively modest. AMS 
investigations and reviews of information sharing services and 
consultations with experts from the Agricultural Research Service, in 
addition to AMS's own subject matter experts, supervisors, and auditors 
with many years of experience in working with growers and auditing live 
poultry dealers all indicated that most live poultry dealers maintain 
this information already, and indeed report much of it to information 
sharing services.
    AMS acknowledges that external analyses of poultry inputs generally 
lack a ranking system context, but the proprietary nature of the 
relevant data makes quantitative academic and other external analysis 
nearly impossible. Even with the lack of context, peer reviewed 
research supports the supposition that input differentiation can affect 
biological outcomes.\96\ AMS is relying on the longstanding concerns of 
growers and its own experience as the industry's regulator to warrant 
placement disclosure requirements. Accordingly, AMS made no changes to 
the proposed rule based on these comments.
---------------------------------------------------------------------------

    \96\ E. David Peebles, et al., ``Effects of Breeder Age and 
Dietary Fat on Subsequent Broiler Performance. 1. Growth, Mortality, 
and Feed Conversion.'' Poultry Science 78.4 (1999): 505-51; J.B. 
O'Neill, ``Relationship of Chick Size to Egg Size and its Effect 
Upon Growth and Mortality.'' Poultry Science 29 (1950):774; C.L. 
Wyatt, W.D. Weaver Jr, and W. L. Beane, ``Influence of Egg Size, 
Eggshell Quality, and Posthatch Holding Time on Broiler 
Performance.'' Poultry Science 64.11 (1985): 2049-2055; R.A. Guill 
and K.W. Washburn, ``Genetic Changes in Efficiency of Feed 
Utilization of Chicks Maintaining Body Weight Constant.'' Poultry 
Science 53.3 (1974): 1146-1154; R.G. Wells, and C. G. Belyawin, 
``Egg Quality-Current Problems and Recent Advances.'' Poultry 
Science Symposium Series. No. 636.513 W4. 1987(citing D. Spackman, 
``The Effects of Disease on Egg Quality''); W.A. Dozier III, et al., 
``Effects of Early Skip-A-Day Feed Removal on Broiler Live 
Performance and Carcass Yield.'' Journal of Applied Poultry Research 
11.3 (2002): 297-303. AMS notes additionally that research in this 
and related areas has limitations. It is older and results are 
mixed. AMS is concerned that publically available research has 
stagnated, despite the introduction of new breed strains in the 
intervening years. Because integrators now own the genetics 
companies, AMS has additional concerns that research has, in effect, 
been privatized, creating information asymmeteries.
---------------------------------------------------------------------------

Settlement Document Information on Tournament Group
    In the proposed rule, AMS proposed to retain existing regulatory 
requirements in Sec.  201.100(f) to provide settlement sheets but to 
move the provision to Sec.  201.214(c). It also proposed to require 
live poultry dealers employing poultry grower ranking systems to 
provide every grower within the system with settlement documents that 
show certain information about each grower's ranking within the system, 
housing specifications, and the inputs each poultry grower received. 
AMS invited comments on how well the requirement to provide input 
distribution information, along with settlement payment information, 
for all members of the tournament group responds to grower requests to 
improve transparency, address information asymmetry, and reduce the 
chance of deception in the tournament payment system.

[[Page 83257]]

    Comment: Groups representing poultry growers, in general, expressed 
support for the proposed settlement disclosure requirements. Commenters 
noted these disclosures would help growers determine if they are being 
treated fairly compared to other growers in their complex and enable 
them to establish cases based on unfair treatment or retaliation 
claims. Several commenters advocated for further rulemaking to reform 
the tournament system, saying the proposed settlement sheet disclosures 
do not sufficiently mitigate several anticompetitive factors and unfair 
practices. Commenters said the current rule does not account for 
factors such as tournament group composition effects and recommended 
that the disclosure requirements for settlements apply to any poultry 
contract in which the integrator-controlled factors may impact the 
baseline or bonus income of the contract grower. These commenters 
suggested AMS require live poultry dealers to disclose input quality 
variables and feed discrepancies by house on each grower's farm to 
reflect circumstances in which flock drop-off or pick-up for a grower 
is split over a weekend, introducing variables in bird performance. AMS 
received few comments that specifically opposed making available to 
growers information about tournament grouping and composition. AMS has 
summarized above and below any comments that oppose proposed required 
disclosures, e.g.,: that the disclosures would unnecessarily increase 
the dealer's costs.
    AMS response: AMS acknowledges the commenters' interest in input 
quality variables and feed discrepancies, as well as the timing of 
flock drop-off or pick-up. In response to comments, and based on AMS's 
experience regulating the poultry industry, AMS has identified 
circumstances where live poultry dealers commonly exercise higher 
levels of discretion. In these circumstances, broiler growers are 
unable to evaluate how live poultry dealers may handle those 
circumstances and, as such, are exposed to risks of deception with 
respect to the operation of their contract and payment. Commenters 
asked for specific disclosures regarding sick, diseased, or high early 
mortality flocks; natural disasters; depopulation events; feed outages; 
and feed quality, formulation, and suitability.\97\
---------------------------------------------------------------------------

    \97\ See, e.g., Animal Welfare Institute, ``Comment on AMS-FTPP-
21-0044: Transparency in Poultry Grower Contracting and 
Tournaments'' (received Aug. 1, 2022), available at https://www.regulations.gov/comment/AMS-FTPP-21-0044-0109; Campaign for 
Contract Agriculture, Rural Advancement Foundation International--
USA, ``Comment on AMS-FTPP-21-0044: Transparency in Poultry Grower 
Contracting and Tournaments'' (received Aug. 23, 2022), available at 
https://www.regulations.gov/comment/AMS-FTPP-21-0044-0479; Institute 
for Agriculture & Trade Policy, ``Comment on AMS-FTPP-21-0044: 
Transparency in Poultry Grower Contracting and Tournaments'' 
(received Aug. 1, 2022), available at https://www.regulations.gov/comment/AMS-FTPP-21-0044-0110; Stone Barns Center for Food & 
Agriculture, ``Comment on AMS-FTPP-21-0044: Transparency in Poultry 
Grower Contracting and Tournaments'' (received Aug. 4, 2022), 
available at https://www.regulations.gov/comment/AMS-FTPP-21-0044-0139.
---------------------------------------------------------------------------

    In this final rule, AMS requires additional disclosure regarding 
policies and procedures relating to layout time; sick, diseased, and 
high early-mortality flocks; natural disasters, weather events, or 
other events adversely affecting the physical infrastructure of the 
local complex or grower facility; other events potentially resulting in 
massive depopulation of flocks, affecting grower payments; feed 
outages, including outage times; and grower complaints relating to feed 
quality, formulation, or suitability. AMS believes that focusing on 
disclosure of the live poultry dealer's policies and procedures--if 
any--in these areas will provide the appropriate flexibility for live 
poultry dealers to develop systems that work best for their company and 
their growers, while also providing growers with the additional 
information they may need to better manage risks relating to those 
matters.
    AMS determined that specific disclosures would not be suitable to 
addressing these risks because the burden on live poultry dealers would 
be great, and the benefit of these disclosures would be insufficient. 
In part, many of these situations occur from time to time and depend 
upon discretion by the live poultry dealer and its field agents. 
Because ongoing disclosure would likely be insufficient to provide 
growers the advance notice of how live poultry dealers intend to handle 
such circumstances, AMS has determined that disclosure of policies and 
procedures is the most suitable and effective way to provide growers 
with transparency regarding these situations and risks arising from 
them. Such an approach is consistent with the approach to disclosure 
that AMS is taking, and proposed to take, in other areas that may 
depend on a degree of circumstance-specific discretion--for example, 
sale-of-farm policies.
    AMS will continue to monitor these areas and expects to use the 
additional transparency provided by the disclosures to develop more 
tailored educational, outreach, or regulatory responses. AMS also notes 
the commenters' interest in additional rulemaking with respect to 
fairness concerns relating to tournament systems and highlights that it 
has put forth an Advance Notice of Proposed Rulemaking focused on those 
issues.\98\
---------------------------------------------------------------------------

    \98\ Agricultural Marketing Service, ``Poultry Growing 
Tournament Systems: Fairness and Related Concerns,'' Request for 
Comments (87 FR 34814, June 8, 2022), available at https://www.federalregister.gov/documents/2022/06/08/2022-11998/poultry-growing-tournament-systems-fairness-and-related-concerns.
---------------------------------------------------------------------------

    Comment: AMS requested comment on whether the proposed requirement 
in Sec.  201.214(c) (Sec.  201.104(c)(1) in the final rule) to include 
the housing specification for each poultry grower ranking system 
participant on grouping or ranking sheets responds to grower requests 
to improve transparency, address information asymmetry, and reduce the 
chance of deception in the tournament payment system. Groups 
representing poultry growers expressed support for this proposed 
requirement, saying it would improve growers' ability to assess the 
relative performance and income gains that more modern infrastructure 
may provide.
    AMS response: In addition to helping growers assess the value of 
making housing upgrades, dealers may benefit from making such 
disclosures when they can demonstrate for growers a correlation between 
more advanced housing tiers and improved flock performance, inducing 
more grower advancement. Accordingly, we have retained the requirement 
in Sec.  201.104(c) to provide these disclosures.
    Comment: Several commenters said the proposed settlement 
disclosures would help poultry growers evaluate or improve their 
performance, make informed business decisions, or mitigate risks. For 
example, these commenters said the information would help growers to 
better understand their placement in the tournament and could change 
industry bargaining dynamics. However, many commenters said the 
disclosures do not go far enough in giving poultry growers meaningful 
tools to address fundamental power imbalances, hampering poultry 
growers' ability to meaningfully negotiate contracts with live poultry 
dealers and minimize dealer opportunities to manipulate rankings within 
a group.
    AMS response: AMS has designed this final rule to enhance 
transparency for broiler chicken growers because of the deception that 
arises from well-documented information asymmetries and attendant risks 
in the design and operation of poultry grower ranking systems. 
Transparency, as provided by this rule, will prevent deception, 
encourage live poultry dealers to offer

[[Page 83258]]

better contracts, and enhance growers' ability to understand contracts 
and the grower-dealer relationship. Transparency will also prevent live 
poultry dealers from engaging in certain forms of deception in the 
operation of those contracts. AMS also expects increased transparency 
to function as a deterrent by exposing abusive conduct by market 
participants. Transparency also creates reputational disincentivizes to 
such actions as well. Disclosure regimes in other areas, such as the 
FTC's Franchise Rule, as well as the long-established operation of the 
Federal securities laws, show that disclosure is a cost-effective tool 
to prevent deception, improve trust among market participants, and 
mitigate market failure and the potential for market failure. 
Disclosure laws are common in financial, housing, and other markets 
where the products are complex, the financial risks are significant, 
and one party has significantly more information than the other.\99\ 
Additionally, AMS's experience in the poultry sector and agriculture in 
general shows that producers value transparency as a tool for enhancing 
their ability to contract and manage risks.
---------------------------------------------------------------------------

    \99\ D.W. Carlton and J.M. Perloff, Modern Industrial 
Organization (1994): 624. Paula J. Dalley, ``The Use and Misuse of 
Disclosure as a Regulatory System,'' 34 Fla. St. U.L. Rev. 1121-22 
(2007). https://ir.law.fsu.edu/lr/vol34/iss4/2.
---------------------------------------------------------------------------

    AMS recognizes, however, that transparency may not be sufficient to 
address all the risks that growers may face, in part because 
transparency does not inherently prohibit harmful practices that 
growers may be unable to avoid owing to lack of competition (i.e., lack 
of other options for poultry dealers with whom to do business), 
deception, or other reasons.\100\ Accordingly, AMS has proposed other 
rules seeking to prevent retaliation for joining an association or 
forming a cooperative, among other protections against discrimination, 
retaliation, and deception. AMS has also published an Advance Notice of 
Proposed Rulemaking regarding additional rules to address fairness 
concerns relating to tournament systems.\101\ AMS is committed to 
continuing to improve the integrity, fairness, and competitiveness of 
the poultry growing marketplace through additional rules and through 
the enforcement of existing laws and regulations, as well as through a 
range of other strategies, such as $1 billion in direct investments in 
expanded meat and poultry processing capacity that USDA is implementing 
to promote competition across agriculture.\102\
---------------------------------------------------------------------------

    \100\ Federal Trade Commission Chair Lina M. Khan, ``Poultry 
Growing Tournament Systems: Fairness and Related Concerns'' 
(received Sept. 1, 2022), available at https://www.regulations.gov/comment/AMS-FTPP-22-0046-0143.
    \101\ Agricultural Marketing Service, ``Poultry Growing 
Tournament Systems: Fairness and Related Concerns,'' Request for 
Comments (87 FR 34814, June 8, 2022), available at https://www.federalregister.gov/documents/2022/06/08/2022-11998/poultry-growing-tournament-systems-fairness-and-related-concerns.
    \102\ U.S. Department of Agriculture, Agricultural Marketing 
Service. (May 2022). Agricultural Competition: A Plan in Support of 
Fair and Competitive Markets: USDA'S REPORT TO THE WHITE HOUSE 
COMPETITION COUNCIL. Retrieved from Agricultural Competition: A Plan 
in Support of Fair and Competitive Markets (usda.gov).
---------------------------------------------------------------------------

    Comment: AMS requested comment on whether there is other 
information or another way of presenting the proposed settlement 
information that would be better. Several groups representing poultry 
growers said the proposed disclosure requirements are helpful but 
incomplete and recommended requiring live poultry dealers to disclose 
other factors that impact grower settlement performance. Commenters 
suggested AMS require dealers to document and disclose the quality of 
the feed provided to the growers in the settlement group because feed 
quality can significantly affect the ranking if a live poultry dealer 
provides lower quality feed to one poultry grower within a settlement 
group. Commenters urged AMS to require integrators to disclose the 
average feed conversion efficiency of flocks hatched from breeder 
flocks of that age to enable growers to compare their own performance 
to a more accurate flock efficiency performance expectation. Commenters 
also suggested that AMS require live poultry dealers to disclose the 
flock age at pickup because when integrators pick up flocks before or 
after the ideal pick-up time range, growers are penalized due to the 
flock's less optimal weight or feed conversion efficiency metrics. 
Commenters also recommended disclosure of all appeals, summaries of 
their resolution, and any extended delay during poultry delivery or 
collection that results in the remaining flock members losing body 
weight, being placed back on feed, or being delivered or collected with 
a different payment settlement group at a later date.\103\
---------------------------------------------------------------------------

    \103\ Campaign for Contract Agriculture, Rural Advancement 
Foundation International--USA, ``Comment on AMS-FTPP-21-0044: 
Transparency in Poultry Grower Contracting and Tournaments'' 
(received Aug. 4, 2022), available at https://www.regulations.gov/comment/AMS-FTPP-21-0044-0479, and Virginia Farm Bureau Federation, 
``VFBF Comments--AMS Poultry Disclosure Proposed Rule'' (received 
Aug. 5, 2022), available at https://www.regulations.gov/comment/AMS-FTPP-21-0044-0160.
---------------------------------------------------------------------------

    Industry groups expressed concerns regarding proposed requirements 
to report feed disruptions, suggesting AMS clarify what constitutes a 
disruption. These commenters noted the proposed rule does not address 
situations, such as outages caused by natural disasters or other events 
out of either party's control that may affect all participants in the 
settlement pool. An industry group also said omitting the requirement 
to disclose breeder flock information would reduce costs and 
administrative burden on live poultry dealers and reduce confusion 
among poultry growers. This commenter also noted live poultry dealers 
already provide the information used to calculate a grower's payment 
under the contract; therefore, the additional information is 
unnecessary and would be confusing to growers. The commenter also asked 
AMS to clarify how to address situations in which the live poultry 
dealer has determined the sex of the birds for some, but not all, 
growers in the settlement pool.
    AMS response: Paragraphs 201.102(c)(4)(v) and (vi) of the final 
rule require disclosure of integrator policies and procedures relating 
to feed outages, including outage times, and grower complaints about 
feed quality, formulation, or suitability. AMS intends these provisions 
to be broadly construed to include situations caused by natural 
disasters as well as other miscellaneous situations. While AMS 
acknowledges the requests to omit breeder flock information, it 
recognizes that many growers have expressed concern about and need for 
this information. Growers will benefit from its inclusion in the 
required settlement disclosures because academic research indicates 
that different breeder flocks may perform differently.\104\ This is 
particularly important information to growers settled under a 
tournament payment system, where small differences in outcomes can have 
an outsized effect on grower payments because growers are compared on a 
relative rather than objective basis. Integrators are in possession of 
this information because they acquire and deliver the chicks to 
growers, and engage in extensive research and development to improve 
performance of the breeds. Absent the provision of this information, 
growers are subject to deception because their ability to perform under 
the tournament may be adversely affected by differences in these inputs 
between growers and by the inability to know and adjust to those 
differences at the earliest possible

[[Page 83259]]

moment, to the extent such adjustment is possible. Therefore, AMS is 
retaining this requirement in the final rule.
---------------------------------------------------------------------------

    \104\ E. David Peebles, et al. ``Effects of Breeder Age and 
Dietary Fat on Subsequent Broiler Performance. 1. Growth, Mortality, 
and Feed Conversion.'' Poultry Science 78.4 (1999): 505-511.
---------------------------------------------------------------------------

    Paragraph 201.104(b)(3) requires that ``[i]f the live poultry 
dealer has determined the sex of the birds, all ratios of male and 
female poultry delivered'' must be disclosed. AMS does not require that 
the live poultry dealer disclose the sex of all birds delivered because 
AMS understands that industry practice varies on sexing, and not all 
birds are sexed before delivery. However, AMS maintains the requirement 
that where a live poultry dealer does engage in some collection of 
information regarding the sex of the birds, that the integrator must 
disclose that information to growers as it is helpful to growers.
    AMS would accept the live poultry dealer using ratios and 
percentages to describe bird sex in relation to a flock. AMS did not 
provide further clarification beyond this explication because of the 
potential variation in practice, and because AMS believes that the 
language ``all ratios'' provides an appropriately inclusive coverage of 
the information that the live poultry dealer may collect, and which 
should be disclosed to growers in those circumstances. AMS will be 
making available guidance documents during the implementation phase to 
answer live poultry dealer and grower questions, and intends to 
implement the rule in a careful, iterative manner.
    AMS acknowledges commenters' concerns that flock pick-up timing 
(and hence age) may affect grower outcomes. Flock age is often 
disclosed under existing Sec.  201.100(f) to the extent that daily 
averages are used in formulas to calculate payments. To appropriately 
balance the burdens on live poultry dealers, AMS is not adopting 
specific disclosures, beyond those that exist in Sec.  201.100(f) on 
that topic at this time.
    Comment: AMS requested information about obstacles to sharing or 
discussing settlement information with others and on whether the right 
to discuss the terms of poultry growing arrangement offers should apply 
to these disclosures. Groups representing poultry growers said they 
appreciate the proposed rule's extension of the existing right to 
discuss the terms of growing arrangement offers with other growers from 
the same dealer to include the right to discuss the Disclosure 
Document. However, they believe growers should also have the right to 
discuss the settlement sheet disclosures proposed under Sec.  201.214, 
and that AMS should clarify that the current right to discuss the 
poultry growing arrangement encompasses this right.
    AMS response: The settlement sheet disclosures in Sec.  201.104 
will be provided to the entire pool of growers settled during the same 
time period. Only the growers' personal identifying information may be 
excluded from the settlement sheet documents, as the rule specifically 
provides that the disclosures need not show the names of other growers. 
AMS is not aware of existing restrictions on settlement information. 
New restrictions related to settlement information will be reviewed by 
AMS for compliance under the Act, but AMS has not changed the rule 
based on this comment.
    Comment: AMS invited comments on whether a grower being completely 
out of feed for 12 hours is an appropriate length of disruption to 
trigger reporting of a feed disruption or whether it should instead 
require a shorter time, such as 6 hours. Multiple farm bureau and 
poultry group commenters indicated that 6 hours rather than 12 hours 
would be an appropriate length of time to trigger reporting. The 
commenters stated that being out of feed for 6 hours drops birds' feed 
conversion efficiency and would affect the grower on the settlement 
sheet. The commenters stated this length would allow growers to 
establish a pattern, as growers would have records that let them take 
action to correct the problem if they are out of feed multiple times 
for multiple hours during consecutive growout periods.
    A poultry industry association commented that the turkey industry 
has almost no feed disruptions lasting more than 12 hours, except in 
cases of natural disaster. The commenter noted in the rare instances 
when a disruption might extend to that length of time, addressing it 
depends on timely and accurate reporting from the turkey grower and 
that turkey integrators have no control over the circumstances when 
growers do not report feed disruptions in a timely manner.
    AMS response: AMS notes that research \105\ has shown that 
commercial broilers deprived of feed for more than 12 hours develop 
hemorrhages in their intestines that curtail usual growth patterns and 
lessen the efficiency of conversion of feed into meat. AMS also noted 
feed withdrawal for 6 hours was not found to be statistically 
significant.\106\ Accordingly, in the final rule, AMS retains the 12-
hour threshold for reporting feed disruptions. However, AMS will 
monitor implementation and encourages growers to report specific 
instances or patterns of concern to AMS.
---------------------------------------------------------------------------

    \105\ K.L. Thompson, ``Optimizing Feed Withdrawal Programs,'' 
Purdue Extension (2008).
    \106\ S.F. Bilgili and J.B. Hess. ``Tensile strength of broiler 
intestines as influenced by age and feed withdrawal.'' J. Appl. 
Poultry Res. 6 (1997): 279-283.
---------------------------------------------------------------------------

Disclosure of Grower and Breeder Identity Information
    Section 201.214(b)(4) of the proposed rule would require dealers to 
include the breeder facility identifier for the flock in the 
information they provide to growers within 24 hours of flock delivery. 
Under proposed Sec.  201.214(c)(1), dealers, when providing grouping or 
ranking sheets to growers at time of settlement, would not have to show 
the names of other growers, but would be required to show their housing 
specification and the actual figures upon which the grouping or ranking 
is based for each grower grouped or ranked during the specified period. 
AMS proposed in Sec.  201.214(c)(2)(iv) to require the grouping or 
ranking sheets provided to growers to disclose the breeder facility 
identifiers for each poultry grower ranking participant. However, AMS 
did not propose to require dealers to disclose the names of breeder 
farms. AMS invited comments on whether it should reevaluate this 
position. In addition, live poultry dealers currently are not required 
to disclose the names of all competing growers on ranking sheets. AMS 
did not propose to change this requirement but asked whether it should 
require dealers to disclose the names of all competing growers in 
settlement documents.
    Comment: Several groups representing poultry growers urged AMS to 
require integrators to provide the names of breeding facilities, saying 
extreme vertical integration means that many breeding facilities are 
owned by the integrator delivering chicks to a grower and if growers 
knew the actual names of breeders, it would be easier for them to 
independently assess relevant variables or issues rather than relying 
on the integrator's representations. However, other groups representing 
poultry growers did not support a requirement for live poultry dealers 
to disclose farm names.
    AMS response: The purpose of the rule is to provide the grower with 
reliable information needed to make decisions in the management of 
their farm. Consistent designation of breeder facility identifiers is 
sufficient for the purposes of enabling growers to consistently 
understand and track the input. AMS makes no changes based on the 
comment.
    Comment: Farm bureaus and poultry grower groups said it is not 
necessary for AMS to require live poultry dealers to disclose the names 
of all competing growers in settlement documents. These

[[Page 83260]]

commenters opposed disclosure of individual grower names and said such 
disclosure would be a breach of privacy.
    AMS response: AMS agrees grower privacy is important and should be 
appropriately protected. The names of competing growers does not 
provide useful information to growers to assess the role that 
differences in inputs played in their settlement or, from that, in the 
expected future profitability of their operations because the purpose 
of the disclosure is to prevent deception against the grower and to 
enable the grower to perform better. The appropriate focus then is on 
the substantive differences in the inputs, or the housing 
specifications, which requires disclosure of those items among 
different settlement participants but can be done using consistent 
identifiers other than actual grower names. To affirm that position, 
AMS retained the language of the proposed rule, which provided that the 
names of the growers need not be provided in the settlement document, 
consistent with current practice under existing disclosure requirements 
for settlement. AMS is not adopting a prohibition on live poultry 
dealers using the names of growers as that was not proposed. Further, 
because the goal of the rule is disclosure, rather than prohibitions 
against disclosure, such a prohibition is outside of the scope of this 
rule.

J. Effective Date

    Comment: Live poultry dealers and industry groups noted AMS has 
publicly indicated that it is considering changes to multiple 
regulations under the Act and said that AMS should share all proposed 
rules specific to the tournament system at one time to allow 
stakeholders to comment on the proposed changes in their entirety. 
Commenters further urged AMS not to take an incremental approach to 
updating the regulations and asserted that such an approach would 
create challenges for poultry growers and dealers, such as increasing 
compliance costs, confusion, uncertainty, and frustration. In addition, 
these commenters recommended that AMS provide one effective date for 
all regulatory changes under the Act. One commenter recommended that 
the effective date for this rule be delayed for five years to give live 
poultry dealers time to build five-year records for disclosure and to 
develop the necessary systems for producing required disclosures. 
Another commenter suggested that AMS conduct outreach to explain to 
producers and food companies the regulatory changes and how they will 
be implemented and enforced.
    AMS response: Our approach has been to address the regulatory needs 
of the poultry industry systematically and as swiftly as possible. All 
broiler growers can benefit immediately from the greater transparency 
offered by this final rule. AMS does not want to postpone implementing 
this regulation, which makes available vital information growers need 
when deciding whether to incur capital expenses and engage in broiler 
production. Nor do we want to delay provision of useful input 
information to broiler growers in tournaments, who can use that 
information immediately to make production management decisions.
    Based on AMS's experience with the industry, we believe live 
poultry dealers have ready access to the historical information they 
are required to provide in the Disclosure Documents. AMS agrees with 
commenters that the final rule should provide sufficient time to 
implement any changes it requires. Therefore, the effective date for 
this rule is 75--rather than 60--days following publication in the 
Federal Register. Live poultry dealers will need to amend contracts in 
some instances, create records processes, format the incorporation of 
new information in existing documents, and create Disclosure Documents 
using USDA instructions. Seventy-five days provides the length of at 
least one flock to prepare for implementation of the rule. USDA will 
have resources available to answer questions as appropriate. 
Additionally, based in part on the experience of recent settlements 
between DOJ and a large poultry company, AMS believes this period will 
provide sufficient time for live poultry dealers to update their 
compliance systems and policies and procedures and commence complying 
with the rule.
    AMS agrees that it should conduct outreach to producers and food 
companies regarding regulatory changes, implementation, and 
enforcement. Over the course of this rulemaking, AMS has published 
informational materials, including a fact sheet and a video webinar to 
help the public understand the proposed rule. AMS intends to conduct 
further education and outreach following the finalization of the rule.
    AMS rejects comments calling for a delay of rules until other rules 
are proposed and critiquing its incremental approach. To the contrary, 
AMS is deploying a nuanced approach to these rulemaking proposals such 
that stakeholders and the public can review each individual proposal on 
its own merits. This approach offers producers and other market 
participants greater ability to effectively evaluate the impacts of 
each proposal on the market and their particular interests, and enables 
commenters to more effectively tailor and target comments.

K. Regulatory Notices & Analysis and Executive Order Determinations

    Comment: Live poultry dealers said the full cost of the proposed 
rule will likely be many times more than predicted by AMS. For example, 
these commenters asserted AMS greatly underestimated the costs of 
creating the recordkeeping systems needed to comply with the proposed 
rule, the proposal would add costs generated by frivolous litigation, 
and the proposal would undermine the tournament system and replace it 
with a new model that would likely drive up the costs of chicken 
production. Live poultry dealers and industry groups said AMS's own 
estimate indicates the 10-year aggregate costs will be higher for 
poultry growers than for live poultry dealers.
    AMS response: In drafting and estimating the cost of the proposed 
rule, AMS consulted auditors and supervisors who are familiar with live 
poultry dealers' records from many years of experience in auditing live 
poultry dealers for compliance with the Act. In contrast, commentors 
provided no estimated costs for AMS to review. AMS expects the 
recordkeeping systems most live poultry dealers already have in place 
will enable them to gather much of the information in the disclosures 
from records available to them, which limits the necessity of 
developing new recordkeeping systems.
    The higher costs estimated for broiler growers compared to live 
poultry dealers is due to the large number of broiler growers that 
receive the disclosures compared to a small number of live poultry 
dealers. The primary costs to the live poultry dealers are the one-time 
costs to develop the disclosures, while the ongoing costs to update, 
distribute, and maintain the disclosures are relatively small. A small 
number of live poultry dealers will incur relatively small costs to 
distribute the disclosures to relatively large groups of growers, but 
AMS anticipates every grower will read the disclosures. The actual cost 
to any individual grower is estimated as the value of the time required 
to read the Disclosure Documents, but with more than 16,000 broiler 
growers with more than 19,000 broiler growing contracts and just over 
40 live poultry dealers engaged in broiler production, aggregate cost 
estimates are higher for broiler growers

[[Page 83261]]

than for live poultry dealers, though the rule has a significantly 
lower cost estimate for a single grower than for a single dealer.
    The new requirements in the rule are primarily disclosures of 
information by dealers to broiler growers. AMS does not expect that 
informing growers about their contracts and how they are ranked in the 
tournament system will cause frivolous lawsuits. Increased transparency 
through this final rule should improve confidence in the tournament 
system rather than undermine it.
    Comment: Groups representing poultry growers said they agree with 
AMS that the benefits of the proposed rule outweigh the costs. They 
suggested that benefits for poultry growers include being able to 
predict their range of income for the coming year and having 
transparency about the quality of inputs provided by the live poultry 
dealer. These commenters also said that additional benefits to poultry-
dependent communities could include fewer growers going into debt to 
build facilities and consequently fewer abandoned poultry houses 
degrading the value of farms and the community. Industry groups said 
they do not believe estimates of benefits are well-founded, and that 
the calculation of benefits merely attempts to quantify the revenue 
reduction poultry growers would be willing to accept in exchange for 
increased transparency under the proposal.
    AMS response: USDA estimated that some of the benefits of the rule 
would come from reduced revenue uncertainty associated with greater 
transparency. The greater transparency would include a tighter range 
around predicted income due to such factors as a higher probability of 
receiving a new contract and lower variability in compensation under 
the contracts due to greater transparency about input quality as it 
relates to revenue. USDA also listed a number of benefits in 
qualitative terms, as it does not have the information to estimate 
empirical values associated with them.
    AMS expects that if property values change due to final Sec. Sec.  
201.102 or 201.104, the change would be very small. Broiler growers who 
abandoned housing and exited the industry will not benefit from the 
rule and will have no incentive to remove the abandoned housing. For 
broiler growers that remain in the industry, expected gains would be 
modest relative to the costs removing buildings.
    The concept of risk aversion is well founded. It is the reason that 
insurance and futures and options exchanges exist, for example. The 
risk aversion benefits estimated for the rule represent the value to 
growers of a decrease in the uncertainty of revenue due to increased 
transparency. Since growers do not have to pay for the increased 
transparency, the estimated benefit to growers is the same as their net 
benefit (i.e., the gross benefit minus the cost to growers of increased 
transparency). And at the industry level, even with the small decrease 
in grower revenue uncertainty assumed for the analysis, the benefits to 
growers are higher than the cost to dealers of complying with the rule.

L. Legal Issues Relating to the Proposed Rule

    Comment: Industry groups argued AMS lacks authority to issue this 
rule. A commenter said that AMS asserts a broad mandate to rewrite 
private contracts and affect relationships between live poultry dealers 
and poultry growers, yet the Act's legislative history shows Congress 
intended for AMS's statutory authority to be much narrower in scope. A 
commenter cited a Supreme Court decision shortly after the Act's 
passage noting that Congress enacted the Act to ensure the free flow of 
livestock and prevent packers from using monopoly power to set unfair 
prices,\107\ as well as the 1935 expansion of the Act to include live 
poultry dealers, in which Congress said it targeted unfair, deceptive, 
and fraudulent practices and devices because ``they are an undue 
restraint and unjust burden upon interstate commerce.'' \108\
---------------------------------------------------------------------------

    \107\ Stafford v. Wallace, 258 U.S. 495, 514-15 (1922).
    \108\ Packers and Stockyards Act of 1921, Public Law 74-272, 
Sec.  501, 49 Stat. 648, 648 (1935).
---------------------------------------------------------------------------

    Commenters continued by arguing, for instance, AMS does not have 
authority to promulgate parts of the proposed rule it justifies based 
on the goal of achieving ``fair income'' for poultry growers or that 
characterize growing arrangements as incomplete contracts so it can 
target information asymmetry between dealers and growers. A commenter 
rejected the concept that the Act gives AMS authority to prevent 
information asymmetry in contracts between dealers and growers, stating 
that it has not established that the Act's prohibition on unfair, 
unjustly discriminatory, or deceptive practices applies to ``plainly 
written poultry growing arrangements.'' Commenters contended that many 
other lawful business arrangements do not encompass all conditions 
affecting compensation in the contract and that all real-world markets 
have some information asymmetry. A commenter also contended AMS's 
citation of FTC regulation under sec. 5 of the FTC Act, which Congress 
drew on in enacting the Act to support its targeting of information 
asymmetry, undermines its authority in relation to the proposed rule. 
According to this commenter, this section was interpreted at the time 
of the Act's enactment to ``prohibit anti-competitive and monopolistic 
conduct, but not to restrict legitimate corporate activity'' such as 
the tournament system.
    A meat and poultry industry association said AMS lacks statutory 
authority to justify disclosure of potentially confidential, 
proprietary, and competitively sensitive payment history information 
required in Sec.  201.102(d) of the final rule, as well as the 
requirement in Sec.  201.102(d)(4) of the final rule that live poultry 
dealers must disclose contact information for State university 
extension service offices or county farm advisor's offices. The 
commenter also said if, as implied under Sec.  201.102(g)(1)--Grower 
Receipt of the final rule, AMS is taking the position that live poultry 
dealers can violate sections 202(a) and 202(b) of the Act even if they 
do not harm competition, it is acting without statutory authority, as 
Congress enacted the Act to curb monopolies and courts have 
consistently held that the statute only prohibits anticompetitive 
practices.
    AMS response: AMS disagrees that competition was at the time of 
enactment, or is now, the controlling factor for all regulations issued 
under the Act. Moreover, even where relevant, competition for the 
purposes of Section 202 must be defined by the plain meaning of Section 
202, which defines the scope of USDA's authority. Therefore, the 
meaning of competition or harm to competition must be broader than its 
meaning under the antitrust laws.\109\
---------------------------------------------------------------------------

    \109\ See Spencer Livestock Com. Co. v. Department of 
Agriculture, 841 F.2d 1451 at 1455 (9th Cir. 1988) (The Packers and 
Stockyards Act is more than ``a mere mirror of the antitrust 
laws'').
---------------------------------------------------------------------------

    As USDA noted in a 2010 proposed rule, a 2016 interim final rule, 
and a 2017 final rule,\110\ it has consistently taken the position that 
``in some cases, a violation of section 202(a) or (b) can be proven 
without proof of predatory intent, competitive injury, or likelihood of 
competitive injury.'' Scope of Sections 202(a) and (b) of the Packers

[[Page 83262]]

and Stockyards Act, 81 FR 92566, 92567 (Dec. 20, 2016); see also Scope 
of Sections 202(a) and (b) of the Packers and Stockyards Act, 82 FR 
48594, 48595 (Oct. 18, 2017); Implementation of Regulations Required 
Under Title XI of the Food, Conservation and Energy Act of 2008; 
Conduct in Violation of the Act, 75 FR 35338, 35340 (June 22, 2010).
---------------------------------------------------------------------------

    \110\ In the 2017 final rule, USDA withdrew the 2016 interim 
final rule out of concerns about confusion over the conflicting 
court decisions on this subject and the absence of a good cause 
justification for foregoing notice and comment. However, USDA 
reaffirmed its longstanding position that harm to competition is not 
required, which we again reaffirm here.
---------------------------------------------------------------------------

    USDA has previously explained that this consistently-held position 
is based on the language, structure, purpose, and legislative history 
of the Act. See, e.g., Scope of Sections 202(a) and (b) of the Packers 
and Stockyards Act, 81 FR at 92567-92568. USDA continues to adhere to 
this longstanding position, despite the disagreement of some courts as 
to the proper scope of the Act. See Scope of Sections 202(a) and (b) of 
the Packers and Stockyards Act, 82 FR 48596 (Oct. 18, 2017) 
(reaffirming that ``USDA has adhered to this interpretation of the P&S 
Act for decades'' and rejecting comments that this interpretation is 
not the USDA's longstanding position).
    Even where courts have disagreed with USDA's longstanding position 
that competitive harm is not required under these sections, some have 
not held that such a requirement would apply to a claim of deception 
under Sec.  202(a), as opposed to other claims such as unfairness 
claims. See, e.g., Been v. O.K. Industries, 495 F.3d 1217, 1227 (10th 
Cir. 2007) (``We are concerned here only with whether unfairness 
requires a showing of a likely injury to competition, not whether 
deceptive practices require such a showing.'') Such AMS authority to 
regulate deception is well-established. This includes forming the basis 
of a proposed consent decree between DOJ and two of the nation's 
largest poultry companies relating to the failure to provide the 
transparency that would be mandated under this rule. As DOJ set forth 
in its complaint: ``Poultry processors have also engaged in deceptive 
practices associated with the `tournament system.' Under this system, 
growers are penalized if they underperform other growers, but poultry 
processors control the key inputs . . . that often determine a grower's 
success. Poultry processors often fail to disclose the information that 
growers would need to evaluate and manage their financial risk or 
compare offers from competing processors.'' \111\
---------------------------------------------------------------------------

    \111\ U.S. v. Cargill Meat Solutions, Complaint, D. MD, July 25, 
2022, available at https://www.justice.gov/atr/case-document/file/1528331/download.
---------------------------------------------------------------------------

    The regulatory mechanism of disclosure, as set forth in this rule, 
is also well-established as a cure for deceptive practices that arise 
from information gaps in the marketplace, including AMS's disclosures 
already in place under the Act for settlement in the poultry sector, 
FTC's mandated disclosures by franchise companies to franchisees, and a 
range of other mandated disclosures by Federal and State regulators. 
Rather than undermining AMS's authority, a reference to FTC's sec. 5 
authority on deceptive practices is entirely appropriate, as courts 
have long recognized the similar design and application of the two 
provisions. Violations under FTC's sec. 5 deceptive practices authority 
do not require a showing of harm to competition.\112\
---------------------------------------------------------------------------

    \112\ Federal Trade Commission, Policy Statement on Deception, 
1983. See also, e.g., FTC v. Minuteman Press et al., E.D. N.Y. 
(1998), available at https://www.ftc.gov/legal-library/browse/cases-proceedings/minuteman-press-et-al. Morrone's Water Ice, Inc.; 
Franchise Consultants Corporation d/b/a Franchise Consultants Group; 
et al., E.D. Penn. (2003), available at https://www.ftc.gov/legal-library/browse/cases-proceedings/x020068-morrones-water-ice-inc-franchise-consultants-corporation-dba-franchise-consultants-group-et-al.
---------------------------------------------------------------------------

    Regardless, even if a showing of harm to competition were required 
for a deception claim, the deceptive practices prohibited in this rule 
would meet such a requirement. AMS rejects the idea that a prohibition 
on certain widespread deceptive practices is inconsistent with 
addressing anticompetitive conduct, including information asymmetries 
and the holdup and other anticompetitive risks that may arise from them 
and distort competition in the market for grower services.
    AMS affirms the longstanding view that fraud and deception have no 
value or place in a competitive market.\113\ Indeed, the academic 
literature has long understood that Section 202 covers two broad 
categories of conduct, (1) anticompetitive conduct and (2) conduct 
described as ``market abuses.'' <SUP>114</SUP> AMS seeks to enable 
growers to better protect themselves from hidden risks in contracting 
and the operation of those contracts. Preventing deception enhances 
competition among dealers by enabling growers to compare offers and 
reasonably assess entry into the business. Preventing deception 
improves how markets function by forcing dealers to compete for growers 
service based on the merits of commercial offer the producer is making. 
Preventing deception enables growers to better assess their performance 
vis-[agrave]-vis other growers.
---------------------------------------------------------------------------

    \113\ Bruhn's Freezer Meats, Inc. v. Department of Agriculture, 
438 F.2d 1332, at 1341 (mislabeling grading of meat violates section 
202); USDA v. Excel Corp, 397 F.3d 1285 (failure to disclose change 
in grading system violates section 202).
---------------------------------------------------------------------------

    Ultimately, the conduct at issue is squarely within the purposes of 
the Act. Where conduct ``prevents an honest give and take in the 
market,'' it ``deprives market participants of the benefits of 
competition'' and ``impedes . . . a well-functioning market.'' \115\ In 
its report on the 1958 amendments to the Packers and Stockyards Act, 
the U.S. House of Representatives explained that the statute promotes 
both ``fair competition and fair trade'' and is designed to guard 
``against [producers] receiving less than the true market value of 
their livestock.'' \116\ Deception subverts normal market forces, 
undermines market integrity, and deprives producers and growers of the 
true value of their products and services.
---------------------------------------------------------------------------

    \115\ Kades, 55, also quoting the FTC.
    \116\ Kades at 55.
---------------------------------------------------------------------------

    Comment: Poultry grower groups argued that AMS has both authority 
and obligation to implement the rule. These commenters said the Act 
authorizes the Secretary of Agriculture to make rules necessary to 
carry out its provisions, and one of its cornerstones is ensuring that 
business arrangements between live poultry dealers and growers are not 
unfair, unjustly discriminatory, deceptive, or facilitating undue 
preferences. They contended that, because the proposed rule aims to 
improve the information asymmetry between dealers and growers so that 
violations of the Act no longer persist unchecked, its requirements 
clearly fall within AMS's rulemaking authority. The commenters also 
cited evidence that Congress intended the Act to go beyond previous 
antitrust laws to target an expansive range of anticompetitive conduct 
by meat companies.
    AMS response: AMS affirms the view that the conduct that may be 
prohibited under the Act is more expansive than that which is covered 
under the Sherman Act, 15 U.S.C. 1 et seq., the Clayton Act, 15 U.S.C. 
12 et seq. or the FTC Act, 15 U.S.C. 41 et seq., and in particular, 
that deceptive practices sought to be prohibited by the rule fall 
within the authority of the Act.
    Comment: Live poultry dealers and industry groups argued that the 
proposed rule is beyond the scope of congressional direction. They said 
that there was a lack of further congressional action since the Food, 
Conservation, and Energy Act of 2008 (2008 Farm Bill; Pub. L. 110-234; 
June 18, 2008) and that AMS has completed its rulemaking under the 2008 
Farm Bill. This, the commenters assert, indicates that Congress views 
the current framework as adequate.

[[Page 83263]]

    These commenters also cited the major questions doctrine put forth 
by the recent Supreme Court decision in West Virginia v. Environmental 
Protection Agency \117\ as a limiting factor for AMS's authority to 
promulgate this rule. According to these commenters, the issue of 
whether the Federal Government should further regulate poultry growing 
contracting has political and economic significance, and AMS has not 
demonstrated clear congressional authorization to exercise its powers 
on this issue, meaning the agency lacks the authority for this rule. 
Poultry grower groups argue that the proposed rule does not trigger the 
major questions doctrine because, rather than making a radical change 
based on vague authority, it is based on clear congressional mandates 
and represents only incremental improvements to the preexisting 
regulatory regime. These commenters further contended that sec. 202 of 
the Act, which enumerates the practices Congress has deemed unlawful, 
provides a clear and forceful statement of AMS responsibility to 
regulate such practices.
---------------------------------------------------------------------------

    \117\ 142 S. Ct. 2587 (2022).
---------------------------------------------------------------------------

    AMS response: AMS exercises its statutory authority under the Act, 
which includes authority to address deceptive practices. The lack of 
congressional action since the 2008 Farm Bill does not impact the scope 
of AMS's authority under the Act.
    With respect to the major questions doctrine, there is no 
indication that this regulation is of such economic and political 
significance that the Congress did not give the Secretary authority to 
write a regulation of this kind. In West Virginia, 142 S. Ct. at 2604, 
the Court noted that EPA's modeling ``would entail billions of dollars 
of compliance costs[.]'' In comparison, this rule will cost less than 
10 million dollars over the course of the next decade. Sec. 407 of the 
Act gives AMS the authority to ``make such rules, regulations, and 
orders as may be necessary to carry out the provisions of'' the Act. 7 
U.S.C. 228. Moreover, at least one court has concluded that Congress 
intended for the USDA to have broad regulatory power under the Packers 
and Stockyards Act. As the Court of Appeals for the Eighth Circuit 
observed in Bruhn's Freezer Meats of Chicago, Inc. v. U.S. Dep't of 
Agric., 438 F.2d 1332, 1339 (8th Cir. 1971), ``[t]he Act was framed in 
language designed to permit the fullest control of packers and 
stockyards which the Constitution permits, and its coverage was to 
encompass the complete chain of commerce and give the Secretary of 
Agriculture complete regulatory power over packers and all activities 
connected therewith. H.R. Rep. No. 324, 67th Cong., 1st Sess. (1921); 
H.R. Rep. No. 77, 67th Cong., 1st Sess. (1921).''
    As noted above, AMS has long maintained disclosure requirements 
under the Act with respect to poultry contracting and the operation 
thereof, including settlement payment disclosures. Further, regulation 
of the communication to producers under related regulations is not at 
all unusual: buyers in grade and yield transactions must provide 
accurate accounting and provide the basis of the grade. Similarly, FTC 
has long required disclosures under its Franchise Rule \118\ to address 
similar deception risks for business owners seeking to enter into a 
franchise relationship with a franchisor. In this rule, AMS updates its 
disclosure rules to reflect the realities of modern poultry growing, 
which are comparable to a franchisor-franchisee contractual 
relationship, including with respect to taking out debt, taking into 
account the range of other risks relating to doing business in this 
sector such as trust and compliance issues as exemplified by a recent 
DOJ poultry industry price fixing prosecution and Packers and 
Stockyards Act deceptive practices investigation resulting in a number 
of guilty pleas and consent decrees.\119\
---------------------------------------------------------------------------

    \118\ 16 CFR parts 436 and 437.
    \119\ Plea Agreement: U.S. v. Pilgrim's Pride Corp., Feb. 23, 
2021, 20-cr-00330-RM, available at https://www.justice.gov/atr/case-document/file/1373956/download. Consent Decree: U.S. v. Cargill Meat 
Solutions. Corp., et al. (Sanderson Farms, Inc., Wayne Farms, LLC), 
July 25, 2022, 1:22-cv-01821-ELH, available at https://www.justice.gov/opa/pr/justice-department-files-lawsuit-and-proposed-consent-decrees-end-long-running-conspiracy.
---------------------------------------------------------------------------

    Comment: Live poultry dealers and industry groups argued that AMS 
relied on anecdotes and did not cite actual violations of the Act that 
would justify the proposed rule. These commenters indicated that the 
administrative record thus does not support a rulemaking on poultry 
grower contracting at this time, especially one likely to have 
significant costs affecting supply chains. State attorneys general and 
groups representing poultry growers noted a proposed settlement 
agreement between DOJ and poultry processors \120\ stemming from the 
recent wage suppressing conspiracy and Packers and Stockyards Act 
deceptive practices investigation that includes disclosure requirements 
similar to those in the proposed rule. Groups representing poultry 
growers suggested this consent decree indicates that these companies 
are capable of running their businesses under fairer and more 
transparent conditions.
---------------------------------------------------------------------------

    \120\ U.S. v. Cargill Meat Solutions. Corp., et al. (Sanderson 
Farms, Inc., Wayne Farms, LLC), July 25, 2022, 1:22-cv-01821-ELH, 
available at https://www.justice.gov/opa/pr/justice-department-files-lawsuit-and-proposed-consent-decrees-end-long-running-conspiracy.
---------------------------------------------------------------------------

    AMS response: AMS chose to take a regulatory approach, as opposed 
to case-by-case enforcement, to enable it to better tailor its approach 
to addressing the concerns under the Act that AMS has identified in the 
poultry sector, especially relating to broiler chickens. Such an 
approach permits AMS to transparently engage the public, industry, 
Congress, and others, and obtain the benefit of accepting public 
comments during the regulatory process. Yet, as indicated by the State 
attorney general commenters, AMS has also determined it appropriate to 
refer cases regarding deception in the failure to disclose important 
information regarding financial risks in poultry growing arrangements 
and the operation of those arrangements to DOJ for handling as 
circumstances warrant, as exemplified by the recent consent decree 
whereby the nation's third largest poultry processor agreed to provide 
the disclosures as set forth in the proposed rule and updated by this 
final rule. This case and settlement indicate both the seriousness of 
the ongoing deceptive practices violation, as well as the 
appropriateness and workability of the remedy defined by this rule.
    Comment: Several farm bureaus suggested the rule should have been 
an interim final rule, rather than a final rule, to give AMS the 
regulatory flexibility to immediately address any effectiveness issues 
with the disclosures. Groups representing poultry growers said the 
proposal's required disclosure of material information to protect 
parties to asymmetrical business relationships is a longstanding policy 
tool for promoting healthier markets and does not violate any 
``cognizable right,'' including dealers' First Amendment rights. Groups 
representing poultry growers also urged AMS to affirm its 
interpretation of secs. 202(a) and (b) of the Act to not require a 
harm-to-competition standard, as it is highly difficult for farmers to 
meet this standard, and argued that USDA's December 2020 ``undue 
preferences'' rule \121\ creates a substantial loophole for

[[Page 83264]]

dealers by allowing them to justify actions they claim are a 
``reasonable business decision.'' An industry group said the heightened 
disclosure requirements between dealers and growers in the proposed 
rule may raise competitive concerns by creating an information exchange 
of specific and competitively sensitive information between a wide 
range of actual and potential competitors. The commenter also said 
marketing agreements may experience a chilling effect, as increased 
transparency may lead dealers to offer growers uniform contract terms 
that diminish competition as well as individual growers' marketing 
power.
---------------------------------------------------------------------------

    \121\ Agricultural Marketing Service, ``Undue and Unreasonable 
Preferences and Advantages Under the Packers and Stockyards Act, 
Final Rule, Dec. 11, 2020, 85 FR 79779, available at https://www.federalregister.gov/documents/2020/12/11/2020-27117/undue-and-unreasonable-preferences-and-advantages-under-the-packers-and-stockyards-act.
---------------------------------------------------------------------------

    AMS response: AMS notes the commenters' interest in an interim 
final rule. An interim final rule is generally reserved for situations 
where the agency, for good cause, finds that prior notice is 
``impracticable,'' ``unnecessary,'' or ``contrary to the public 
interest,'' in which case the agency may issue a final rule without 
providing the usual notice and comment required by the Administrative 
Procedure Act (APA).\122\ However, because AMS has already solicited 
comments on the proposed rule, it is unnecessary to issue an interim 
rule and make a good cause finding to justify non-compliance with the 
APA's notice and comment requirements.
---------------------------------------------------------------------------

    \122\ 5 U.S.C. 553(b)(B).
---------------------------------------------------------------------------

    AMS further affirms that no further showing is required to prove a 
violation of the Act beyond a violation of the provisions set forth in 
this rule.
    AMS believes that the provision of additional information to 
growers will improve the competitive market conditions by allowing 
growers to better understand, evaluate, and compare contracts among 
dealers, enhancing their ability to bargain efficiently by reducing 
deceptive practices. Deception has no competitive value or place in the 
market and can create inefficiencies. AMS is skeptical that contract 
terms will necessarily become more uniform and further finds that the 
new transparency will allow live poultry dealers to compete for growers 
on the merits of their contracts and aid in marketplace innovation as 
live poultry dealers and growers remain free to develop new and 
innovative methods for conducting their business. Previous AMS 
rulemakings related to disclosures in poultry growing have not been 
shown to negatively affect innovation.
    With respect to information exchanges, AMS notes that statistical 
sharing services today routinely collect and make available a wide 
range of information only to live poultry dealer subscribers. AMS has 
tailored the disclosures to provide information useful to growers in 
their particular circumstances and has reduced requirements such as the 
disclosure of information across all complexes in part to reduce risks 
of inappropriate information sharing.

M. Other Comments About the Proposed Rule

    Comment: A farm bureau recommended adding several requirements for 
grower contracts, such as: performance verification provisions to 
protect growers from arbitrary company sanctions on bird placements; 
clear statements of layout times (i.e., time between flock placements) 
and company compensation for extended periods of reduced or no bird 
placements; a requirement that contracts should not be subject to 
change by the company without prior agreement from the grower; starting 
pay rates that allow amortization of debt load in 10 years, cover 
normal expenses, and provide the grower a livable income; additional 
compensation for above-average feed conversion; and company 
responsibility for low performance based on company-provided inputs. In 
addition, the commenter recommended that contracts clearly disclose 
risks and provide grower protections against early termination, and 
that live poultry dealers provide growers with ample time to review 
contracts. This commenter said contracts that require arbitration for 
grower disputes should also require arbitration for dealer disputes, 
while another farm bureau said AMS should ban mandatory arbitration 
clauses in contracts.
    AMS response: AMS shares many of the concerns expressed in the 
above comment summary. Improved transparency including contract 
requirements requiring minimum flock placements and minimum density 
will reduce asymmetric information problems and address many of the 
issues related to flock placements and out time. Additionally, this 
regime will deter dealers from constant contract modifications that 
would trigger a new Disclosure Document. Further, AMS views the 
financial disclosures required in this rule as appropriate to inform 
growers of revenues, potential profitability, and debt management. 
Growers maintain the statutorily protected right to opt out of 
arbitration. Therefore, no changes were made to the proposed rule.
    Comment: A poultry grower group indicated the rule does not address 
the lack of transparency associated with farm research and development. 
The commenter explained that poultry companies do not own their own 
farms; therefore, research and development for farm-level changes 
cannot take place within the company's business infrastructure. 
According to the commenter, the result is that major dealers benefit 
from expensive research and development efforts, and the unknowing 
poultry growers routinely shoulder the burden of live poultry dealer 
``experiments'' with neither consent from nor compensation for the 
grower.
    To stay ahead of the field and make advancements, according to the 
commenter, companies use a few common strategies, such as merging with 
and acquiring smaller companies that are pioneers in new fields, 
leveraging financial and political influence over research at 
universities, and experimenting through mandatory trial-and-error 
efforts on contract farms, such as studying the effect of windows in 
chicken houses and introduction of slow-growth chickens as a research 
program with associated adjustments in flock schedules for growers.
    The commenter provided an example of growers being required to 
change growing practices due to the increased value of chicken paws 
(feet) without seeing a benefit. Multiple farmers contracting with 
three different integrators have come to the commenter expressing 
concerns about having to change growing practices to promote the health 
of chicken paws. No farmer was compensated for these changes according 
to the commenter; however, the companies have experienced a financial 
windfall because of growing demand in China for chicken paws. According 
to the commenter, farmers spent their own time and energy to increase 
company profits and that effort was not reflected in their tournament 
ranking.
    AMS response: AMS shares some of the concerns cited above, 
particularly with regard to practices resembling ``trial and error'' 
experimentation at the expense of contract growers. To the extent that 
programs of this type are a change in housing specification, new 
disclosures would be required for growers to evaluate the benefit. 
Where adjustments to management practices cause growers to incur 
additional costs and are not covered in the contract, a new contract 
may be required, again triggering a new Disclosure Document. 
Separately, AMS has proposed rules to better protect growers' rights to 
organize associations and cooperatives, which may enable them to more 
effectively

[[Page 83265]]

work together and bargain under existing laws.\123\ Therefore, no 
changes to the proposal are warranted.
---------------------------------------------------------------------------

    \123\ Agricultural Marketing Service, ``Inclusive Competition 
and Market Integrity,'' Proposed Rule, Oct. 3, 2022, 87 FR 60010, 
available at https://www.federalregister.gov/documents/2022/10/03/2022-21114/inclusive-competition-and-market-integrity-under-the-packers-and-stockyards-act.
---------------------------------------------------------------------------

    Comment: A group representing poultry growers noted that, under the 
proposed rule, live poultry dealers will still control most of the 
production inputs, which fails to close the extreme disparity in 
bargaining power between growers and dealers. Based on the experience 
of growers in its network, the commenter described several problems it 
anticipated will remain even if the proposed rule is implemented.
    The commenter stated debt accumulation is a problem that will 
remain even if the rule is implemented. The commenter stated that 
growers lack leverage to negotiate favorable contract terms, often 
incurring substantial debt loads as they invest significant amounts of 
money in poultry houses and in modifications and upgrades that dealers 
require as a condition of contract renewal. According to the commenter, 
growers are then stuck paying back the loans to the same companies that 
required them to make the investments in the first place, leading to 
``crippling accumulations of debt'' resulting in numerous bankruptcies, 
and the amount of this debt is expected to increase.
    Finally, the commenter said there are limited legal resources 
available to farmers to fight against poultry companies, with time and 
legal costs deterring farmers from seeking justice in court. According 
to the commenter, while the proposed rule provides some legal recourse 
for controversies related to the Disclosure Document and poultry 
growing arrangements, the exchange of information between growers and 
dealers is not sufficient and the costs of litigation are still often 
prohibitive.
    AMS response: AMS is concerned about poultry grower debt 
accumulation. AMS is confident the disclosure regime outlined in this 
proposal will provide baseline information relating to revenue and 
profitability of their operations, improving grower debt management. As 
housing specifications evolve and new investments are mandated, under 
this rule, growers will receive additional required disclosures that 
will better enable growers to assess additional capital investments. 
AMS will continue to review capital improvement programs and evaluate 
those programs under existing Sec.  201.216. AMS encourages growers 
with specific concerns to submit complaints and tips through 
farmerfairness.gov or to contact AMS directly at 1-833-DIAL-PSD (1-833-
342-3773).
    Comment: Commenters recommended AMS require dealers proposing or 
requiring modifications to existing grower infrastructure housing 
specifications to disclose their own cost-benefit analysis to growers. 
Further those commenters said that any finding that any such cost/
benefit disclosures are broadly fallacious, i.e., that where the 
dealer's cost-benefit claims did not match the actual costs and 
benefits, should constitute a violation of the Act as a deceptive 
practice.
    AMS response: While this rule does require some financial 
disclosures related to additional capital improvements and other 
deviations from the prior five-year grower payments, AMS is not 
requiring the production and disclosure of a dealer's cost-benefit 
analyses because AMS is not prepared, at this time, to assess all 
potential cost-benefit factors, as well as the necessary formatting and 
recordkeeping requirements that would be implicated. In the interim, 
AMS will also continue to review grower solicitation practices and 
inducement materials. Practices and materials that are deceptive have 
and will continue to be violations of the Act. AMS is not adopting such 
a requirement at this time but may consider the value of such a 
disclosure as part of future steps. In particular, AMS is reviewing 
this issue in light of comments received on the June 2022 ``Advance 
Notice of Proposed Rulemaking on Poultry Tournaments: Fairness and 
Related Concerns'' and may elect to address issues related to 
additional capital investments in future rulemakings.
    Comment: Commenters also wanted AMS to require live poultry dealers 
to give poultry growers a minimum of 6 months to begin any upgrades 
they might demand.
    AMS response: AMS is also not at this time adopting any 
requirements relating to the timing for when housing upgrades could be 
required. The request by commenters is not within the scope of this 
rule, and AMS needs additional time to consider the matter. AMS will 
consider the matter as part of comments received to the June 2022 
``Advance Notice of Proposed Rulemaking on Poultry Tournaments: 
Fairness and Related Concerns.''

VIII. Regulatory Analyses

A. Executive Orders 12866, 13563, and 14094

    AMS is providing a regulatory analysis in conformance with the 
requirements of Executive Orders 12866--Regulatory Planning and Review, 
13563--Improving Regulation and Regulatory Review, and 14094--
Modernizing Regulatory Review, which direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits, including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity. Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, reducing costs, harmonizing rules, and promoting flexibility. 
Executive Order 14094 reaffirms, supplements, and updates Executive 
Order 12866 and further directs agencies to solicit and consider input 
from a wide range of affected and interested parties through a variety 
of means.
    In the development of this rule, AMS considered several 
alternatives, which are described in the Regulatory Impact Analysis, 
below.
    The final rule is not expected to provide, and AMS did not 
estimate, any environmental, public health, or safety benefits or 
impacts associated with the proposed rule.
    This final rule has been determined to be significant for the 
purposes of Executive Order 12866 and therefore has been reviewed by 
the Office of Management and Budget (OMB). Details on the estimated 
costs of this final rule can be found in the rule's economic analysis.
    AMS is amending 9 CFR part 201 by adding new definitions to Sec.  
201.2, adding new Sec.  201.102 regarding contract and disclosure 
requirements for live poultry dealers engaged in broiler production, 
and adding new Sec.  201.104 regarding live poultry dealer 
responsibilities when they use poultry grower ranking systems to settle 
payments for broiler growers. Based on its familiarity with the 
industry, AMS's Packers and Stockyards Division (PSD) prepared an 
economic analysis of the final rule as part of the regulatory process. 
The economic analysis includes a cost-benefit analysis of the rule. PSD 
then discusses the impact on small businesses.

B. Regulatory Impact Analysis

    As a required part of the regulatory process, AMS prepared an 
economic

[[Page 83266]]

analysis of the costs and benefits of final Sec. Sec.  201.102 and 
201.104.
    The poultry industry is highly vertically integrated. That is, a 
single entity owns or controls nearly all the steps of poultry 
production and distribution. Poultry production contracts reduce the 
costs for live poultry dealers of negotiation with individual growers 
over the purchase of individual flocks of poultry and relieve live 
poultry dealers from the burden and risks of owning and maintaining 
poultry houses. The growout portion of production is largely 
accomplished through contract growers, who bear these burdens and 
risks. Most poultry, and particularly broilers, are grown under 
production contracts.
    The USDA National Agricultural Statistics Service's (NASS) Census 
of Agriculture (Agricultural Census) reported that 96.3 percent of 
broilers were raised and delivered under production contracts in 
2017.\124\ Live poultry dealers place chicks in poultry houses owned by 
contract growers. Typically, live poultry dealers provide young 
poultry, feed, medication, and harvest and transportation services to 
these poultry growers, who house, feed, and tend the growing birds.
---------------------------------------------------------------------------

    \124\ USDA, NASS. 2017 Census of Agriculture: United States 
Summary and State Data, (April 2019): 7, 56.
---------------------------------------------------------------------------

    In order to grow poultry on a commercial scale, a poultry grower 
must invest in poultry housing. The investment is often substantial. 
Most farms have multiple houses, and the total investment required can 
easily exceed $1 million. Also, the housing is built and equipped 
specifically for the purpose of growing poultry. The costs of adapting 
the housing for any other purpose can be prohibitive.\125\ Because the 
live poultry dealers control most aspects of a grower's production, 
growers are dependent upon the actions of the live poultry dealers to 
recoup the grower's substantial and specific investment. This puts 
growers in a particularly precarious position in which contract growers 
have only a small number of live poultry dealers with whom to do 
business in almost all geographic markets within the United States.
---------------------------------------------------------------------------

    \125\ For a discussion of the difficulty in adapting of broiler 
grow houses for other purposes, see Vukina and Leegomonchai 2006, 
Op. Cit.
---------------------------------------------------------------------------

    Broiler industry vertical integration leads to many risks being 
borne by contract poultry growers. Due to the large investment required 
of poultry growers, the financial risk of protecting that investment is 
substantial. Because live poultry dealers maintain such heavy influence 
over many key aspects of growers' production, growers have significant 
exposure to liquidity risks, should flock placements and revenues fall.
    Thus, contract poultry growers are subject to numerous risks 
associated with live poultry dealers' control over key aspects of their 
operations, such as the frequency and density of flock placements, and 
the related risks of not having control over the genetic quality or 
health of the chicks placed by the live poultry dealers. Live poultry 
dealers control the scheduling of feed deliveries, which also can 
impact feed conversion and thus grower pay. Also, production variables 
such as bird target weights and growout periods are determined by the 
live poultry dealer, further adding to the risks borne by contract 
poultry growers.
    Live poultry dealers benefit from poultry growing contracts by 
having control over the quality and supply of inputs (birds) into the 
processing plant while remaining free from many of the risks related to 
capital investments in growing capacity, where those costs and 
associated risks are borne by the growers. On the other hand, contracts 
shift other risks from the grower to the live poultry dealer. With live 
poultry dealers responsible for chick genetics, feed quality, and other 
inputs (with the possible exception of fuel), changes in input prices 
do not directly affect growers. Growers also do not bear the risks (or 
enjoy the benefits) of price changes in the value of live poultry or 
poultry meat, as they do not own the poultry or poultry meat and thus 
do not sell it. Research on poultry growing contracts in the broiler 
market has shown live poultry dealers to shift that variation in input 
costs and output prices, which comprises up to 84 percent of the 
variation in returns to broiler production.<SUP>126 127</SUP>
---------------------------------------------------------------------------

    \126\ C.R. Knoeber and W.N. Thurman, ``Don't Count Your Chicken 
. . . : Risk and Risk Shifting in the Broiler Industry.'' American 
Journal of Agricultural Economics 77 (1995): 486-496.
    \127\ This research is regularly cited and reaffirmed in the 
current economics literature including Tsoulouhas and Vukina (2001) 
and McDonald (2014) that we cite elsewhere.
---------------------------------------------------------------------------

    The most common form of poultry growing contract is a relative 
performance contract, also known as a ``tournament'' contract in the 
industry. Tournament systems are a type of poultry contract under which 
the live poultry dealer assigns each grower to a settlement pool, which 
consists of all the growers' given flocks that the live poultry dealer 
processed in a given week. The live poultry dealer provides the grower 
with the production inputs of an initial supply of chicks and feed and 
veterinary support throughout the growing period; the grower provides 
the inputs of housing, water, electricity, labor, and management. At 
the time of processing, the live poultry dealer collects the finished 
broilers and calculates an average performance metric for the 
settlement pool, typically the feed-conversion ratio or similar metric. 
The grower's compensation under the tournament contract, is the sum of 
a base payment, which typically depends on the total liveweight of the 
finished birds and a payment or deduction based on the average 
performance metric for the settlement pool. For most tournaments, the 
payment or deduction formula is the difference between the grower's 
performance metric and the settlement's average, subject to a scaling 
multiplier. Production periods for poultry are sufficiently short that 
a grower will typically be in several tournaments in a year.
    Agricultural production is an inherently risky endeavor, and 
returns have some level of risk no matter the marketing channel or 
structural arrangement. For example, common production risks are 
systematic risks common to all growers in a given geography (which may 
coincide with a given tournament) such as weather or widespread 
disease, feed quality, or genetic strains. Academic research finds that 
where risks are likely to affect all growers in a region, compensation 
is less likely to be adversely affected under a tournament contract 
than it would be on a simple price per unit of weight contract.\128\ 
For example, if an unusual heat wave caused all growers in a tournament 
to experience poorer feed conversion, all tournament growers may 
require more feed and a longer grow period for their flocks to reach 
the target weight. They would receive the same pay for the weight 
produced, while not being penalized for the higher feed costs incurred 
to produce that weight. Some aspects of the tournament system are not 
necessary to account for these risks, however, and other contractual 
arrangements may account for the same risks without the concerns 
associated with the tournament system.
---------------------------------------------------------------------------

    \128\ See, e.g., Theofanis Tsoulouhas and Tomislav Vukina. 
``Regulating Broiler Contracts: Tournaments Versus Fixed Performance 
Standards,'' American Journal of Agricultural Economics 83 (2001): 
1062-1073.
---------------------------------------------------------------------------

    As noted, no contract type will protect growers from all market 
risks, and tournament contracts still leave growers exposed to some 
common risks. For example, when plants had to reduce processing 
capacity due to the COVID-19 pandemic, growers experienced

[[Page 83267]]

reduced compensation to the extent that they received fewer or less 
dense placements from the live poultry dealers.
    Tournament systems do not insulate growers from the other risks of 
contracts discussed above such as financial risk, liquidity risk, the 
risk from incomplete contracts, and the lack of control over inputs and 
production variables. Tournaments also introduce new categories of 
risks to growers, such as group composition risk and added risks of 
settlement-related deception or fraud. The risks of deception or fraud 
as discussed above include the inability of growers to verify the 
accuracy of payments, and to detect discrimination or retaliation.
    Group composition risk is the risk associated with the composition 
and performance of other growers in their settlement groups. A 
particular grower's pay is impacted by the performance of others in the 
tournament. Growers have no control over the other tournament members' 
effort and performance, nor over with which other growers they are 
grouped. An individual grower's effort and performance can be static, 
and yet that grower's payments could fluctuate based on the grower's 
relative position in the settlement group. Further, changes in payment 
may not be commensurate with the changes in grower's effort and 
performance. These characteristics of the tournament system can add to 
the variability of pay and affect the ability of growers to plan and 
measure their own effort and performance. On the other hand, the system 
is designed to incentivize participants to do their best in the hopes 
of gaining higher rewards.
    The integrators also determine which growers are in each settlement 
group. While growers in a group must have similar flock finishing 
times, a live poultry dealer could move a grower into a different 
grouping by altering layout times to change the week that a grower's 
broilers are processed. An individual grower may perform consistently 
in an average performing pool, but if the live poultry dealer places 
that grower in a pool with more outstanding growers, those outstanding 
growers raise the group average and reduce the fees paid to the 
individual. At its discretion or per the poultry growing arrangement, a 
live poultry dealer may remove certain growers it considers to be 
outliers from a settlement pool. This would likely affect the average 
performance standard for the settlement and affect the remaining 
growers' pay. Group composition risk can be more relevant to some 
growers when a tournament's settlement group contains growers with 
different quality or ages of grow houses.
    In addition, the current documentation of tournament terms provides 
little to no information on the expected variation between individual 
payments over time. Providing the settlement formula alone does not 
give growers a means by which they can predict total income over a 
meaningful period. More generally, an individual grower cannot estimate 
the variance in pay across periods with the same accuracy as the live 
poultry dealer with which he or she contracts. Information provided 
pursuant to this rule addresses this issue. Also, growers do not 
currently receive information that allows them to understand the impact 
of many live poultry dealer decisions made during the growout period 
that may affect grower incomes. For example, live poultry dealers may 
switch the genetics of chicks supplied to growers or change a feed 
ration or supplier. Increased information required in settlement 
disclosure regarding inputs and other factors will make it easier for 
growers to assess the impacts of these decisions and improve their 
ability to protect themselves against any systematic issues related to 
those decisions.
    Live poultry dealers benefit from tournaments systems, because they 
provide live poultry dealers more control and certainty of the total 
pay to all the growers in a settlement group. They also benefit from 
the system if it disincentivizes shirking with respect to production 
efficiency. However, the incentive to avoid shirking can be imparted in 
a fixed performance standard contract as well.
    There is asymmetry in the information available to live poultry 
dealers and the growers with whom they contract. Some of the 
information held by live poultry dealers would be valuable to growers 
because it influences grower compensation in tournament contracts and 
might help growers in negotiating contract terms and making decisions 
about capital investments and flock management.
    The contracts themselves are often incomplete and exhibit asymmetry 
in the information available to live poultry dealers and contract 
growers. Because live poultry dealers supply most of the inputs, much 
of the production information is available to the grower only from the 
live poultry dealer. For example, the contract grower may not know 
precisely how much feed it used, or how much weight the flock gained 
under his or her care, unless the live poultry dealer provides the 
information.
    Growers often lack negotiating leverage with live poultry dealers 
to demand transparency and completeness in contracts. Most growers have 
few live poultry dealers in their area with whom they can potentially 
contract. The table below shows the number of live poultry dealers that 
broiler growers have in their local areas by percent of total farms 
(number of growers), total birds produced (number of birds), and total 
production (pounds of birds produced).
---------------------------------------------------------------------------

    \129\ MacDonald. (June 2014) Op. Cit.
    \130\ MacDonald. (June 2014) Op. Cit. (Percentages were 
determined from the USDA Agricultural Resource Management Survey 
(ARMS), 2011. ``Respondents were asked the number of integrators in 
their area, which was subjectively defined by each grower. They were 
also asked if they could change to another integrator if they 
stopped raising broilers for their current integrator.'' The 7 
percent of those facing a single integrator assert that they could 
change, presumably through longer distance transportation to an 
integrator outside the area. Ibid. p. 29 and 30.)

                          Table 1--Live Poultry Dealers In Broiler Growers' Area \129\
----------------------------------------------------------------------------------------------------------------
                                                                                                Have additional
 Integrators in grower's area \130\         Farms             Broilers          Production       integrator in
                                                                                                      area
----------------------------------------------------------------------------------------------------------------
Number..............................                      Percent of total                      Percent of farms
                                     ---------------------------------------------------------------------------
1...................................               21.7               23.4               24.5                  7
2...................................               30.2               31.9               31.7                 52
3...................................               20.4               20.4               19.7                 62
4...................................               16.1               14.9               14.8                 71
>4..................................                7.8                6.7                6.6                 77
No Response.........................                3.8                2.7                2.7                 Na
----------------------------------------------------------------------------------------------------------------


[[Page 83268]]

    The data in the table show that 52 percent of broiler growers 
(farms), accounting for 55 percent of broilers produced and 56 percent 
of total production and, report having only one or two integrators in 
their local areas. This limited integrator competition may accentuate 
the contract risks. Even where multiple integrators are present, there 
can be significant costs to switching, including owing to the 
differences in technical specifications that integrators may require. 
To switch, the growers likely may need to invest in new equipment and 
learn to apply different operational techniques due to different 
breeds, target weights and growout cycles.
    Live poultry dealers hold information on how individual poultry 
growers perform under a variety of contracts. The mean number of 
contracts for the live poultry dealers filing annual reports \131\ with 
AMS in 2021 was 472. The largest live poultry dealers contracted with 
several thousand growers. Because live poultry dealers provide most of 
the inputs to all the growers in each tournament, the live poultry 
dealers have information about the quality of the inputs, while each 
grower can know only what he or she can observe. A grower almost 
certainly will not know about the inputs received by other growers. 
Live poultry dealers also have historical information concerning 
growers' production and income under many different circumstances for 
all the growers with which they contract, while an individual grower, 
like most other producers, has information concerning only its own 
production and income.
---------------------------------------------------------------------------

    \131\ All live poultry dealers are required to annually file PSD 
form 3002 ``Annual Report of Live Poultry Dealers,'' OMB control 
number 0581-0308. The annual report form is available to public on 
the internet at https://www.ams.usda.gov/sites/default/files/media/PSP3002.pdf.
---------------------------------------------------------------------------

    New growers entering the industry may have little or no experience 
from which to draw information for forming expectations for future 
input and maintenance costs or for evaluating the value of initial 
capital expenditures. Experienced growers entering into new contracts 
are limited to their own past experience to draw upon. Live poultry 
dealers have information from all their contractors about performance, 
costs, and expenditures.
    Compensation based on relative performance when growers are not in 
control of many of the inputs of production may create opportunities 
for live poultry dealer deception. It is also difficult, especially for 
new growers, to understand how compensation is likely to vary over time 
as a result of tournaments and other terms that may not currently be 
present in all contracts such as placement frequency and flock density. 
This problem of incomplete contracts is of particular concern due to 
the cost and lifespan of the capital required to be a poultry grower.
    With incomplete contracts, at least one party will have 
discretionary latitude to deviate from expectations.\132\ For example, 
poultry production contracts often do not guarantee the number of 
flocks a grower will receive even with long-term contracts, even though 
this is critical information for understanding the value of the 
contract to the grower.\133\ The type and frequency of required 
upgrades to existing equipment and housing are often left to the 
discretion of the live poultry dealer.
---------------------------------------------------------------------------

    \132\ Steven Y. Wu and James MacDonald, ``Economics of 
Agricultural Contract Grower Protection Legislation,'' Choices, 
Third Quarter, 2015, pp 1-6.
    \133\ MacDonald (June 2014) Op. Cit.
---------------------------------------------------------------------------

    Hold-up is a problem that occurs in poultry production contracts 
because the poultry grower's outlay of the significant capital 
requirements of growing chickens results in specialized equipment and 
facilities with little value outside of growing chickens. As a result, 
growers entering the market are tied to growing chickens to pay off the 
financing of the capital investment. Growers might fear that they will 
be forced to accept unfavorable contract terms because they must 
continue production to pay off lenders and have few, if any, 
alternative live poultry dealers with which they can contract. This can 
lead to underinvestment in the capital necessary to grow broilers.
Comments From the Proposed Rule and Changes to the Final Rule
    After consideration of public comments, AMS determined to adopt the 
proposed rule as a final rule with several modifications. In order to 
make compliance with the final rule as easy as possible for regulated 
entities, AMS reorganized the final rule by moving the new disclosures 
required into revised Sec.  201.102 and new Sec.  201.104. In the final 
rule, AMS removed the proposed revisions to Sec.  201.100 requiring all 
live poultry dealers to provide certain additional disclosures to 
prospective or current growers and placed the requirements in new Sec.  
201.102. AMS also moved the requirements from proposed new Sec.  
201.214 to new Sec.  201.104. This reorganization of the rule does not 
impact the recordkeeping requirements or costs of the final rule.
    A commenter representing the turkey industry noted the proposed 
rule was largely based on research into the broiler industry. The 
commenter asserted it would be extremely difficult for turkey companies 
to implement the rule due to differences between turkey and chicken 
production. Based on comments received to the proposed rule and AMS 
further study, AMS has limited the applicability of final Sec. Sec.  
201.102 and 201.104 to live poultry dealers engaged in the production 
of broilers. The final rule does not apply to live poultry dealers 
engaged in the production of turkeys, ducks, geese, and other domestic 
fowl. The proposed rule considered the costs and benefits to all live 
poultry dealers. This change reduced the number of live poultry dealers 
to whom the final rule applies from 89 respondents made up of live 
poultry dealers engaged in the production of broilers, turkeys, ducks, 
geese, and other domestic fowl under the proposed rule to 42 live 
poultry dealers engaged in the production of broilers in the final 
rule. Accordingly, this change reduced the costs and benefits from the 
proposed rule to the final Sec. Sec.  201.102 and 201.104. Existing 
provisions of Sec.  201.100 continue to apply to live poultry dealers 
engaged in the production of broilers, turkeys, ducks, geese, and other 
domestic fowl. The new provisions of Sec.  201.102 and the new Sec.  
201.104 apply only to live poultry dealers engaged in the production of 
broilers. AMS made several other changes to the proposed rule that are 
reflected in the final rule.
    Live poultry dealers commented that the full cost of the proposed 
rule would likely be many times greater than predicted by AMS. The 
commenters asserted AMS greatly underestimated the costs of creating 
the recordkeeping systems needed to comply with the proposed rule.
    Commenters suggested that AMS underestimated the amount of time 
required to create and maintain recordkeeping systems. They also 
suggested that AMS did not adequately consider the IT and legal costs 
or the cost of hiring compliance officers. Some live poultry dealers 
indicated that the rule would promote frivolous lawsuits, and suggested 
the requirement to list ongoing litigation would discourage settlement. 
Some commenters also indicated that disclosures would undermine the 
tournament payment system, forcing live poultry dealers to adopt less 
efficient methods of compensation, which would increase the price of 
chicken and ultimately increase inflation.
    AMS consulted auditors and supervisors who are familiar with live 
poultry dealers' records from many

[[Page 83269]]

years of experience with AMS in auditing live poultry dealers for 
compliance with the Act. AMS expects that recordkeeping systems that 
most live poultry dealers already have in place will enable them to 
gather much of the information in the disclosures from records they 
already have available to them and limit the necessity of developing 
new recordkeeping systems. AMS made no changes to the information 
collection requirements of the proposed rule based on this comment.
    AMS proposed to require live poultry dealers to make various 
financial disclosures to broiler growers, including a table showing 
``average annual gross payments'' made to growers at all complexes 
owned or operated by the live poultry dealer for the previous calendar 
year, as well as to growers at the local complex. Poultry and meat 
trade associations suggested AMS require dealers to disclose average 
annual gross payments only for the grower's local complex. These 
commenters noted that complexes in different geographic areas face 
different economic conditions, arguing that information about payments 
at other complexes would not be useful and would potentially confuse 
growers. Therefore, AMS removed the proposed requirement disclose 
payment information for all complexes owned or operated by the dealer. 
AMS maintains the requirement for live poultry dealers engaged in the 
production of broilers to disclose payment information only relating to 
the broiler grower's local complex. Accordingly, this change reduced 
the information collection burden on live poultry dealers from the 
proposed to the final rule.
    Growers and live poultry dealers also requested in comments that 
AMS provide more specificity on how to calculate average annual gross 
payments. While the proposed rule provided detail on calculations, the 
commenters felt the instructions were not sufficiently specific to 
assure that live poultry dealers could comply and that broiler growers 
received adequate data on which to base business decisions. Therefore, 
AMS developed more detailed instructions on how to calculate them. The 
instructions are included in Form PSD 6100 (Live Poultry Dealer 
Disclosure Document). AMS added a modest amount of time to its cost 
estimates for live poultry dealers to review the instructions.
    Several commenters recommended that AMS require the disclosure of 
grower turnover data. Grower turnover rates relate to the general risk 
of termination and non-renewal of contracts with a live poultry dealer. 
This information would allow growers to compare the turnover rates of 
multiple live poultry dealers as a risk factor when making contracting 
decisions. Therefore, AMS added a provision of the final rule requiring 
live poultry dealers engaged in the production of broilers to disclose 
average annual broiler grower turnover rates for the previous calendar 
year and the average of the 5 previous calendar years at both the 
company level and the local complex level. AMS developed instructions 
for how to calculate average annual broiler grower turnover rates. The 
instructions are included in Form PSD 6100. AMS added a modest amount 
of time to its cost estimates for live poultry dealers to review the 
instructions and calculate grower turnover rates.
    Numerous commenters from the grower and live poultry dealer sectors 
expressed that these provisions should be in plain and unambiguous 
language to avoid discrepancies in interpretation among the various 
parties, regulators, and courts. Some commenters also indicated a need 
to ensure growers who are not native speakers of English can understand 
the disclosures.
    Considering the comments, AMS added a provision at Sec.  
201.102(g)(4) of the final rule to require live poultry dealers engaged 
in the production of broilers to make reasonable efforts ensure that 
growers are aware of their right to request translation assistance, and 
to assist the grower in translating the Disclosure Document at least 14 
calendar days before the live poultry dealer executes the broiler 
growing arrangement, but the grower has the option to waive up to 7 
calendar days of that time period. Reasonable efforts include but are 
not limited to providing current contact information for professional 
translation service providers, trade associations with translator 
resources, relevant community groups, or any other person or 
organization that provides translation services in the broiler grower's 
geographic area. The rule would also prevent a live poultry dealer from 
restricting a broiler grower or prospective broiler grower from 
discussing or sharing the Disclosure Document for purposes of 
translation with a person or organization that provides language 
translation services. AMS also added a provision to Sec.  201.100 
preventing live poultry dealers from restricting growers from sharing 
the Disclosure Documents with legal counsel, accountants, family, 
business associates, and financial advisors or lenders.
    The proposed rule would have required live poultry dealers to 
provide growers with copies of the Disclosure Document and a true 
written copy of the contract 7 calendar days prior to executing the 
contract. The final rule changes the 7-day requirement to a 14-day 
requirement, but the broiler grower has the option to waive 7 calendar 
days of that time period. These changes did not affect the estimation 
of costs or benefits in the rule because growers retain the flexibility 
to determine the length of time they need to review the documentation.
    The proposed rule also would have required live poultry dealers to 
obtain the broiler grower's or prospective broiler grower's dated 
signature as evidence of receipt of the Disclosure Document or obtain 
alternative documentation acceptable to the Administrator as evidence 
of receipt. The final rule will require live poultry dealers to obtain 
the broiler grower's or prospective broiler grower's dated signature as 
evidence of receipt or obtain alternative documentation to evidence 
delivery and that best efforts were used to obtain grower receipt. AMS 
expects in either case live poultry dealers to engage in personal 
communications with the grower and the delivery of the Disclosure 
Document, resulting in comparable levels of effort by the live poultry 
dealer. Accordingly, these changes did not affect the estimation of 
costs or benefits in the rule.
    In the proposed rule, AMS did not specifically propose to require 
live poultry dealers to disclose their policies on grower payments with 
respect to increased lay-out time, diseased flocks, natural disasters 
and other depopulation events, feed issues or outages, or policies on 
grower appeal rights and processes. Multiple commenters suggested AMS 
include these disclosures. In the final rule, AMS added a provision at 
Sec.  201.102(c)(4) requiring live poultry dealers engaged in the 
production of broilers to disclose policies and procedures on increased 
lay-out time; sick, diseased, or high early mortality flocks; natural 
disasters, weather events, or other events adversely affecting the 
physical infrastructure of the local complex or the grower facility; 
other events potentially resulting in massive depopulation of flocks, 
affecting grower payments; feed outages including outage times; and 
grower complaints relating to feed quality, formulation, or 
suitability, as well as any appeal rights arising out of these events. 
AMS added a modest amount of time to its cost estimates for

[[Page 83270]]

live poultry dealers to comply with this new requirement.
    AMS proposed in Sec.  201.100(f)(1)(i) to require live poultry 
dealers to establish, maintain, and enforce a governance framework 
reasonably designed to audit the accuracy and completeness of the 
disclosures in the Disclosure Document, which must include audits and 
testing, as well as reviews of an appropriate sampling of Disclosure 
Documents by the principal executive officer or officers.
    AMS determined that the requirement in Sec.  201.102(f)(2) for the 
principal executive officer or officers to certify the governance 
framework and the accuracy of the Disclosure Document adequately covers 
the intended requirement for officers of this level to be focused on 
the effectiveness of the governance framework. AMS concluded that this 
level of detail about the audit process for the Disclosure Document was 
not necessary, particularly as AMS seeks to balance the need to ensure 
reliability of these statements with the burden on the principal 
executive officers regarding details of the governance process. 
Therefore, AMS removed the proposed requirement for audit, testing, and 
reviews of an appropriate sampling of Disclosure Documents by the 
principal executive officer or officers, which reduces the burden on 
regulated entities.
    AMS expects Sec. Sec.  201.102 and 201.104 to mitigate costs 
associated with asymmetric information by requiring live poultry 
dealers to disclose more and potentially valuable information to 
growers. Section 201.102 requires live poultry dealers engaged in the 
production of broilers to make disclosures before entering into new 
contracts, renewing existing contracts, or requiring growers to make 
additional capital investments. Section 201.104 requires live poultry 
dealers engaged in the production of broilers to disclose additional 
information at the placement and settlement of each flock.
    AMS considered three alternatives to the final Sec. Sec.  201.102 
and 201.104. The first is ``do nothing'' or the status quo. All 
regulations under the Act would remain unchanged. It forms the baseline 
against which the second alternative, Sec. Sec.  201.102 and 201.104 
will be compared. The rule removes portions of the current Sec.  
201.100, which already requires disclosure from live poultry dealers, 
and replaces them with a more extensive set of disclosure requirements 
in Sec.  201.102 that only apply to live poultry dealers engaged in 
broiler production. Since the cost and benefit analysis are compared to 
the cost and benefits status quo, costs and benefits estimated here 
reflect only cost and benefits associated with the new requirements in 
Sec. Sec.  201.102 and 201.104.
    AMS considered a third alternative similar to Sec. Sec.  201.102 
and 201.104. The alternative would leave all of the requirements in 
Sec. Sec.  201.102 and 201.104 the same, but entirely exempt live 
poultry dealers engaged in broiler production that process less than 2 
million pounds per week. This third alternative would exempt smaller 
live poultry dealers, some of which might not have sophisticated 
records. However, since larger growers do most of the contracting (as 
quantified later in this analysis), most broiler growers would still 
receive the disclosures. AMS then estimated and compared the costs and 
benefits of the alternatives and selected Sec. Sec.  201.102 and 
201.104 as the preferred alternative to finalize.
Discussion of the Benefits of the Regulations
    The primary purpose of the final rule is to make information 
available to broiler growers when that information would be most 
important in decision-making. Currently, most broiler production 
contracts are incomplete, and providing more information would likely 
lower the uncertainty the grower faces over their revenue and profit 
estimates. In addition, growers lack negotiating leverage with live 
poultry dealers to demand, among other things, transparency, and 
completeness in contracts. A benefit of this regulation is that by 
providing prospective growers and those contemplating additional 
capital investments better information on expected returns, growers 
should be able to make more informed business decisions and can more 
readily avoid entering into contracts that are not financially 
sustainable. The regulation still retains the rights of broiler growers 
to discuss the terms of the broiler growing arrangement and the 
Disclosure Document with other growers for the same live poultry 
dealer, advisors, and governmental agencies even if the broiler growing 
arrangement contains a confidentiality provision. This facilitates 
better information sharing, decision making, and risk management. By 
alleviating market failures, disclosures may help the market for grower 
services function better and help growers benefit from competition in 
the market for their services.
    Better information on live poultry dealer commitments should reduce 
hold-up concerns that may stifle investment by growers. Better 
information and transparency on placements and settlements could reduce 
grower concerns over live poultry dealer manipulation of inputs and 
reduces the potential for deception or fraud, and the high degree of 
control and influence that the live poultry dealer has over many, if 
not most, of the critical inputs that will determine the business 
success of the grower's operation.
    Alternatively, the placement and settlement information could 
provide broiler growers with concrete information they can use to 
support, individually or collectively, any grievances they might have 
with a particular live poultry dealer. At the same time, this 
regulation provides growers a measure of protection against risks of 
retaliation or discrimination that may arise from disputes with live 
poultry dealers during the course of the broiler growing arrangement.
    Section 201.102 lays out the information that a live poultry dealer 
is required to provide to broiler growers contemplating a relationship 
with that live poultry dealer. The disclosure of information is 
required whenever a live poultry dealer seeks to renew, revise, or 
replace an existing broiler growing arrangement. In addition, such 
disclosure is required for any new contract as well as whenever a live 
poultry dealer is requiring an original capital investment or a change 
to existing housing specifications that require an additional capital 
investment. These are the times when the information will be most 
useful in informing broiler growers of the potential implications of 
entering into a contract with the live poultry dealer or contemplating 
additional investment in capital stock. This information allows 
potential growers to make more informed and financially sustainable 
business decisions. Inaccurate information provided in disclosure to 
growers, and other bait-and-switch tactics, such as making a material 
policy change but not through a new or revised contract, would be a 
deceptive practice and would constitute a violation of this section and 
Sec.  202(a).
    When a live poultry dealer requires a broiler grower to make a 
capital investment, the dealer is required to provide the grower with 
the capital specifications they are required to meet and with a letter 
of intent sufficient to seek financing, as well as a full disclosure of 
the terms of the agreement. This information allows more informed 
investment decisions and help potential lenders accurately assess risk.
    The Disclosure Document provides information on the length of the 
contract, number of guaranteed placements, stocking density, and 
notification of certain risks inherent in

[[Page 83271]]

the agreement. All this information helps to evaluate the longer-term 
viability of the investment and reduce hold-up fears.
    Grower awareness of minimum flock placements and minimum stocking 
densities enables growers to more accurately estimate the risks and 
returns associated with their operations including debt management, 
cash flow, and other risks. It may enable growers, as well as financial 
institutions, to better estimate and manage risk, potentially including 
the acquisition of external insurance and risk management products.
    In addition to information about the specific terms of the 
contract, information is provided to inform growers about the live 
poultry dealer's financial history and history of grievances with 
growers with whom they have contracted. This information also improves 
growers' ability to evaluate their decisions and the potential for 
hold-up related concerns.
    The Disclosure Document includes information on the level and 
distribution of payments made to broiler growers under contract to the 
live poultry dealer. It describes past and expected future annual 
returns for similarly situated growers based on the complex and the 
live poultry dealer's other complexes with the same housing 
specifications. It presents returns at various levels of performance, 
as not all growers perform equally relative to the fixed cost of entry, 
making it easier for potential growers to estimate their revenues from 
the contract. The Disclosure Document also provides insights into the 
variability of cash flow within any given year to enable the grower to 
improve business decision-making and manage risk. The increased 
information in the Disclosure Document on the expected levels and 
distributions of payments has the added benefit of lowering the 
uncertainty of revenue streams for contract broiler growers.
    The reliability of these disclosures would be reinforced by a 
governance framework and anti-fraud protections. In presenting this 
information to growers, the Disclosure Document reduces information 
asymmetry and the risk of fraud and deception. As a result, prospective 
growers and those contemplating additional capital investments have 
more confidence in the integrity of the information and consequently in 
their ability to make sound decisions.
    A live poultry dealer is required to provide the Disclosure 
Document to growers prior to their entering into an agreement to allow 
time to discuss the terms of the agreement with advisors, lawyers, 
business associates, bankers, USDA, or other extension organizations to 
obtain assistance in evaluating the agreement.
    Section 201.104 requires additional ongoing disclosure of 
information related to broiler grower ranking pay systems 
(``tournaments''). This information is focused on the actual 
distribution of inputs to growers at the time of placements and the 
outcomes of the ranking system. Some of this information improves 
growers' ability to manage the flocks under their care, while other 
information helps growers to evaluate the factors affecting the outcome 
of the ranking system.
    Lack of transparency in the tournament calculations has led to 
risks by growers relating to the potential for fraud and deception. 
These include grower inability to verify the accuracy of payments, to 
measure and manage risks, and to detect possible discrimination or 
retaliation for disputes arising under the broiler growing arrangement. 
The provision of additional transparency around tournament systems in 
this regulation is designed to address those risks. Provision of 
information regarding consistency of inputs (both at the time of 
placement and at the time of settlement), and any adjustments to 
methods or formulas, will foster more transparent, accurate, reliable, 
and widely accepted tournaments, and greater ability to monitor and 
hold live poultry dealers accountable for divergences from high 
standards of market integrity.
    Broiler growers who participate in numerous tournaments over time 
will benefit from the added information they receive at the time of 
placement and settlement, as they will gain experience and knowledge 
useful in maximizing their growout performance. Because live poultry 
dealer-provided inputs may vary from flock-to-flock, growers may 
enhance their knowledge and improve management practices and skills 
with access to input distribution information, particularly at the 
stage when the input is provided. The increased information in the 
settlement and placement disclosures will allow growers to assess the 
impacts of input variability on revenues over time, which will also 
serve to lower the uncertainty of revenue streams. Growers armed with 
this information may be better able to efficiently allocate resources, 
reduce uncertainty of revenue streams, and maximize their individual 
profitability.
    Confidentiality restrictions have historically prevented broiler 
growers from releasing details of contract pay and performance, thus 
limiting the availability of comprehensive data with which to consider 
the effects of alternative regulatory and institutional structures on 
market performance.\134\ Subsequently, the literature on these topics 
is insufficient to allow AMS to fully estimate the magnitude of the 
inefficiencies corrected by the rule, nor the degree to which the 
disclosure requirements and additional grower protections will address 
them. Though AMS is unable to completely quantify the benefits of the 
regulations, this analysis explains numerous benefits derived from 
increased information, reduced information asymmetries, and reduction 
in risk of deception by live poultry dealers. Each of the disclosures 
required under Sec. Sec.  201.102 and 201.104 of the rule provides 
information that will be useful to growers in making more informed 
decisions and reducing concerns resulting from lack of access to 
information.
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    \134\ For instance, the analysis of MacDonald (2014), MacDonald 
and Key (2014), and Vukina and Leegomanchai (2006) (Op. Cit.) relies 
on data from grower surveys. Knoeber and Thurman (1995) relies on 
contract settlement data from a single integrator.
---------------------------------------------------------------------------

    AMS estimated the industry benefits in two parts, one quantifiable 
and the other non-quantifiable. For the quantifiable part, AMS will 
provide a minimum value of the benefit to broiler growers from the 
additional information in the disclosures required under Sec. Sec.  
201.102 and 201.104 and will refer to this minimum benefit as 
G<INF>min</INF>.
    The quantifiable minimum benefit of the financial, placement, and 
settlement disclosures, G<INF>min</INF>, arises from the additional 
information available to growers that serves to lower the uncertainty 
in revenue streams of contract growers. Lower uncertainty in revenue 
streams results in a reduction in revenue risks to growers. According 
to economic principles, a risk averse grower will benefit economically 
from a reduction in revenue risk.\135\ AMS quantifies the benefit to 
growers from the reduction in revenue risk by estimating the Risk 
Premium (RP) to contract broiler growers from reducing variability of 
their net revenues from the disclosures. AMS will then use RP as 
G<INF>min</INF>, the quantifiable minimum benefit of the disclosures.
---------------------------------------------------------------------------

    \135\ A risk averse grower prefers revenue streams with low 
uncertainty to revenue streams with high uncertainty when both have 
the same mean return.
---------------------------------------------------------------------------

    However, Sec. Sec.  201.102 and 201.104 have additional, other non-
quantified benefits to growers and live poultry dealers, referred to as 
B<INF>O</INF>.\136\ These other benefits arise from a reduction in risk 
of retaliation by allowing growers to share

[[Page 83272]]

information even if the growing arrangement contains a confidentiality 
provision and reducing the potential for fraud and deception by live 
poultry dealers by providing better, more accurate, and verifiable 
information to growers. These other benefits may lead to an improved 
allocation of capital and labor resources (such as increased capital 
investment through the reduction in perceived hold-up risk, and more 
informed decisions on whether and with whom to enter into a growing 
arrangement), leading to improved efficiencies and an improved 
allocation of resources for broiler growers and live poultry dealers.
---------------------------------------------------------------------------

    \136\ In the context of this analysis, ``non-quantified'' is 
defined to include measures which are quantitative in principle but 
whose value cannot be estimated at present.
---------------------------------------------------------------------------

    AMS refers to the total benefits to the industry as B<INF>T</INF>, 
which is the sum of the quantified G<INF>min</INF>, and the non-
quantified B<INF>O</INF>, benefits or, B<INF>T</INF> = G<INF>min</INF> 
+ B<INF>O</INF>. AMS is not able to fully quantify the total benefits, 
B<INF>T</INF>, from improved grower information, more informed 
decision-making, reduced revenue uncertainty, grower risk reductions, 
and an improved allocation of resources. The benefits AMS was able to 
quantify exceed the costs AMS was able to quantify.
    AMS expects that the effects on the industry from the final rules 
will be very small in relation to the total value of industry 
production. In other words, AMS expects the impacts on total industry 
supply to be immeasurably small, leading to immeasurably small indirect 
effects on industry supply and demand, including price and quantity 
effects.
Estimation of Costs and Benefits of the Regulations
    AMS estimated costs and benefits for two alternatives. The first is 
the Sec. Sec.  201.102 and 201.104, which is the preferred alternative. 
The second alternative is the same as Sec.  201.102 and 201.104 with a 
complete exemption for live poultry dealers engaged in broiler 
production that process fewer than 2 million pounds per week. Both are 
compared against a baseline of status quo, which has no costs or 
benefits.
    The quantified costs of Sec. Sec.  201.102 and 201.104 primarily 
consist of the time required to gather the information and distribute 
it among the broiler growers. These costs of the rule will fall on live 
poultry dealers as they collect and disseminate the required 
information, and on broiler growers based on the value of the time they 
put into reviewing the disclosures. Though broiler growers are expected 
to incur costs in reviewing the information, they would be the primary 
beneficiaries of the information, which would be reflected in their 
ability to make more informed decisions. The broiler growers must 
review the information in order to realize the benefits. This may 
result in a more efficient allocation of capital to the broiler growing 
industry.
    There were 42 live poultry dealers to which the rule would apply 
that filed annual reports \137\ with AMS, and their reports indicate 
that they had 19,808 contracts with 16,524 broiler growers during their 
fiscal year 2021.
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    \137\ All live poultry dealers are required to annually file PSD 
form 3002 ``Annual Report of Live Poultry Dealers,'' OMB control 
number 0581-0308. The annual report form is available to public on 
the internet at https://www.ams.usda.gov/sites/default/files/media/PSP3002.pdf.
---------------------------------------------------------------------------

    AMS expects the total costs and benefits would be very small 
relative to the size of the market. Chicken sales in the U.S. for 2019 
were approximately $58.6 billion. The total quantified costs of 
Sec. Sec.  201.102 and 201.104 are estimated to be greatest in the 
first year at $3.4 million, or 0.006 percent (six thousandths of one 
percent) of revenues. Although an increase in cost of six-thousandths 
of a percent of sales could reduce supply, the reduction would be 
extremely small and would not measurably alter broiler supply. 
Provisions of final Sec.  201.202 and 201.204 require only disclosures 
to growers. Neither requires any changes in the way live poultry 
dealers or broiler growers produce or process broilers. Given the 
nature of the rule, AMS expects that neither live poultry dealers nor 
broiler growers would measurably change any production practices that 
would impact the overall supply of broilers.
    Expected quantified costs are estimated as the value of the time 
required to produce and distribute the disclosures required by 
Sec. Sec.  201.102 and 201.104 as well as the time required to create 
and maintain any necessary additional records. AMS's experience in 
reviewing live poultry dealers' records indicates that most live 
poultry dealers already keep nearly all of the required records.
    Final Sec.  201.102 requires live poultry dealers disclose 
information to broiler growers concerning the growout contract, capital 
investments, grower earnings, recent litigation, recent bankruptcies, 
and live poultry dealers' policies concerning events such as disasters 
or feed outages that might occur during the growout period. The 
disclosures will require live poultry dealers to retain records, but 
AMS experience in reviewing live poultry dealers' records indicates 
that most live poultry dealers already keep nearly all of the necessary 
records.
    Paragraph (a) of final Sec.  201.102 requires live poultry dealers 
to provide a true copy of a new contract as well as a Disclosure 
Document that is defined in the remaining paragraphs. When the new 
contract is associated with new housing or changes in the housing live 
poultry dealers are also required to provide a letter of intent that 
growers can present to lenders. Paragraph (b) of the final Sec.  
201.102 requires live poultry dealers to disclose certain terms of the 
contract including the live poultry dealer's contact information, 
length of the term of the agreement offered, annual minimum number of 
placements, and minimum stocking density. AMS is aware that live 
poultry dealers already keep copies of contracts because AMS commonly 
reviews growout contracts on letters of intent during live poultry 
dealer compliance reviews.
    Paragraph (c) of final Sec.  201.102 requires live poultry dealers 
to disclose a summary of litigation and bankruptcies in the last 5 
years. Although AMS does not commonly review records of past 
bankruptcies or litigation in live poultry dealer compliance reviews, 
courts keep records of litigation and bankruptcies that would enable 
live poultry dealers to disclose the required summaries. Paragraph (c) 
also requires live poultry dealers to disclose their policies 
concerning a number of events that could occur during the term of the 
contract, including increased layout times; high mortality birds, 
natural disasters, weather events, or other events adversely affecting 
the physical infrastructure of the local complex or the grower 
facility; depopulation of birds; feed outages; grower complaints 
concerning feed. In the event that the live poultry has no policy, 
paragraph (c) requires the live poultry dealer to disclose that it has 
no policy. AMS commonly reviews the types of policies in paragraph (c) 
of final Sec.  201.102, and AMS expects that live poultry dealers that 
have the relevant policies will have records of them.
    Paragraph (d) of final Sec.  201.102 requires records of annual 
turnover rates for the last 5 years and annual gross payments per 
square foot by complex and housing type. Current regulations under the 
Act generally require live poultry dealers to retain payment records 
for at least 2 years,\138\ and as noted below the final rule requires 
payment records under final Sec.  201.104(a) be retained for 5 years. 
Some disclosures required under final

[[Page 83273]]

Sec.  201.102 will inherently necessitate that the companies keep 
records sufficient to produce and substantiate the disclosure. For 
example, the dealer would need to keep the last 5 years of litigation 
records to support a disclosure about its litigation history. As a 
result, some live poultry growers may need to keep payment records for 
a longer period of time than they do today, but AMS experience 
indicates that most live poultry dealers already keep the records for a 
longer period. Live poultry dealers keep lists of the growers under 
contract, and AMS reviews indicate that most keep list of growers for 
at least 5 years.
---------------------------------------------------------------------------

    \138\ Section 401 of the Act and 9 CFR 201.94, 201.95, and 
203.4.
---------------------------------------------------------------------------

    Paragraph (f) of Sec.  201.102 requires live poultry dealers to 
create a governance framework to ensure the accuracy of the disclosure 
documents and paragraph (g) requires live poultry dealers to keep a 
receipt from growers indicating that the grower received the disclosure 
document. The records required in paragraphs (f) and (g) would be 
records that live poultry dealers currently do not keep. Live poultry 
dealers will need to develop new recordkeeping systems to retain them.
    Paragraph (a) of final Sec.  201.104 requires live poultry dealers 
to retain payment records for 5 years. Current regulations require live 
poultry dealers to retain records for 2 years. Some live poultry 
growers may need to keep payment records for a longer period of time as 
result of the rule, but AMS experience indicates that most live poultry 
dealers already keep the records for a longer period. The remainder of 
final Sec.  201.104 requires live poultry dealers to disclose 
information to poultry growers about flocks placed with each grower, 
including when the flocks are placed and when the live poultry dealers 
make payment for raising the flocks.
    Paragraph (b) requires live poultry dealers to make disclosures 
when flocks are placed with the broiler grower. Paragraph (c) requires 
live poultry dealers to make disclosures when the live poultry dealer 
makes payment to the broiler grower. Paragraph (b) and (c) requires the 
live poultry dealer to retain records for each flock of the stocking 
density, ratios of the breeds delivered in the flock, ratios of each 
sex in the lot if the live poultry dealers has determined it, age of 
the breeder flock, known health impairments in the breeder flock, and 
adjustments that live poultry dealers make to a grower's payment based 
on any of the disclosed information. Paragraph (c) also requires live 
poultry dealers to disclose the number feed outages that lasted more 
than twelve hours at each grower's facility.
    Paragraphs (b) and (c) require live poultry dealers to maintain the 
same type of records that AMS commonly requests from live poultry 
dealers during compliance reviews,\139\ and are records that most live 
poultry dealers already retain. An exception would be live poultry 
dealers that purchase chicks from outside hatcheries, as they may not 
already be retaining records concerning the breeder flock. The records 
would be available from the hatchery, but some live poultry dealers may 
have to keep records that they do not otherwise keep.
---------------------------------------------------------------------------

    \139\ AMS routinely conducts reviews of live poultry dealers for 
compliance with the Packers and Stockyards Act and regulations. Some 
of the applicable regulations in live poultry compliance reviews 
include Sec.  201.43 Payment and accounting for livestock and live 
poultry; Sec.  201.49 Requirements regarding scale tickets 
evidencing weighing of livestock, live poultry, and feed; Sec.  
201.71 Scales and or Electronic Evaluation Devices or Systems; 
accurate weights and measures, repairs, adjustments or replacements 
after inspection; Sec.  201.73 Scale operators to be qualified; 
Sec.  201.82 Care and promptness in weighing and handling livestock 
and live poultry; Sec.  201.95 Inspection of business records and 
facilities; Sec.  201.100 Records to be furnished poultry growers 
and sellers; Sec.  201.108-1 Instructions for weighing live poultry 
or feed; Sec.  201.211 Undue or unreasonable preferences or 
advantages; Sec.  201.215 Suspension of delivery of birds; Sec.  
201.216 Additional capital investments criteria; and Sec.  201.217 
Reasonable period of time to remedy a breach of contract among 
others.
---------------------------------------------------------------------------

    Although live poultry dealers will need to keep considerable 
amounts of records to comply with the disclosures required in final 
Sec. Sec.  201.102 and 201.104, live poultry dealers already retain 
most of the records necessary. Live poultry dealers will need to create 
relatively few new records beyond those that they already retain, and 
AMS expects that additional costs to live poultry dealers associated 
with creating and maintaining records will be relatively small.
    AMS also estimates the amount of time that broiler growers would 
take to review the information provided to them by live poultry 
dealers. Estimates of the amount of time required by live poultry 
dealers to create and distribute the disclosures and for growers to 
review the information were provided by AMS subject matter experts. 
These experts were supervisors and auditors with many years of 
experience in working with growers and with auditing live poultry 
dealers for compliance with the Act. Estimates for the value of the 
time are U.S. Department of Labor (DOL) Bureau of Labor Statistics 
(BLS) Occupational Employment and Wage Statistics (OEWS) released May 
2022.\140\ Occupations used in the estimation were Executive 
Secretaries and Executive Administrative Assistants (occupation code 
43-6011) for live poultry dealers' administrative assistants, General 
and Operations Managers (Occupation code 11-1021) for live poultry 
dealers' managers, Lawyers (occupation code 23-1011) for attorneys for 
live poultry dealers and for growers, Agricultural Workers (occupation 
code 45-2090), Computer and Information Systems Managers (occupation 
code 11-3021), Software and Web Developers, Programmers, and Testers 
(occupation code 15-1250) for information technology managers, 
Accountants and Auditors (occupation code 13-2011) for accountants for 
live poultry dealers, Bookkeeping, Accounting, and Auditing Clerks 
(occupation code 43-3031) for bookkeepers for live poultry dealers, and 
Management Occupations (occupation code 11-0000) for poultry growers.
---------------------------------------------------------------------------

    \140\ See U.S. Bureau of Labor Statistics, May 2021 National 
Occupational Employment and Wage Estimates, May 2021. https://www.bls.gov/oes/current/oes_nat.htm#00-0000.
---------------------------------------------------------------------------

    AMS marked up the wages 41.82 percent to account for benefits. This 
results in a cost per hour of $41.71 ($29.41 x 1.4182) for live poultry 
dealers' administrative assistants, $84.27 ($59.42 x 1.4182) for live 
poultry dealers' managers, $131.38 ($92.64 x 1.4182) for attorneys for 
live poultry dealers and for growers, $92.91 ($65.51 x 1.4182) for 
information technology managers, $56.27 ($39.68 x 1.4182) for 
information technology staff, $49.98 ($35.24 x 1.4182) for accountants 
for live poultry dealers, $27.44 ($19.35 x 1.4182) for bookkeepers for 
live poultry dealers, and $60.70 ($42.80 x 1.4182) for poultry growers.
Costs of Sec.  201.102
    Section 201.102 lists several new disclosure and recordkeeping 
requirements for live poultry dealers engaged in the production of 
broilers. These new and extended requirements are in additional to 
those already included in current Sec.  201.100 that would create 
additional costs above the status quo.
    The new provisions in Sec.  201.102 require large live poultry 
dealers to disclose a true written copy of the growing agreement and a 
new Disclosure Document any time a live poultry dealer seeks to renew, 
revise, or replace an existing broiler growing arrangement that does 
not contemplate modifications to the existing housing specifications. 
Small live poultry dealers that process less than 2 million pounds of 
broilers per week are excluded from this disclosure requirement. Before 
a live poultry dealer enters a broiler growing arrangement that would 
require an original capital

[[Page 83274]]

investment or requires modifications to existing housing, both large 
and small live poultry dealers must provide a copy of the broiler 
growing agreement, the housing specifications, a letter of intent, and 
the new Disclosure Document.
    The Disclosure Document requires live poultry dealers to disclose 
summaries of litigation over the prior five years with any broiler 
growers, bankruptcy filings, and the live poultry dealer's policy 
regarding a grower's sale of the farm or assignment of the contract.
    Live poultry dealers are required to disclose growers' variable 
costs if it collects the information. Live poultry dealers are required 
to establish, maintain, and enforce a governance framework that is 
reasonably designed to audit the information to ensure accuracy, ensure 
compliance with the Act, and obtain and file signed receipts certifying 
that the live poultry dealer provided the required Disclosure Document.
    Section 201.102 requires live poultry dealers to include a 
statement in the disclosure document describing existing policies and 
procedures, as well as any appeal rights arising from increased lay-out 
time; sick, diseased, and high early mortality flocks; natural 
disasters, weather events, or other events adversely affecting the 
physical infrastructure of the local complex or the grower facility; 
other events potentially resulting in massive depopulation of flocks, 
affecting grower payments; feed outages including outage times; and 
grower complaints relating to feed quality, formulation, or 
suitability. If no policy and procedures exist, the live poultry dealer 
will acknowledge ``no policy exists''.
    The Disclosure Document requires specific financial disclosures to 
broiler growers. The first required disclosure is a set of tables 
showing average annual gross payments in U.S. dollars per farm facility 
square foot in each quintile or mean and standard deviation to broiler 
growers for each of the 5 previous years, organized by housing 
specification at each complex. Based on comments received to the 
proposed rule, AMS has provided instructions in the final rule for 
calculating average annual gross payments in each quintile or mean and 
standard deviation. The second required disclosure is a table showing 
the average annual broiler grower turnover rates for the previous 
calendar year and the average of the 5 previous calendar years at a 
company level and at a local complex level.
    AMS estimates the aggregate one-time costs of setting up the 
Disclosure Document will require 4,128 management hours, 1,512 legal 
hours, 1,016 administrative hours, and 1,079 information technology 
hours costing $689,000 in the first year for live poultry dealers to 
initially review the regulation and set up the Disclosure 
Document.<SUP>141 142</SUP> A more detailed explanation of the one-time 
first-year costs associated with Sec.  201.102 is in Table 1 in 
Appendix 1.
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    \141\ Average hourly wage rates used to estimate dealer costs 
include a 41.82% markup for benefits and are as follows: 
Management--$93.20, Legal--$113.80, Administrative--$39.69, and 
Information Technology--$82.50.
    \142\ The one-time set-up costs are not equal to the first-year 
costs of Sec.  201.102 because the first-year costs include the one-
time set-up costs and the ongoing costs that would be incurred in 
the first year as contracts are renewed, revised, or originated.
---------------------------------------------------------------------------

    AMS expects the ongoing costs of updating and distributing the 
Disclosure Document to growers renewing or revising existing contracts, 
new growers entering into contracts, existing growers required to make 
additional capital investments to require in aggregate 2,061 management 
hours, 273 legal hours, 836 administrative hours, and 805 information 
technology hours to produce and distribute to growers the gross payment 
disclosure information annually for an aggregate annual cost of 
$319,000 to live poultry dealers. AMS expects the total cost of 
producing the annual gross payment disclosure information to consist of 
$689,000 in the first year to set up the systems and controls, plus 
$319,000 in costs the first year and annually thereafter to compile, 
distribute, and maintain the disclosure data and documents. Thus, the 
first-year aggregate total costs of Sec.  201.102 to live poultry 
dealers are expected to be $1.0 million and then $319,000 annually on 
an ongoing basis. A more detailed explanation of the ongoing costs 
associated with Sec.  201.102 is in Table 2 in Appendix 1.
    With the exception of signing a receipt--itself not mandatory--the 
rule does not impose any requirement on broiler growers to review the 
information provided by live poultry dealers. However, to benefit from 
the Disclosure Document, growers will need to review the information 
provided. According to AMS subject matter experts, broiler growers will 
spend the most time on their first review of the Disclosure Document in 
order to understand the information and then spend less time reviewing 
subsequent disclosures. For Sec.  201.102 (a)(1), AMS expects that 
growers will take about one hour to review the documents each time 
documents are disclosed to them in the first year. Live poultry dealers 
processing fewer than an average of 2 million pounds of broilers weekly 
will be exempt from the reporting requirements, but large live poultry 
dealers are required to provide disclosures to growers for each of 
19,417 \143\ contracts that come up for renewal in the first year. AMS 
expects that 74.71 percent of the contracts will require renewal in the 
first year. This includes all flock-to-flock contract, one-year 
contracts, and the portion of the longer-term contracts that will 
expire in the first year. At an hourly wage of $60.70 AMS expects the 
requirements associated with Sec.  201.102 (a)(1) will cost about 
$881,000 \144\ in the aggregate in the first year. After the first 
year, as broiler growers get familiar with the disclosures, AMS expects 
growers to spend less time reviewing the documents. AMS expects growers 
to take about five minutes reviewing each Disclosure Document for an 
aggregate cost of $73,000 \145\ per year.
---------------------------------------------------------------------------

    \143\ Live poultry dealers processing an average of more than 
2,000,000 pounds of broiler per week, reported a combined 19,417 
broiler contracts in their fiscal year 2021 annual reports to AMS. 
All live poultry dealers are required to annually file PSD form 3002 
``Annual Report of Live Poultry Dealers,'' OMB control number 0581-
0308. The annual report form is available to public on the internet 
at https://www.ams.usda.gov/sites/default/files/media/PSP3002.pdf.
    \144\ 1 hour to review each disclosure x $60.70 per hour x 
19,417 contracts x 74.71 percent of the contracts renewed in the 
first year = $880,541.
    \145\ 1/12 hour to review each disclosure x $60.70 per hour x 
19,417 contracts x 74.71 percent of the contracts renewed in the 
first year = $73,378.
---------------------------------------------------------------------------

    For the remaining contracts that will not be renewed in the first 
year, AMS expects that 5 percent of the contracts will be renewed in 
each of the next five years for a yearly cost of $59,000.\146\
---------------------------------------------------------------------------

    \146\ 1 hour to review each disclosure x $60.70 per hour x 
19,417 contracts x 5 percent of the contracts renewed per year = 
$58,931 per year.
---------------------------------------------------------------------------

    Section 201.102 (a)(2) and (3) will only apply to broiler growers 
that are new entrants requiring an original capital investment and to 
broiler growers making significant capital improvements. AMS expects 
that each of these groups of growers will account for 5 percent of the 
20,000 \147\ contracts live poultry dealers reported in their annual 
reports to AMS. If growers require one hour at $60.70 per hour, 
growers' aggregate costs will be $60,000 \148\ for reviewing documents 
required in Sec.  201.102(a)(2) and an

[[Page 83275]]

additional $60,000 \149\ for reviewing documents required in Sec.  
201.102(a)(3) in the first year and in each successive year.
---------------------------------------------------------------------------

    \147\ Live poultry dealers reported a combined total of 19,808 
contracts for their fiscal year 2021. Smaller live poultry dealers 
would not be exempt from reporting requirements in Sec.  
201.102(a)(2) or (3).
    \148\ 1 hour to review each disclosure x $60.70 per hour x 
19,808 contracts x 5 percent of growers that are new entrants = 
$60,117.
    \149\ 1 hour to review each disclosure x $60.70 per hour x 
19,808 contracts x 5 percent of growers that require significant 
housing upgrades = $60,117.
---------------------------------------------------------------------------

    AMS estimates growers' aggregate costs for reviewing and 
acknowledging receipt of disclosures associated with Sec.  201.102 to 
be $1.2 million in the initial year, $253,000 through year five, and 
then $194,000 in each succeeding year.\150\ The costs will decline 
after year five because AMS expects that all contracts will have been 
renewed by the end of year five and that all growers would have 
reviewed the Disclosure Document at least one time by year six. The 
Agricultural Census reports that there were 16,524 contract broiler 
growers in the United States in 2017.\151\
---------------------------------------------------------------------------

    \150\ The average hourly wage rate used to estimate broiler 
grower costs includes a 41.56% markup for benefits and is as 
follows: Management--$70.94.
    \151\ USDA, NASS. 2017 Census of Agriculture: United States 
Summary and State Data, (April 2019).
---------------------------------------------------------------------------

    The ten-year total costs of Sec.  201.102 to all 42 of the affected 
live poultry dealers are estimated to be $3.9 million and the present 
value (PV) of the ten-year total costs to be $3.4 million discounted at 
a 3 percent rate and $2.9 million at a 7 percent rate. The aggregate 
annualized costs of the PV of ten-year costs to live poultry dealers 
discounted at a 3 percent rate are expected to be $398,000 and $411,000 
discounted at a 7 percent rate.
    The ten-year aggregate total costs of Sec.  201.102 to broiler 
growers are estimated to be $3.2 million and the present value of the 
ten-year total costs to be $2.8 million discounted at a 3 percent rate 
and $2.5 million at a 7 percent rate. The annualized costs of the PV of 
ten-year costs to broiler growers discounted at a 3 percent rate are 
expected to be $331,000 and $351,000 discounted at a 7 percent rate.
    The ten-year aggregate total costs of Sec.  201.102 to live poultry 
dealers and broiler growers are estimated to be $7 million. The present 
value of the ten-year total costs are estimated to be $6.2 million 
discounted at a 3 percent rate and $5.4 million at a 7 percent rate. 
The annualized costs of the PV of ten-year costs to live poultry 
dealers and broiler growers discounted at a 3 percent rate are expected 
to be $728,000 and $762,000 discounted at a 7 percent rate.
Costs of Sec.  201.104
    Disclosures that are required in Sec.  201.104 are associated with 
poultry grower ranking systems. At the time of broiler placement, Sec.  
201.104 requires live poultry dealers to disclose information about 
inputs, such as stocking density, breed and breeder flock information 
for each flock placed with a grower within 24 hours of flock placement. 
At the time of settlement, it requires the live poultry dealer to 
disclose information about the housing specifications for each grower 
grouped or ranked during the specified period and the distribution of 
inputs to each grower in each tournament for each flock settled in the 
tournament system.
    AMS estimates that the live poultry dealers' one-time aggregate 
costs of reviewing the regulation and developing the placement and 
settlement disclosure documents will require 630 management hours, 462 
administrative hours, and 1,764 information technology hours costing 
$236,000 in the first year to initially set up the disclosure documents 
required by Sec.  201.104.\152\ A more detailed explanation of the one-
time first-year costs associated with Sec.  201.104 is in Table 3 in 
Appendix 1.
---------------------------------------------------------------------------

    \152\ IT staff will be required to modify integrator information 
systems to compile information from past settlements to calculate 
the information required to be disclosed to growers.
---------------------------------------------------------------------------

    AMS expects the Sec.  201.104 disclosure documents will require an 
additional 2,640 hours divided evenly among management, administrative, 
and information technology staff to produce, distribute, and maintain 
the disclosure documents each year on an ongoing basis for an aggregate 
annual cost of $193,000. A more detailed explanation of the ongoing 
costs associated with Sec.  201.104 is in Table 4 in Appendix 1.
    AMS expects the aggregate cost of producing the Sec.  201.104 pre-
flock placement and settlement disclosure documents to consist of 
$236,000, in the first year to review the regulation and to set up the 
systems and controls, plus $193,000 in costs the first year and 
annually thereafter to compile, distribute, and maintain the placement 
and settlement disclosure documents. Thus, the aggregate first-year 
total costs to live poultry dealers of Sec.  201.104 are expected to be 
$429,000 and then $193,000 annually on an ongoing basis.
    Section Sec.  201.104(b) concerns disclosures of inputs placed with 
broiler growers in tournament settlement systems. Live poultry dealers 
will be required to disclose information about inputs, such as feed, 
medication, chicks, etc. for each flock placed with a grower. AMS 
expects that, the first time a grower receives the disclosure, he or 
she will require about 10 minutes to review each of the disclosure's 
documents. At $60.70 per hour, the first disclosure document will cost 
growers $134,000.\153\ After reviewing the documents the first time, 
AMS expects that growers will need only 5 minutes to review successive 
disclosures. Because growers average 4.5 flocks per year, AMS expects 
that reviewing the disclosure documents concerning inputs will cost in 
the aggregate an additional $234,000 \154\ for the remaining 3.5 flocks 
in the first year and $301,000 \155\ for the 4.5 flocks in each 
successive year.
---------------------------------------------------------------------------

    \153\ 1/6 hours x $60.70 per hour x 16,524 broiler growers x 80 
percent of broilers raised in tournament systems = $133,731.
    \154\ 1/12 hours x $60.70 per hour x 16,524 broiler growers x 
3.5 additional flocks in the first year x 80 percent of broilers 
raised in tournament systems = $234,029.
    \155\ 1/12 hours x $60.70 per hour x 16,524 broiler growers x 
4.5 flocks per year x 80 percent of broilers raised in tournament 
systems = $300,894 per year.
---------------------------------------------------------------------------

    Section 201.104(c) concerns disclosures about the group of growers 
in settlement groups in tournament settlement systems. Live poultry 
dealers are required to disclose information about growers in each 
tournament for each flock settled in tournament system. AMS expects 
that the cost to growers associated with Sec.  201.104(c) will be 
identical to the costs of reviewing the disclosures required in Sec.  
201.104(b). Aggregate costs would be $134,000 \156\ for the disclosures 
reviewed. AMS expects that reviewing the disclosure documents will cost 
an additional $234,000 \157\ for the remaining 3.5 flocks in the first 
year and $301,000 \158\ for the 4.5 flocks in each successive year.
---------------------------------------------------------------------------

    \156\ 1/6 hours x $60.70 per hour x 16,524 broiler growers x 80 
percent of broilers raised in tournament systems = $133,731.
    \157\ 1/12 hours x $60.70 per hour x 16,524 broiler growers x 
3.5 additional flocks in the first year x 80 percent of broilers 
raised in tournament systems = $234,029.
    \158\ 1/12 hours x $60.70 per hour x 16,524 broiler growers x 
4.5 flocks per year x 80 percent of broilers raised in tournament 
systems = $300,894 per year.
---------------------------------------------------------------------------

    AMS estimates growers' aggregate costs for reviewing disclosures 
associated with Sec.  201.104 to be $736,000 in the first year and 
$602,000 in each subsequent year. AMS expects that broiler growers will 
spend the most time on their first review of the placement and 
settlement disclosures in order to understand the information, with 
less time for each subsequent review.
    The ten-year aggregate total costs of Sec.  201.104 to live poultry 
dealers are estimated to be $2.2 million and the present value of the 
ten-year total costs to be $1.9 million discounted at a 3 percent rate 
and $1.6 million at a 7 percent rate. The annualized costs of the PV of 
ten-year costs to live poultry dealers discounted at a 3 percent rate 
are expected to be $219,000 and $224,000 discounted at a 7 percent 
rate.

[[Page 83276]]

    The ten-year aggregated total costs of Sec.  201.104 to broiler 
growers are estimated to be $6.2 million and the present value of the 
ten-year total costs to be $5.3 million discounted at a 3 percent rate 
and $4.4 million at a 7 percent rate. The annualized costs of the PV of 
ten-year costs to broiler growers discounted at a 3 percent rate are 
expected to be $617,000 and $620,000 discounted at a 7 percent rate.
    The costs from Sec.  201.104 are higher for broiler growers than 
for live poultry dealers. There are two reasons for this. First, the 
rule only affects 42 live poultry dealers while it affects 16,524 
broiler growers. Secondly, the primary costs to the live poultry 
dealers are the development of the placement and settlement 
disclosures, while the ongoing costs to distribute and maintain them 
are relatively small. Each broiler grower would receive and review both 
a placement and settlement disclosure for each flock placed and then 
settled in each tournament. Thus, there are many broiler growers who 
would receive and review the placement and settlement disclosures with 
each flock every year, which explains the higher cost relative to live 
poultry dealers. The relative higher cost to the broiler growers would 
be more than offset by the benefits of the extra information they can 
use to make financial business decisions. The benefits will be 
discussed in a later section.
    The ten-year aggregate total costs of Sec.  201.104 to live poultry 
dealers and broiler growers are estimated to be $8.3 million and the 
present value of the ten-year total costs to be $7.1 million discounted 
at a 3 percent rate and $5.9 million at a 7 percent rate. The 
annualized aggregate costs of the PV of ten-year costs to live poultry 
dealers and broiler growers discounted at a 3 percent rate are expected 
to be $836,000 and $844,000 discounted at a 7 percent rate.
Combined Costs of Sec. Sec.  201.102 and 201.104
    Combined costs to live poultry dealers for Sec. Sec.  201.102 and 
201.104 are expected to be $1.4 million in the first year, and $512,000 
in subsequent years. These combined costs are also reported above the 
Paperwork Reduction Act section as the combined costs to live poultry 
dealers for compliance with the reporting and recordkeeping 
requirements of Sec. Sec.  201.102 and 201.104. The combined costs for 
broiler growers are expected to be $1.9 million in the first year, 
$854,000 in years two through five, and $795,000 after year five on an 
ongoing basis.
    The ten-year aggregate combined costs of Sec. Sec.  201.102 and 
201.104 to live poultry dealers are estimated to be $6.0 million and 
the present value of the ten-year total costs to be $5.3 million 
discounted at a 3 percent rate and $4.5 million at a 7 percent rate. 
The annualized aggregate combined costs of the PV of ten-year costs to 
live poultry dealers discounted at a 3 percent rate are expected to be 
$617,000 and $635,000 discounted at a 7 percent rate.
    The ten-year aggregate combined costs of Sec. Sec.  201.102 and 
201.104 to broiler growers are estimated to be $9.3 million and the 
present value of the ten-year total costs to be $8.1 million discounted 
at a 3 percent rate and $6.8 million at a 7 percent rate. The 
annualized aggregate combined costs of the PV of ten-year costs to 
broiler growers discounted at a 3 percent rate are expected to be 
$948,000 and $971,000 discounted at a 7 percent rate. The costs to 
broiler growers from Sec. Sec.  201.102 and 201.104 are higher for 
broiler growers than live poultry dealers for the reasons discussed 
above.
    The ten-year aggregate combined costs of Sec. Sec.  201.102 and 
201.104 to live poultry dealers and broiler growers are estimated to be 
$15.4 million and the present value of the ten-year aggregate combined 
costs to be $13.3 million discounted at a 3 percent rate and $11.3 
million at a 7 percent rate. The annualized aggregate costs of the PV 
of ten-year costs to live poultry dealers and broiler growers 
discounted at a 3 percent rate are expected to be $1.6 million and $1.6 
million discounted at a 7 percent rate.
Benefits of Sec. Sec.  201.102 and 201.104
    As discussed above, AMS will estimate the industry benefits from 
Sec. Sec.  201.102 and 201.104 in two parts, one quantifiable and the 
other non-quantifiable. For the quantifiable part, AMS will provide a 
minimum value of the combined benefit to broiler growers from the 
additional information in the disclosures required under Sec. Sec.  
201.102 and 201.104 and will refer to this minimum benefit as 
G<INF>min</INF>. AMS first estimates G<INF>min</INF> and discusses the 
non-quantifiable benefits of the final rules immediately below and 
after the discussion of the benefit estimates.
    Poultry growers are expected to benefit from the information in two 
ways. First, growers will benefit as live poultry dealers lose some 
potential market power. Second, the Disclosure Documents will provide 
growers more information on their anticipated revenue variability than 
they currently have, which will assist in supporting future income 
projections. This additional information can give growers greater 
economic and financial certainty. While the economic literature does 
not address the relationship between asymmetric information and market 
power in the relationship among broiler growers and live poultry 
dealers, or in any directly analogous relationships, firms with 
information that other market participants do not have can command 
considerable monopoly and monopsony power.\159\ As an example of the 
monopsony power of information, imperfect information in the market 
about an employee's training level limits the wages that a trained 
worker can obtain in the outside market, and it gives monopsony power 
to the employer that supported the training.\160\ This concept extends 
to the grower-live poultry dealer relationship, substituting for 
training the marketing and production information about the contract 
grower that one live poultry dealer possesses but which is not 
available to other live poultry dealers, thus lowering the open market 
value of the grower's services. Further, in this example the grower has 
limited information on returns to other growers in their market due to 
the live poultry dealer's ability to shield this information. Thus, it 
is more difficult for the grower to make business decisions such as 
choosing whether to deal with the current live poultry dealer or sign a 
contract with another live poultry dealer, should one be available in 
the region.
---------------------------------------------------------------------------

    \159\ Allen, B. 1990. ``Information as an Economic Commodity,'' 
American Economic Review, Vol. 80:2, pages 268-273.
    \160\ Acemoglu, D. and J Piskchke. 1998. ``Why do Firms Train? 
Theory and Evidence,'' Quarterly Journal of Economics Vol 113(1):79-
119.
---------------------------------------------------------------------------

    In an example of large grain traders that have oligopsony and 
oligopoly market power, one analysis finds that large grain traders 
manipulate prices and market information.\161\ The analysis contends 
that these major firms move prices to their benefit by taking advantage 
of information they alone possess, e.g., information on foreign 
subsidiaries, contract positions, the price-reporting system, export 
data, and commodity exchanges. Likewise, live poultry dealers have 
information they alone possess and can use to their advantage.
---------------------------------------------------------------------------

    \161\ See Perloff, J., and G. Rausser. 1983. ``The Effect of 
Asymmetrically Held Information and Market Power in Agricultural 
Markets'', American Journal of Agricultural Economics Vol 65(2): 
366-372.
---------------------------------------------------------------------------

    In a third example specific to broiler contracting, but with 
information exchange not being explicitly addressed, live poultry 
dealers will have monopsony-oligopsony power in a

[[Page 83277]]

given geographical area to the extent that growers have limited 
opportunity to contract with other live poultry dealers. Grower capital 
investments (poultry housing and specialized equipment) have little use 
outside of raising broilers. Being aware of the possibility that they 
may be held-up by live poultry dealers, growers will sub-optimally 
invest in specific assets.\162\ Implicitly then, knowledge of the 
possibility that they will be held-up will affect the growers' capital 
investment decisions.
---------------------------------------------------------------------------

    \162\ Vukina, Tom, and Porametr Leegomonchai. ``Oligopsony 
Power, Asset Specificity, and Hold-Up: Evidence from the Broiler 
Industry.'' American Journal of Agricultural Economics 88 (2006).
---------------------------------------------------------------------------

    If the market were less oligopsonistic, with live poultry dealers 
facing more competition between themselves for growers, individual live 
poultry dealers would have to make a case for why growers should grow 
for them rather than for competing live poultry dealers. In the extreme 
case of perfect competition, all price and other market information is 
known by all participants. While the nature of the broiler market means 
full competition and hence full market information cannot be achieved, 
the Disclosure Document does include the grower turnover rates and 
quintiles of average annual gross payment per square foot for the 
calendar year for the complex. Absent the Disclosure Document from the 
live poultry dealer, the typical grower is unlikely to have this market 
information. With this information, the grower can make more informed 
business decisions, including whether to move to another live poultry 
dealer upon contract completion, thus lowering the current live poultry 
dealer's market power, at least when alternative live poultry dealers 
are available. The information on grower turnover rates from the 
Disclosure Document should give the grower a better idea of their 
probability of being held-up, thus better informing their capital 
investment decisions. While lowering information asymmetry increases 
benefits to growers, live poultry dealers will suffer losses by losing 
market power.
    AMS does not have the data necessary for estimating the economic 
impacts of a loss of market power on the part of live poultry dealers 
due to information transfer nor the benefits to growers. However, 
according to basic economic principles, increasing competition--i.e., 
reducing the market power advantage of a buyer or seller--leads to 
increases in economic efficiency in the market. Based on these 
principles, we expect that a reduction in dealer market power would, if 
it occurs, result in net economic benefits. AMS also expects the grower 
to benefit simply from having more information on the potential 
variability of returns, even if average returns do not change. 
According to economic principles of expected utility, a risk averse 
producer will benefit economically from a reduction in revenue 
variability.\163\ Purely addressing information exchange, the live 
poultry dealer is not losing the information it supplies the grower via 
the Disclosure Document. The live poultry dealer's quantified costs are 
associated with creating the Disclosure Document.
---------------------------------------------------------------------------

    \163\ Garcia, P., B. Adam, and R. Hauser. 1994. The Use of Mean-
Variance for Commodity Futures and Options Hedging Decisions'', 
Journal of Agricultural and Resource Economics, 19(1): 32-45.
---------------------------------------------------------------------------

    The act of supplying past revenue information in the disclosures 
may alter the statistical distribution of revenue the grower thinks 
they will face (including statistics that describe the distribution, 
such as mean and variance), mostly likely increasing expected mean 
revenues. By simply having more market information (e.g., the revenue 
quintiles from the Disclosure Document), presumably the grower will be 
able to place a smaller variability on their projected revenue than 
they would with less information. If they are risk averse, by the 
principle of expected utility, they will receive an economic benefit 
from being able to place a lower variability on his projected revenue. 
AMS estimates G<INF>min</INF> as the combined benefits to growers of 
Sec. Sec.  201.102 and 201.104 from the reduction in profit uncertainty 
due to obtaining the revenue information from the Disclosure Document. 
AMS expects the majority of the benefits of reduced profit uncertainty 
will result from additional information in the financial disclosures 
under Sec.  201.102 as these disclosures provide revenue projections at 
different performance percentiles over different housing types. AMS 
expects that the additional information received in placement and 
settlement disclosures under Sec.  201.104 regarding the effects of 
input variability on revenue variability will also result in reduced 
profit uncertainty, though to a lesser extent than the financial 
disclosures. AMS was not able to allocate the benefits between 
Sec. Sec.  201.102 and 201.104 and presents just the total combined 
minimum quantifiable benefits of both rules.
    Given assumptions about the level of risk aversion of the producer, 
the distribution of a contract grower's revenue, and the grower's 
utility function,\164\ it is possible to calculate a grower's benefits 
of decreased revenue uncertainty associated with greater transparency. 
AMS relied on an empirical approach to estimate the minimum benefits, 
defined as a Risk Premium (RP), to contract broiler growers of a range 
of reductions in the variability of their net revenue.\165\
---------------------------------------------------------------------------

    \164\ A utility function is an economic concept that measures an 
individual's preferences over a set of goods and services.
    \165\ AMS prepared a technical appendix (Appendix 2) that 
provides an explanation of the empirical approach used to estimate 
the Risk Premium and is included at the end of this document.
---------------------------------------------------------------------------

    The following table presents the G<INF>min</INF> benefit estimates 
based on RP estimates for the first year for several scenarios of 
reduction in the variability of net revenue and two assumptions for a 
risk aversion premium (RAP) and two assumptions for how risk aversion 
changes with wealth. For the latter, constant absolute risk aversion 
(CARA) assumes that the grower's risk aversion does not change as 
wealth increases. Decreasing absolute risk aversion (DARA) assumes the 
grower's risk aversion increases as wealth decreases. Another 
possibility is that the grower's risk aversion is increasing with 
wealth (IARA). While no evidence exists one way or another for how the 
risk preference of broiler contract growers changes with wealth, the 
agricultural economics literature generally assumes DARA over IARA.

[[Page 83278]]



  Table 2--Minimum Quantifiable Benefits, Gmin, (Risk Premium) to Contract Growers of Reductions in Net Revenue
                                                   Variability
----------------------------------------------------------------------------------------------------------------
                                                     Reduction in coefficient of variation of net revenue \b\
  Grower risk aversion (risk aversion premium)   ---------------------------------------------------------------
                                                        1%              2%              5%              10%
----------------------------------------------------------------------------------------------------------------
                                                                          One year value
----------------------------------------------------------------------------------------------------------------
Moderate (20%)..................................      $1,350,000      $2,690,000      $6,610,000     $12,840,000
High (40%)......................................       3,210,000       6,380,000      15,700,000      30,540,000
DARA, High/Moderate.............................       1,839,000       3,655,000       8,966,000      17,365,000
----------------------------------------------------------------------------------------------------------------
                                                                 PV over 10 years discounted at 3%
----------------------------------------------------------------------------------------------------------------
Moderate (20%)..................................      11,515,774      22,946,246      56,384,641     109,527,804
High (40%)......................................      27,381,951      54,422,694     133,924,185     260,512,395
----------------------------------------------------------------------------------------------------------------
                                                                 PV over 10 years discounted at 7%
----------------------------------------------------------------------------------------------------------------
Moderate (20%)..................................       9,481,835      18,893,434      46,425,874      90,182,787
High (40%)......................................      22,545,697      44,810,450     110,270,230     214,500,180
----------------------------------------------------------------------------------------------------------------
\a\ The risk aversion premium (RAP) varies between 0 and 100 percent of the potential lost revenue, with higher
  values reflecting higher risk aversion. A value of 20 percent is considered a reasonable reflection of
  moderate aversion to risk and 40 percent being reflection of high-risk aversion.
\b\ The coefficient of variation of net revenue is a standardized measure of variability, and is defined as the
  standard deviation of net revenue divided by its mean.

    The RAP varies between 0 and 100 percent of the potential lost 
revenue, with higher values reflecting higher risk aversion. The RP 
estimates assume that mean net returns are unchanged, i.e., this 
exercise is solely valuing the reduction in grower revenue uncertainty. 
AMS estimates benefits under two CARA scenarios, one where the growers 
have moderate risk aversion, with one with a RAP of 20 percent and a 
high RAP of 40 percent, using contract producer revenue data for 2020. 
The parameters used for the DARA scenario are chosen such that the 
grower has a RAP of 40 percent when wealth is zero, and a RAP of 20 
percent at mean wealth.
    As the above table shows, one-year benefits range from $1.4 million 
with a 1 percent reduction in the variability of net revenue when 
moderate risk aversion is assumed to $31 million with a 10 percent 
reduction in the variability of net revenue when high risk aversion is 
assumed. AMS assumes growers will receive the same benefit of reduced 
variability of net revenue every year in which they contract. 
Discounting these annual values over ten years leads to a range in 
benefit estimates from $9.5 million to $261 million depending on the 
combination of risk aversion assumption, reduction in variability in 
net returns, and the discount rate.
    With assumptions of moderate risk aversion and that the rule would 
lead to a two percent reduction in the coefficient of variation in net 
revenue, the benefit estimate is $19 million with a discount rate of 
seven percent PV. The analysis summarized in Table 2 assumes that the 
grower maximizes an absolute risk aversion (ARA) utility function, 
whether CARA or DARA. The alternative to an ARA function is a relative 
risk aversion function (RRA) (see Appendix 2 for a discussion of ARA 
and RRA).
    As discussed above, Sec. Sec.  201.102 and 201.104 have additional, 
other non-quantified benefits to the industry, referred to as 
B<INF>O</INF>. First, if broiler growers did not expect to receive at 
least as much in benefits as it takes in time to review the 
disclosures, they would not review them. Some of these benefits are 
captured in the quantitative estimates of the value of reduction in 
revenue uncertainty, but there are others benefits the growers would 
likely expect from these disclosures. The other benefits would arise 
from a reduction in risk of retaliation and the potential for fraud and 
deception by live poultry dealers. The additional information to 
growers may lead to a more optimal allocation of capital and labor 
resources (such as increased capital investment through the reduction 
in perceived hold-up risk, and more informed decisions on whether and 
with whom to enter into a growing arrangement), leading to improved 
efficiencies across the entire industry.
    The combined minimum benefits for broiler growers, G<INF>min</INF>, 
from reduced revenue uncertainty are expected to be $2.7 million in the 
first year and on an ongoing basis.\166\ The ten-year total minimum 
benefits of Sec. Sec.  201.102 and 201.104 to broiler growers are 
estimated to be $26.9 million and the present value of the ten-year 
total minimum benefits to be $22.9 million discounted at a 3 percent 
rate and $18.9 million at a 7 percent rate. The annualized PV of ten-
year minimum benefits to broiler growers discounted at 3 and 7 percent 
rates are expected to be $2.7 million. The total benefits to the 
industry, B<INF>T</INF>, from Sec. Sec.  201.102 and 201.104 would be 
the sum of the minimum benefits to all growers, G<INF>min</INF>, and 
the other non-quantified benefits to the industry from growers' risk 
reductions and a more efficient allocation of labor and capital, 
B<INF>O</INF>. The values appear in Table 3 in the next section. AMS 
expects the total benefits to the industry from the rule--as is the 
case for total costs, noted above--will be very small in relation to 
the total value of industry production.
---------------------------------------------------------------------------

    \166\ All benefits estimates assume a moderate (20 percent) RAP 
and a 2 percent reduction in coefficient of variation of net 
revenue.
---------------------------------------------------------------------------

    Chicken sales in the U.S. for 2019 were approximately $58.6 
billion. Total quantified cost of Sec. Sec.  201.102 and 201.104 is 
estimated to be greatest in the first year at $3.4 million, or 0.0006 
percent of revenues. A relatively small improvement in efficiency from 
improved allocation of capital and labor resources in the industry 
would more than outweigh the cost of this rule.

[[Page 83279]]

Total Quantified Combined Costs and Benefits of Sec. Sec.  201.102 and 
201.104
    The cost and benefit estimates of Sec. Sec.  201.102 and 201.104 
presented above appear in the following table.

               Table 3--Quantifiable Costs and Benefits \167\ of Sec.  Sec.   201.102 and 201.104
----------------------------------------------------------------------------------------------------------------
                                                       Cost                                  Benefits
                                 -------------------------------------------------------------------------------
      Preferred alternative                                                         Individual
                                   Live poultry       Broiler     Industry total   grower (Gmin)  Total industry
                                      dealers         growers                           \a\            (BT)
----------------------------------------------------------------------------------------------------------------
Sec.   201.102:
    First-Year..................      $1,008,000      $1,180,000      $2,188,000            Gmin       Gmin + BO
    Ten-Year Total..............       3,881,000       3,158,000       7,039,000            Gmin       Gmin + BO
    PV of Ten-Year Discounted at       3,392,000       2,822,000       6,214,000            Gmin       Gmin + BO
     3 Percent..................
    PV of Ten-Year Discounted at       2,886,000       2,468,000       5,354,000            Gmin       Gmin + BO
     7 Percent..................
    PV of Ten-Year Annualized at         398,000         331,000         728,000            Gmin       Gmin + BO
     3 Percent..................
    PV of Ten-Year Annualized at         411,000         351,000         762,000            Gmin       Gmin + BO
     7 Percent..................
Sec.   201.104:
    First-Year..................         429,000         736,000       1,164,000            Gmin       Gmin + BO
    Ten-Year Total..............       2,162,000       6,152,000       8,314,000            Gmin       Gmin + BO
    PV of Ten-Year Discounted at       1,872,000       5,263,000       7,135,000            Gmin       Gmin + BO
     3 Percent..................
    PV of Ten-Year Discounted at       1,573,000       4,352,000       5,925,000            Gmin       Gmin + BO
     7 Percent..................
    PV of Ten-Year Annualized at         219,000         617,000         836,000            Gmin       Gmin + BO
     3 Percent..................
    PV of Ten-Year Annualized at         224,000         620,000         844,000            Gmin       Gmin + BO
     7 Percent..................
Sec.  Sec.   201.102 and
 201.104:
    First-Year..................       1,437,000       1,916,000       3,353,000       2,690,000       Gmin + BO
    Ten-Year Total..............       6,043,000       9,310,100      15,353,000      26,900,000       Gmin + BO
    PV of Ten-Year Discounted at       5,264,000       8,085,000      13,349,000      22,946,000       Gmin + BO
     3 Percent..................
    PV of Ten-Year Discounted at       4,459,000       6,820,000      11,279,000      18,893,000       Gmin + BO
     7 Percent..................
    PV of Ten-Year Annualized at         617,000         948,000       1,565,000       2,690,000       Gmin + BO
     3 Percent..................
    PV of Ten-Year Annualized at         635,000         971,000       1,606,000       2,690,000       Gmin + BO
     7 Percent..................
----------------------------------------------------------------------------------------------------------------
\a\ AMS estimates Gmin as the combined benefits to growers of Sec.  Sec.   201.102 and 201.104.
\b\ Estimates do not include unquantified costs of risk increases.

    The quantified costs and minimum quantifiable benefits to the 
industry in the first year are $3.4 million and $2.7 million, 
respectively. The quantified costs exceed the minimum quantifiable 
benefits in the first year only. The minimum quantifiable benefits 
exceed the quantified costs in the ten-year total, the PVs on the ten 
totals, the annualized PV of ten-year totals. This is a function of 
quantified costs being higher at the beginning of the program and 
falling off over time while the quantified benefits remain constant 
over the entire estimation period.
---------------------------------------------------------------------------

    \167\ Ibid.
---------------------------------------------------------------------------

    AMS expects that the net benefits to the industry from Sec. Sec.  
201.102 and 201.104 will be very small in relation to the total value 
of industry production. Thus, AMS expects the impacts of the net 
benefits on total industry supply to be immeasurably small, leading to 
immeasurably small indirect effects on industry supply and demand, 
including price and quantity effects.
Costs and Benefits of the Small Business Exemption Alternative
    AMS estimated costs and benefits for an alternative to the 
preferred option for the rule. It would be the same as Sec. Sec.  
201.102 and 201.104, with the exception that the alternative would 
exempt live poultry dealers that process less than 2 million pounds of 
broilers per week from all provisions of the two final rules. In the 
preferred alternative, small businesses would be exempt from the 
disclosure requirements in Sec.  201.102(a)(1) only. The rest of the 
provisions of Sec. Sec.  201.102 and 201.104 would still apply.
    The costs associated with this alternative are similar, but smaller 
than the preferred option. According to annual reports that live 
poultry dealers file with AMS,\168\ small live poultry dealers 
processing broilers make up 35.7 percent of all live poultry dealers 
but have only 2 percent of broiler growing contracts. The estimation of 
the costs and benefits of the small business exemption alternative will 
follow the same format as the preferred alternative.
---------------------------------------------------------------------------

    \168\ All live poultry dealers are required to annually file PSD 
form 3002 ``Annual Report of Live Poultry Dealers,'' OMB control 
number 0581-0308. The annual report form is available to public on 
the internet at https://www.ams.usda.gov/sites/default/files/media/PSP3002.pdf.
---------------------------------------------------------------------------

Costs of Sec.  201.102--Small Business Exemption Alternative
    AMS estimates the one-time costs for live poultry dealers of 
setting up the Disclosure Document for the small business exemption 
alternative would require 2,914 management hours, 972 attorney hours, 
722 administrative hours, and 884 information technology hours costing 
$486,000 in the first year for live poultry dealers to set up the 
Disclosure Document.\169\ A more detailed explanation of the one-time 
first-year costs associated with the alternative Sec.  201.102 is in 
Table 1 in Appendix 3.
---------------------------------------------------------------------------

    \169\ As discussed previously, the one-time set-up costs are not 
equal to the first-year costs of Sec.  201.102 because the first-
year costs include the one-time set-up costs and the ongoing costs 
that would be incurred in the first year as contracts are renewed, 
revised, or originated.
---------------------------------------------------------------------------

    AMS expects the ongoing costs for live poultry dealers for the 
small business exemption alternative of updating and distributing the 
Disclosure Document to broiler growers renewing or revising existing 
contracts, new growers entering into contracts, existing growers 
required to make additional capital investments to require 1,617 
management hours, 176 legal hours, 726

[[Page 83280]]

administrative hours, and 733 information technology hours to produce, 
distribute to growers, and maintain the Disclosure Document annually 
for an annual cost of $258,000. A more detailed explanation of the 
ongoing costs associated with the alternative Sec.  201.102 is in Table 
2 in Appendix 3.
    AMS expects the total cost of producing the disclosure information 
to be $486,000 in the first year to set up the systems and controls, 
plus $258,000 in costs the first year and annually thereafter to 
compile and distribute the disclosure data and documents. Thus, the 
first-year total costs of Sec.  201.102 for live poultry dealers are 
expected to be $743,000 for the small business exemption alternative 
and then $258,000 annually on an ongoing basis.
    For alternative Sec.  201.102(a)(1), AMS expects that broiler 
growers would take about 1 hour to review the documents each time 
documents are disclosed to them in the first year. The alternative 
would exempt live poultry dealers processing fewer than an average of 2 
million pounds of broilers weekly from the reporting requirements, but 
large live poultry dealers would be required to provide disclosures to 
broiler growers for each of 19,417 \170\ contracts that come up for 
renewal in the first year. AMS expects that 74.71 percent of the 
contracts will require renewal in the first year. This includes all 
flock-to-flock contracts, one-year contracts, and the portion of the 
longer-term contracts that will expire in the first year. At a wage of 
$60.70, AMS expects the requirements associated with Sec.  201.102 
(a)(1) will cost broiler growers about $881,000 \171\ in the first year 
in the aggregate. After the first year, as broiler growers get familiar 
with the disclosures, AMS expects growers to spend less time reviewing 
the documents. AMS expects broiler growers to take about five minutes 
reviewing each Disclosure Document for an aggregate cost of $73,000 
\172\ per year.
---------------------------------------------------------------------------

    \170\ Live poultry dealers processing an average of more than 
2,000,000 pounds of broilers per week, reported a combined 19,417 
broiler contracts in their fiscal year 2021 annual reports to AMS. 
All live poultry dealers are required to annually file PSD form 3002 
``Annual Report of Live Poultry Dealers,'' OMB control number 0581-
0308. The annual report form is available to public on the internet 
at https://www.ams.usda.gov/sites/default/files/media/PSP3002.pdf.
    \171\ 1 hour to review each disclosure x $60.70 per hour x 
19,417 contracts x 74.71 percent of the contracts renewed in the 
first year = $880,541.
    \172\ 1/12 hour to review each disclosure x $60.70 per hour x 
19,417 contracts x 74.71 percent of the contracts renewed in the 
first year = $73,386.
---------------------------------------------------------------------------

    For the remaining contracts that will not be renewed in the first 
year, AMS expects that 5 percent of the contracts will be renewed in 
each of the next 5 years for a yearly cost of $59,000.\173\
---------------------------------------------------------------------------

    \173\ 1 hour to review each disclosure x $60.70 per hour x 
19,417 contracts x 5 percent of the contracts renewed per year = 
$58,929 per year.
---------------------------------------------------------------------------

    Paragraphs 201.102(a)(2) and (3) would only apply to broiler 
growers that are new entrants with original capital investments and to 
growers making significant upgrades with additional capital investments 
to broiler houses. AMS expects that each of these groups of broiler 
growers will account for 5 percent of the 19,417 broiler growing 
contracts live poultry dealers reported in their annual reports \174\ 
to AMS. If growers require one hour at $60.70 per hour, growers' 
aggregate costs would be $59,000 \175\ for reviewing documents required 
in Sec.  201.102 (a)(2) and an additional $59,000 \176\ for reviewing 
documents required in Sec.  201.102 (a)(3) in the first year and in 
each successive year.
---------------------------------------------------------------------------

    \174\ All live poultry dealers are required to annually file PSD 
form 3002 ``Annual Report of Live Poultry Dealers,'' OMB control 
number 0581-0308. The annual report form is available to public on 
the internet at https://www.ams.usda.gov/sites/default/files/media/PSP3002.pdf.
    \175\ 1 hour to review each disclosure x $60.70 per hour x 
19,417 contracts x 5 percent of growers that are new entrants = 
$58,929.
    \176\ 1 hour to review each disclosure x $60.70 per hour x 
19,417 contracts x 5 percent of growers that require significant 
housing upgrades = $58,929.
---------------------------------------------------------------------------

    AMS estimates broiler growers' aggregate costs for reviewing the 
Disclosure Document associated with Sec.  201.102 for the small 
business exemption alternative to be $1.2 million in the initial year, 
$250,000 through year five, and then $191,000 in each succeeding year.
    The ten-year aggregate total costs for the live poultry dealers of 
Sec.  201.102 for the small business exemption alternative are 
estimated to be $3.1 million. The present value of the ten-year 
aggregate total costs of Sec.  201.102 to live poultry dealers are 
estimated to be $2.7 million discounted at a 3 percent rate and $2.3 
million at a 7 percent rate. The annualized aggregate costs of the PV 
of ten-year costs to live poultry dealers discounted at a 3 percent 
rate are expected to be $313,000 and $322,000 discounted at a 7 percent 
rate.
    The ten-year aggregate total costs to broiler growers of Sec.  
201.102 for the small business exemption alternative are estimated to 
be $3.1 million. The present value of the ten-year total costs of Sec.  
201.102 to broiler growers are estimated to be $2.8 million discounted 
at a 3 percent rate and $2.4 million at a 7 percent rate. The 
annualized aggregate costs of the PV of ten-year costs to broiler 
growers discounted at a 3 percent rate are expected to be $328,000 and 
$349,000 discounted at a 7 percent rate.
    The first-year aggregate total costs to broiler growers and live 
poultry dealers of Sec.  201.102 for the small business exemption 
alternative are estimated to be $1.9 million and the ten-year aggregate 
total costs of Sec.  201.102 for the small business exemption 
alternative for live poultry dealers and broiler growers are estimated 
to be $6.2 million. The present value of the ten-year aggregate total 
costs of Sec.  201.102 to live poultry dealers and broiler growers are 
estimated to be $5.5 million discounted at a 3 percent rate and $4.7 
million at a 7 percent rate. The annualized costs of the PV of ten-year 
aggregate costs to live poultry dealers and broiler growers discounted 
at a 3 percent rate are expected to be $641,000 and $671,000 discounted 
at a 7 percent rate.
Costs of Sec.  201.104--Small Business Exemption Alternative
    AMS estimates that the aggregate one-time costs of developing the 
placement and settlement disclosure documents for live poultry dealers 
under the small business exemption alternative would require 405 
management hours, 297 administrative hours, and 1,134 information 
technology hours costing $152,000 in the first year to initially set up 
the placement and settlement disclosure documents. A more detailed 
explanation of the one-time first-year costs associated with the 
alternative Sec.  201.104 is in Table 3 in Appendix 3.
    AMS expects the disclosure documents to require an additional 1,697 
hours divided evenly among management, administrative, and information 
technology staff to produce, distribute, and maintain the disclosure 
documents each year on an ongoing basis for an annual cost of $124,000. 
Thus, the aggregate first-year costs are estimated to be $276,000, 
including the one-time set up costs and the costs of producing and 
distributing the placement and settlement disclosures. A more detailed 
explanation of the ongoing costs associated with the alternative Sec.  
201.104 is in Table 4 in Appendix 3.
    For the alternative Sec.  201.104(b), live poultry dealers would be 
required to disclose information about inputs, such as stocking 
density, breed and breeder flock information for each flock placed with 
a grower. AMS expects that, the first time a broiler grower receives 
the disclosure, he or she would require about 10 minutes to review each 
of the disclosure's documents. At $60.70 per hour, the first disclosure 
document would cost growers $86,000 in the

[[Page 83281]]

aggregate.\177\ After the reviewing the documents the first time, AMS 
expects that broiler growers would only need 5 minutes to review 
successive disclosures. Since growers average 4.5 flocks per year, AMS 
expects that reviewing the disclosure documents concerning inputs would 
cost an additional $150,000 \178\ for the remaining 3.5 flocks in the 
first year and $193,000 \179\ for the 4.5 flocks in each successive 
year.
---------------------------------------------------------------------------

    \177\ 1/6 hours x $60.70 per hour x 16,524 broiler growers x 80 
percent of broilers raised in tournament systems x 64.3 percent of 
live poultry dealers that process more than 2,000,000 head per week 
= $85,970.
    \178\ 1/12 hours x $60.70 per hour x 16,524 broiler growers x 
3.5 additional flocks in the first-year x 80 percent of broilers 
raised in tournament systems x 64.3 percent of live poultry dealers 
that process more than 2,000,000 head per week = $150,447.
    \179\ 1/12 hours x $60.70 per hour x 16,524 broiler growers x 
4.5 flocks per year x 80 percent of broilers raised in tournament 
systems x 64.3 percent of live poultry dealers that process more 
than 2,000,000 head per week = $193,432 per year.
---------------------------------------------------------------------------

    Alternative Sec.  201.104(c) concerns disclosures about the group 
of broiler growers in settlement groups in broiler tournament 
settlement systems. Live poultry dealers would be required to disclose 
information about the housing specifications for each grower grouped or 
ranked during the specified period and the distribution of inputs to 
each grower in each tournament for each flock settled in tournament 
system. AMS expects that the cost to broiler growers associated with 
Sec.  201.104(c) will be identical to the costs of reviewing the 
disclosures required in Sec.  201.104(b). Aggregate costs would be 
$86,000.\180\ for the disclosures reviewed. AMS expects that reviewing 
the disclosure documents would cost, in the aggregate, an additional 
$150,000 \181\ for the remaining 3.5 flocks in the first year and 
$193,000 \182\ for the 4.5 flocks in each successive year.
---------------------------------------------------------------------------

    \180\ 1/6 hours x $60.70 per hour x 16,524 broiler growers x 80 
percent of broilers raised in tournament systems x 64.3 percent of 
live poultry dealers that process more than 2,000,000 head per week 
= $85,970.
    \181\ 1/12 hours x $60.70 per hour x 16,524 broiler growers x 
3.5 additional flocks in the first-year x 80 percent of broilers 
raised in tournament systems x 64.3 percent of live poultry dealers 
that process more than 2,000,000 head per week = $150,447.
    \182\ 1/12 hours x $60.70 per hour x 16,524 broiler growers x 
4.5 flocks per year x 80 percent of broilers raised in tournament 
systems x 64.3 percent of live poultry dealers that process more 
than 2,000,000 head per week = $193,432 per year.
---------------------------------------------------------------------------

    AMS estimates growers' aggregate costs for reviewing the placement 
and settlement disclosures associated with Sec.  201.104 under the 
small business exemption alternative to be $473,000 in the first year 
and $387,000 in each subsequent year. As discussed previously, AMS 
expects that broiler growers would spend the most time on their first 
review of the placement and settlement disclosures in order to 
understand the information, with less time for each subsequent review.
    The ten-year aggregate total costs to live poultry dealers of Sec.  
201.104 under the small business exemption alternative are estimated to 
be $1.4 million. The present value of the aggregate ten-year total 
costs of Sec.  201.104 to live poultry dealers are estimated to be $1.2 
million discounted at a 3 percent rate and $1.0 million at a 7 percent 
rate. The annualized costs of the PV of aggregate ten-year costs to 
live poultry dealers discounted at a 3 percent rate are expected to be 
$141,000 and $144,000 discounted at a 7 percent rate.
    The ten-year aggregate total costs to broiler growers of Sec.  
201.104 for the small business exemption alternative are estimated to 
be $4.0 million. The present value of the aggregate ten-year total 
costs of Sec.  201.104 to broiler growers are estimated to be $3.4 
million discounted at a 3 percent rate and $2.8 million at a 7 percent 
rate. The annualized aggregate costs of the PV of ten-year costs to 
broiler growers discounted at a 3 percent rate are expected to be 
$397,000, and $398,000 discounted at a 7 percent rate.
    The first-year aggregate total costs to live poultry dealers and 
broiler growers of Sec.  201.104 under the small business exemption 
alternative are estimated to be $749,000 and the ten-year aggregate 
total costs are estimated to be $5.3 million. The present value of the 
ten-year aggregate total costs of Sec.  201.104 to live poultry dealers 
and broiler growers are estimated to be $4.6 million discounted at a 3 
percent rate and $3.8 million at a 7 percent rate. The aggregate 
annualized costs of the PV of ten-year costs to live poultry dealers 
and broiler growers discounted at a 3 percent rate are expected to be 
$538,000 and $542,000 discounted at a 7 percent rate.
Combined Costs of Sec. Sec.  201.102 and 201.104--Small Business 
Exemption Alternative
    Aggregate combined costs to live poultry dealers for Sec. Sec.  
201.102 and 201.104 for the small business exemption alternative are 
expected to be $1.0 million in the first year, and $381,000 in 
subsequent years. The combined costs for broiler growers are expected 
to be $1.6 million in the first year, $637,000 in years two through 
five, and $578,000 after year five on an ongoing basis.
    The aggregate ten-year combined quantified costs to live poultry 
dealers of Sec. Sec.  201.102 and 201.104 for the small business 
exemption alternative are estimated to be $4.5 million and the present 
value of the ten-year combined costs are $3.9 million discounted at a 3 
percent rate and $3.3 million at a 7 percent rate. The aggregate 
annualized costs of the PV of ten-year costs to live poultry dealers 
discounted at a 3 percent rate are expected to be $454,000 and $466,000 
discounted at a 7 percent rate.
    The aggregate ten-year combined costs to broiler growers of 
Sec. Sec.  201.102 and 201.104 for the small business exemption 
alternative are estimated to be $7.1 million and the present value of 
the ten-year combined costs are estimated to be $6.2 million discounted 
at a 3 percent rate and $5.2 million at a 7 percent rate. The aggregate 
annualized costs of the PV of ten-year costs to broiler growers 
discounted at a 3 percent rate are expected to be $725,000 and $747,000 
discounted at a 7 percent rate. As under the preferred alternative, the 
costs to broiler growers from Sec. Sec.  201.102 and 201.104 under the 
small business exemption alternative would be higher for broiler 
growers than live poultry dealers for the reasons discussed above.
    The aggregate combined costs to live poultry dealers and broiler 
growers of Sec. Sec.  201.102 and 201.104 under the small business 
exemption alternative are estimated to be $2.7 million in the first 
year, $1.0 million in years two through five, and $960,000 in years six 
and beyond. The aggregate ten-year combined costs of Sec. Sec.  201.102 
and 201.104 for the small business exemption alternative for live 
poultry dealers and broiler growers are estimated to be $11.5 million 
and the present value of the ten-year combined costs are estimated to 
be $10.1 million discounted at a 3 percent rate and $8.5 million at a 7 
percent rate. The aggregate annualized costs of the PV of ten-year 
costs to live poultry dealers and broiler growers discounted at a 3 
percent rate are expected to be $1.2 million and $1.2 million 
discounted at a 7 percent rate. Additionally, there may be costs of 
bearing increased risk that AMS has not estimated of increasing 
transparency in broiler grower contracting and tournaments, which would 
have different effects on more or less diversified live poultry 
dealers.
Combined Benefits of Sec. Sec.  201.102 and 201.104--Small Business 
Exemption Alternative
    According to PSD records, only 2 percent of broiler growing 
contracts are between small live poultry dealers and broiler growers. 
Thus, 98 percent of all broiler growers will receive the benefits

[[Page 83282]]

of Sec. Sec.  201.102 and 201.104 under the small business exemption 
alternative. To estimate the minimum quantified benefits to broiler 
growers, G<INF>min</INF>, under the small business exemption 
alternative, AMS multiplied the minimum quantified benefits under the 
preferred alternative in Table 3 by 98 percent.
    AMS estimates the aggregate minimum benefits to growers, 
G<INF>min</INF>, from Sec. Sec.  201.102 and 201.104 under the small 
business exemption alternative from reduced profit uncertainty to be 
$2.6 million in the first year and on an ongoing basis.\183\ The ten-
year total minimum benefits of Sec. Sec.  201.102 and 201.104 to 
broiler growers are estimated to be $26.4 million and the present value 
of the ten-year total minimum benefits to be $22.5 million discounted 
at a 3 percent rate and $18.5 million at a 7 percent rate. The 
annualized PV of ten-year minimum benefits to broiler growers 
discounted at 3 and 7 percent rates are expected to be $2.6 million.
    The total benefits to the industry, B<INF>T</INF>, from Sec. Sec.  
201.102 and 201.104, under the small business exemption alternative, 
would be the sum of the minimum benefits to all broiler growers, 
G<INF>min</INF>, and the other benefits to the industry from extra 
information and a more efficient allocation of labor and capital, 
B<INF>O</INF>. The values of the estimated benefits appear in Table 4 
in the next section. AMS expects the quantified minimum benefits to 
growers from Sec. Sec.  201.102 and 201.104, combined with the other 
non-quantified benefits to growers, to exceed the costs of Sec. Sec.  
201.102 and 201.104 under the small business exemption alternative.
Combined Costs and Benefits of Sec. Sec.  201.102 and 201.104
    The aggregate cost and benefit estimates of Sec. Sec.  201.102 and 
201.104 under the small business exemption alternative presented above 
appear in the following table. The quantified costs and minimum 
quantifiable benefits to the industry in the first year under the small 
business exemption alternative are $2.7 million and $2.6 million, 
respectively. The minimum quantifiable benefits exceed the quantified 
costs on a ten-year and ten-year annualized basis.
    As with the preferred option, AMS expects that the net benefits to 
the industry from Sec. Sec.  201.102 and 201.104 under the small 
business exemption alternative will be very small in relation to the 
total value of industry production. Thus, AMS expects the impacts of 
the net benefits on total industry supply under the small business 
exemption alternative to be immeasurably small, leading to immeasurably 
small indirect effects on industry supply and demand, including price 
and quantity effects.

     Table 4--Quantifiable Costs and Benefits of Sec.  Sec.   201.102 and 201.104--Small Business Exemption
----------------------------------------------------------------------------------------------------------------
                                                       Cost                                  Benefits
                                 -------------------------------------------------------------------------------
    Small business exemption                                                        Individual
           alternative             Live poultry   Broiler rowers  Industry total   grower (Gmin)  Total industry
                                      dealers                                           \a\            (BT)
----------------------------------------------------------------------------------------------------------------
Sec.   201.102:
    First-Year..................        $743,000      $1,175,000      $1,918,000            Gmin       Gmin + BO
    Ten-Year Total..............       3,062,000       3,132,000       6,194,000            Gmin       Gmin + BO
    PV of Ten-Year Discounted at       2,669,000       2,799,000       5,469,000            Gmin       Gmin + BO
     3 Percent..................
    PV of Ten-Year Discounted at       2,264,000       2,449,000       4,713,000            Gmin       Gmin + BO
     7 Percent..................
    PV of Ten-Year Annualized at         313,000         328,000         641,000            Gmin       Gmin + BO
     3 Percent..................
    PV of Ten-Year Annualized at         322,000         349,000         671,000            Gmin       Gmin + BO
     7 Percent..................
Sec.   201.104:
    First-Year..................         276,000         473,000         749,000            Gmin       Gmin + BO
    Ten-Year Total..............       1,390,000       3,955,000       5,345,000            Gmin       Gmin + BO
    PV of Ten-Year Discounted at       1,204,000       3,383,000       4,587,000            Gmin       Gmin + BO
     3 Percent..................
    PV of Ten-Year Discounted at       1,011,000       2,798,000       3,809,000            Gmin       Gmin + BO
     7 Percent..................
    PV of Ten-Year Annualized at         141,000         397,000         538,000            Gmin       Gmin + BO
     3 Percent..................
    PV of Ten-Year Annualized at         144,000         398,000         542,000            Gmin       Gmin + BO
     7 Percent..................
Sec.  Sec.   201.102 and          ..............
 201.104:
    First-Year..................       1,019,000       1,648,000       2,667,000       2,637,000       Gmin + BO
    Ten-Year Total..............       4,452,000       7,087,000      11,539,000      26,369,000       Gmin + BO
    PV of Ten-Year Discounted at       3,873,000       6,183,000      10,056,000      22,493,000       Gmin + BO
     3 Percent..................
    PV of Ten-Year Discounted at       3,275,000       5,247,000       8,522,000      18,520,000       Gmin + BO
     7 Percent..................
    PV of Ten-Year Annualized at         454,000         725,000       1,179,000       2,637,000       Gmin + BO
     3 Percent..................
    PV of Ten-Year Annualized at         466,000         747,000       1,213,000       2,637,000       Gmin + BO
     7 Percent..................
----------------------------------------------------------------------------------------------------------------
\a\ AMS estimates Gmin as the combined benefits to growers of Sec.  Sec.   201.102 and 201.104.
\b\ Estimates do not include unquantified cost of risk increases.

    AMS considered the small business exemption alternative in part 
because of concerns that, due to scale economies, smaller live poultry 
dealers would not be able to absorb the cost of the required 
information disclosures as well as the large live poultry dealers. If 
the costs are disproportionately large for smaller live poultry 
dealers, large dealers might have an advantage possibly driving further 
consolidation chicken production. AMS subject matter experts do not 
expect that the costs of the rule will result in any additional 
consolidation by large live poultry dealers acquiring small live 
poultry dealers. The reasons are a lack of additional economies of 
scale from a large firm acquiring a small firm and the increase in 
costs to the large firm from no longer having the exemptions to small 
live poultry dealers offered in the preferred alternative.
---------------------------------------------------------------------------

    \183\ All benefits estimates assume a moderate (20 percent) RAP 
and a 2 percent reduction in coefficient of variation of net 
revenue.
---------------------------------------------------------------------------

    AMS also had to consider the rights of the growers who contracted 
with the smaller live poultry dealers. Those growers would be denied 
the benefits of the rule under the small business exemption. Also, AMS 
estimates that costs associated with the required information 
disclosures will be small relative to the size of the industry. Given 
these considerations, AMS chose final Sec. Sec.  201.102 and 201.104, 
which exempts small live poultry dealers from some, not all, of the 
disclosures required

[[Page 83283]]

of the large firms over the alternative rule that would exempt all live 
poultry dealers producing less than 2 million pounds of chicken per 
week.

C. Regulatory Flexibility Analysis

    AMS is adding Sec. Sec.  201.102 and 201.104 to the regulations 
under the Act. Section 201.102 will require live poultry dealers that 
deal in broilers to make disclosures before entering into new contracts 
or renewing existing contracts. Section 201.104 will require live 
poultry dealers that deal in broilers to disclose information at the 
settlement of each flock. Sections 201.102 and 201.104 will not apply 
to live poultry dealers that deal in turkeys, ducks, geese, or other 
fowl if the live poultry dealer does not deal in broilers.
    The provisions in Sec.  201.102 will require large live poultry 
dealers to disclose a true written copy of the growing agreement and a 
new Disclosure Document any time a live poultry dealer seeks to renew, 
revise, or replace an existing poultry growing arrangement that does 
not contemplate modifications to the existing housing specifications. 
Small live poultry dealers that process less than 2 million pounds of 
poultry per week will be excluded from this disclosure requirement. 
Before a live poultry dealer enters a poultry growing arrangement that 
would require an original capital investment or requires modifications 
to existing housing, both large and small live poultry dealers must 
provide a copy of the growing agreement, the housing specifications, a 
letter of intent, and the new Disclosure Document.
    The Disclosure Document will require live poultry dealers to 
disclose summaries of litigation with any broiler grower, bankruptcy 
filings, and the live poultry dealer's policy regarding a grower's sale 
of the farm or assignment of the contract.
    Live poultry dealers will be required to disclose growers' variable 
costs if it collects the information. Live poultry dealers will be 
required to audit the information to ensure accuracy and obtain and 
file signed receipts certifying that the live poultry dealer provided 
the required Disclosure Document. Live poultry dealers will be required 
to describe policies and procedures, as well as any appeal rights 
arising from increased lay-out time; sick, diseased, and high early 
mortality flocks; other events potentially resulting in massive 
depopulation of flocks, affecting grower payments; feed outages 
including outage times; and grower complaints relating to feed quality, 
formulation, or suitability. Live poultry dealers will be required to 
disclose annual grower turnover rates as well.
    The Disclosure Document will require two separate financial 
disclosures to growers. The first disclosure will be a table indicating 
average annual gross payments to broiler growers for the previous 
calendar year. The table will be organized by housing specification at 
each complex located in the United States that is owned or operated by 
the live poultry dealer and should express average payments on the 
basis of U.S. dollars per farm facility square foot. The second 
disclosure will be a set of tables with the average annual gross 
payments per farm facility square foot in each quintile to broiler 
growers for each of the five previous years, organized by housing 
specification at each complex.
    Live poultry dealers will also be required to make reasonable 
efforts to assist growers in translating the Disclosure Document. The 
rule will also prevent live poultry dealers from restricting growers or 
potential growers from sharing the Disclosure Document with a 
translator. Disclosures required in Sec.  201.104 are associated with 
poultry grower ranking systems. At the time of placement, Sec.  201.104 
requires live poultry dealers to provide specific information 
concerning the inputs, including feed, chicks, medication, etc., that 
the live poultry dealer provided to the grower. At the time of 
settlement, it will require the live poultry to provide specific 
information about inputs provided to every other grower in the 
tournament or ranking pool within 24 hours of flock delivery. Similar 
information on inputs will also be disclosed at settlement.
    AMS expects the disclosure requirements in Sec. Sec.  201.102 and 
201.104 will mitigate effects associated with asymmetric information 
between broiler growers and live poultry dealers. Some of the 
information held by live poultry dealers will be valuable to growers 
because it influences grower compensation in tournament contracts and 
might help growers in negotiating contract terms and making decisions 
about capital investments.
    The contracts themselves are often incomplete and exhibit asymmetry 
in the information available to live poultry dealers and contract 
growers. Because live poultry dealers supply most of the inputs, much 
of the production information is available only to the grower from the 
live poultry dealer. For example, the contract grower may not know 
precisely how much feed it used, or how much weight the flock gained 
under his or her care, unless the live poultry dealer provides the 
information.
    The proposed rule would have amended Sec.  201.100 and added new 
Sec.  201.214 to the regulations under the Act. The final rule will 
leave the current Sec.  201.100 unchanged, and it will add two new 
regulations, Sec. Sec.  201.102 and 201.204.
    The proposed rule would have required live poultry dealers to 
provide growers with copies of the disclosure document and a true 
written copy of the contract 7 calendar days prior to executing the 
contract. The final rule changes the 7-day requirement to a 14-day 
requirement, but the broiler grower has the option to waive 7 calendar 
days of that time period.
    The proposed rule also would have required live poultry dealers to 
obtain the broiler grower's or prospective broiler grower's dated 
signature as evidence of receipt of the Disclosure Document. The final 
rule will require live poultry dealers to obtain the broiler grower's 
or prospective broiler grower's dated signature as evidence of receipt 
but will also permit a live poultry dealer to obtain alternative 
documentation to evidence delivery and that best efforts were used to 
obtain grower receipt. The proof of delivery and best-efforts 
requirement, as an alternative, provide reasonable assurance in 
circumstances where the grower refuses to sign or where the grower has 
made him or herself unavailable that the grower receives and is able to 
evaluate in a timely manner the Disclosure Document. The grower receipt 
requirement, and this alternative, are comparable in cost and achieve 
the goal of this rule to minimize the risk that live poultry dealer 
deliver the Disclosure Document through means that, in practice, are 
not be read or noticed by the grower under the time frames provided, 
and so obstruct the purposes of ensuring the grower can evaluate the 
information before the grower makes significant decisions.
    In response to comments to the proposed rule, AMS changed the final 
rule to make it applicable only to live poultry dealers that deal in 
broilers. The rule will not apply to live poultry dealers that deal 
with turkeys, ducks, geese, or other fowl unless the live poultry 
dealer also deals in broilers. For live poultry dealers that deal in 
broilers as well as turkeys or other fowl, the final rule only applies 
to the broiler operations.
    In response to comments, AMS also added provisions to Sec.  201.102 
that will require live poultry dealers to assist growers with 
understanding the Disclosure Documents for broiler growers that do not 
speak English as a primary language. AMS also added

[[Page 83284]]

provisions requiring live poultry dealers to describe policies and 
procedures, as well as any appeal rights arising increased lay-out 
time; sick, diseased, and high early mortality flocks; other events 
potentially resulting in massive depopulation of flocks, affecting 
grower payments; feed outages including outage times; and grower 
complaints relating to feed quality, formulation, or suitability.
    Applying the rule to fewer firms considerably reduces the aggregate 
cost to small businesses. The proposed rule would have applied to 54 
small live poultry dealers. The final rule will apply to 20 live 
poultry dealers that are small businesses. This is mostly due to 
removing live poultry dealers that handle turkeys. There were very few 
live poultry dealers active in the markets for ducks, geese, and other 
fowl. Also, the smallest of the small live poultry dealers do not deal 
in broilers, and while they would have been required to comply with the 
proposed rule, the final rule will not apply to them.
    AMS also added disclosure requirements to the final rule that were 
not required in the proposed rule, and those disclosures will increase 
costs to the small businesses that will be required to comply with the 
final rule.
    The Small Business Administration (SBA) defines small businesses by 
their North American Industry Classification System Codes (NAICS). SBA 
considers broiler producers, NAICS 112320, small if sales are less than 
$3.5 million per year. Live poultry dealers, NAICS 311615, are 
considered small businesses if they have fewer than 1,250 
employees.\184\
---------------------------------------------------------------------------

    \184\ U.S. Small Business Administration. Table of Small 
Business Size Standards Matched to North American Industry 
Classification System Codes. Effective December 19, 2022.
---------------------------------------------------------------------------

    AMS maintains data on live poultry dealers from the annual reports 
these firms file with PSD. Data from the annual reports indicate that 
42 live poultry dealers would have been subject to the regulation in 
their fiscal year 2021. Twenty of the live poultry dealers would be 
small businesses according to the SBA standard. In their fiscal year 
2021, live poultry dealers reported that they had 19,808 broiler 
production contracts with broiler growers. Small live poultry dealers 
accounted for 950 contracts.
    Annual reports from live poultry dealers indicate they had 19,808 
contracts, but a broiler grower can have more than one contract. The 
2017 Census of Agriculture indicated that there were 16,524 poultry 
growers in the United States.\185\ AMS has no record of the number of 
broiler growers that qualify as small businesses but expects that 
nearly all of them are small businesses.
---------------------------------------------------------------------------

    \185\ USDA, NASS. 2017 Census of Agriculture: United States 
Summary and State Data. Volume 1, Part 51. Issued April 2019. p. 56. 
https://www.nass.usda.gov/Publications/AgCensus/2017/Full_Report/Volume_1,_Chapter_1_US/usv1.pdf.
---------------------------------------------------------------------------

    Costs of Sec. Sec.  201.102 and 201.104 to live poultry dealers 
will primarily consist of the time required to gather the information 
and distribute it among the growers. Sections 201.102 and 201.104 will 
also cost broiler growers the value of the time they put into reviewing 
and acknowledging receipt of the disclosures.
    Expected costs are estimated as the total value of the time 
required to produce and distribute the disclosures that will be 
required by Sec. Sec.  201.102 and 201.104 as well as the time to 
create and maintain any necessary additional records, although live 
poultry dealers already keep nearly all of the required records. 
Estimates of the amount of time required to create and distribute the 
disclosure documents were provided by AMS subject matter experts. These 
experts were auditors and supervisors with many years of experience in 
auditing live poultry dealers for compliance with the Act. Estimates 
for the value of the time are DOL BLS OEWS estimated released May 
2022.\186\ AMS marked up the wages 41.82 percent to account for 
benefits.
---------------------------------------------------------------------------

    \186\ See U.S. Bureau of Labor Statistics, May 2021 National 
Occupational Employment and Wage Estimates, May 2022. https://www.bls.gov/oes/special.requests/oesm21all.zip. Viewed January 31, 
2023.
---------------------------------------------------------------------------

    AMS expects Sec.  201.102 will initially require 1,589 hours of 
management time at $84.27 per hour costing $134,000, 720 hours of 
attorney time at $131.38 per hour costing $95,000, 487 hours of 
administrative time at $41.71 per hour costing $20,000, and 396 hours 
of information technology staff hours at $92.91 per hour costing 
$37,000 to keep and maintain records and produce and distribute the 
disclosures. AMS expects Sec.  201.102 will annually require an 
additional 578 hours of management time at $84.27 per hour costing 
$49,000, 116 hours of attorney time at $131.38 per hour costing 
$15,000, 254 hours of administrative time at $41.71 per hour costing 
$11,000, and 148 hours of information technology staff hours at $92.91 
per hour costing $14,000. Total aggregate first-year one-time set up 
costs to small live poultry dealers for Sec.  201.102 are expected to 
be $286,000. AMS expects aggregate cost to small live poultry dealers 
to be $88,000 annually, for a first-year total cost of $374,000.
    AMS estimated Sec.  201.104 will require a one-time first year 
aggregate investment of 300 hours of management time at $84.27 per hour 
costing $25,000, 220 hours of administrative time at $41.71 per hour 
costing $9,000, and 840 hours of information technology staff time at 
$92.91 per hour costing $78,000. Total aggregate first-year setup costs 
are expected to be $112,000.
    AMS expects Sec.  201.104 will annually require an aggregate 
additional 1,257 hours distributed evenly across management, 
administrative, and information technology staff at $84.27, $41.71, and 
$92.91 per hour, respectively, costing $35,000, $17,000, and $39,000 
respectively to keep and maintain records and produce and distribute 
the disclosures. Total aggregate first-year costs to small live poultry 
dealers for Sec.  201.104 are expected to be $204,000. After the first 
year, aggregate costs are expected to be $92,000 annually.
    The rule will regulate live poultry dealers' contracts. AMS expects 
that costs per live poultry dealer would be correlated with number of 
contracts. All expected costs of Sec.  201.102 are associated with 
maintaining records and producing and distributing Disclosure Documents 
among contract growers. AMS expects that firms that contract with few 
growers will have lower costs. Larger live poultry dealers will tend to 
have more contracts and will likely have more costs. Section 201.104 
only concerns poultry ranking systems. Smaller live poultry dealers 
that do not have tournament contracts will not have any of the costs 
associated with Sec.  201.104, and some live poultry dealers have few 
contracts with broiler growers and raise broiler in their own 
facilities. Those dealers will have relatively lower costs.
    AMS does not regulate poultry growers, and the rule has no 
requirements of poultry growers. To benefit from the disclosures, 
growers will need to review the information provided. Growers are not 
required to review the disclosure information in Sec. Sec.  201.102 and 
201.104, and growers that do not expect a benefit from reviewing the 
disclosure information likely will not review it.
    AMS estimates aggregate growers' costs for reviewing disclosures 
associated with Sec. Sec.  201.102 and 201.104 combined to be $93,000 
in the initial year. After broiler growers become familiar with the 
disclosures, they will likely require less time to review the 
documents, and AMS expects annual aggregate costs to growers will be 
$41,000 for years two through five and $38,000 each year thereafter. 
This

[[Page 83285]]

amounts to $117 per grower in the first year. The table below 
summarizes costs of Sec. Sec.  201.102 and 201.104 to small live 
poultry dealers and small broiler growers.

                Table 5--Estimated Costs to Small Businesses of Sec.  Sec.   201.102 and 201.104
----------------------------------------------------------------------------------------------------------------
                                                           Regulated live
                      Type of cost                        poultry dealers      Unregulated      Total (dollars)
                                                             (dollars)      growers (dollars)
----------------------------------------------------------------------------------------------------------------
Sec.   201.102:
    First-year Cost....................................            374,000             58,000            432,000
    First-year Cost per Firm...........................             19,000                 73                 NA
    PV of Ten-year Cost Discounted at 3 Percent........          1,031,000            137,000          1,168,000
    PV of Ten-year Cost Discounted at 7 Percent........            888,000            120,000          1,008,000
    Ten-year Cost Annualized at 3 Percent..............            121,000             16,000            137,000
    Ten-year Cost Annualized at 7 Percent..............            126,000             17,000            143,000
    Average Ten-Year Cost per Firm Annualized at 3                   6,100                 20                 NA
     Percent...........................................
    Average Ten-Year Cost per Firm Annualized at 7                   6,300                 22                 NA
     Percent...........................................
Sec.   201.104:
    First-year Cost....................................            204,000             35,000            239,000
    First-year Cost per Firm...........................             10,000                 45                 NA
    PV of Ten-year Cost Discounted at 3 Percent........            891,000            252,000          1,144,000
    PV of Ten-year Cost Discounted at 7 Percent........            749,000            209,000            958,000
    Ten-year Cost Annualized at 3 Percent..............            105,000             30,000            134,000
    Ten-year Cost Annualized at 7 Percent..............            107,000             30,000            136,000
    Average Ten-Year Cost per Firm Annualized at 3                   5,300                 37                 NA
     Percent...........................................
    Average Ten-Year Cost per Firm Annualized at 7                   5,400                 37                 NA
     Percent...........................................
Sec.  Sec.   201.102 and 201.104:
    First-year Cost....................................            578,000             93,000            671,000
    First-year Cost per Firm...........................             29,000                117                 NA
    PV of Ten-year Cost Discounted at 3 Percent........          1,923,000            389,000          2,312,000
    PV of Ten-year Cost Discounted at 7 Percent........          1,637,000            329,000          1,965,000
    Ten-year Cost Annualized at 3 Percent..............            225,000             46,000            271,000
    Ten-year Cost Annualized at 7 Percent..............            233,000             47,000            280,000
    Average Ten-Year Cost per Firm Annualized at 3                  11,300                 58                 NA
     Percent...........................................
    Average Ten-Year Cost per Firm Annualized at 7                  11,700                 59                 NA
     Percent...........................................
----------------------------------------------------------------------------------------------------------------

    Live poultry dealers report net sales in annual reports to AMS. 
Table 6 below groups small live poultry dealers' net sales into 
quartiles, reports the average net sales in each quartile, and compares 
average net sales to average expected first-year costs per firm for 
each of Sec.  201.102 and Sec.  201.104 and total first-year costs. 
Estimated first-year costs are higher than 10-year annualized costs, 
and for the threshold analysis, first-year costs will be higher than 
annualized costs as percentage of net sales. Correspondingly, the ratio 
of ten-year annualized costs to net sales is lower than their 
corresponding first-year cost ratios listed in Table 6. If estimated 
costs meet the threshold in the first year, they will in the following 
years as well.
    Estimated first-year costs per firm are small. The ratio is less 
than 0.1 percent of average net sales in the three largest quartiles. 
Percentage of net sales are about 0.26 percent in the smallest 
quartile.

     Table 6--Comparison of Small Live Poultry Dealers' Net Sales to Expected Annualized Costs of Sec.  Sec.
                                               201.102 and 201.104
----------------------------------------------------------------------------------------------------------------
                                                          First year costs   First year costs
                                                          related to Sec.    related to Sec.    Total first year
              Quartile                Average net sales     201.102 as a       201.104 as a        costs as a
                                          (dollars)        percent of net     percent of net     percent of net
                                                          sales (percent)    sales (percent)    sales (percent)
----------------------------------------------------------------------------------------------------------------
 
0 to 25 percent.....................         11,173,037              0.260              0.101              0.105
25 to 50 percent....................         30,021,116              0.097              0.038              0.039
50 to 75 percent....................         73,471,776              0.039              0.015              0.016
75 to 100 percent...................        193,207,736              0.015              0.006              0.006
----------------------------------------------------------------------------------------------------------------

    AMS also estimated costs of an alternative proposal that would 
exempt most small live poultry dealers from the requirements of the 
regulations. The alternative would exempt all live poultry dealers that 
process less than 2 million pounds of poultry per week from all 
reporting requirements. The alternative would only apply to five small 
business under the SBA standard.
    AMS estimated the alternative to Sec.  201.102 would require a one-
time first year aggregate investment of 488 hours of management time at 
$84.27 per hour costing $41,000, 180 hours of attorney time at $131.38 
per hour costing $24,000, 145 hours of administrative time at $41.71 
per hour costing $6,000, and 163 hours of information technology staff 
time at $92.91 per hour costing $15,000. Aggregate total first-

[[Page 83286]]

year setup costs are expected to be $86,000. AMS expects the 
alternative proposal for Sec.  201.102 will annually require an 
additional aggregate 198 hours of management time at $84.27 per hour 
costing $17,000, 29 hours of attorney time at $131.38 per hour costing 
$4,000, 92 hours of administrative time at $41.71 per hour costing 
$4,000, and 64 hours of information technology staff hours at $92.91 
per hour costing $6,000 to keep and maintain records and produce and 
distribute the disclosures. Aggregate total first-year costs to small 
live poultry dealers for Sec.  201.102 are expected to be $116,000. 
After the first year AMS expects aggregate costs to small live poultry 
dealers to be $30,000 annually.
    AMS estimated alternative Sec.  201.104 will require a one-time 
first year aggregate investment of 75 hours of management time at 
$84.27 per hour costing $6,000, 55 hours of administrative time at 
$41.71 per hour costing $2,000, and 210 hours of information technology 
staff time at $92.91 per hour costing $20,000. Aggregate total first-
year setup costs are expected to be $28,000.
    AMS expects alternative Sec.  201.104 will annually require an 
additional aggregate 70 hours distributed evenly across management, 
administrative, and information technology staff at $84.27, $41.71, and 
$92.91 per hour, respectively, costing $2,000, $1,000, and $2,000 
respectively to keep and maintain records and produce and distribute 
the disclosures. Aggregate total first-year costs to small live poultry 
dealers for alternative Sec.  201.104 are expected to be $33,000. After 
the first year, costs are expected to be $5,000 annually.
    The alternative would have a relatively small effect on costs to 
broiler growers on a per grower basis, and growers will only review the 
disclosures if they perceive that they are beneficial. AMS estimates 
growers' aggregate costs for reviewing and acknowledging receipt of 
disclosures associated with Sec. Sec.  201.102 and 201.104 to be 
$55,000 in the initial year. AMS expects annual aggregate costs to 
growers would be $24,000 for years two through five and $22,000 each 
year thereafter. Table 7 below summarizes aggregate costs of 
alternative Sec. Sec.  201.102 and 201.104 combined to small live 
poultry dealers and small broiler growers.

          Table 7--Estimated Costs to Small Businesses of Alternative Sec.  Sec.   201.102 and 201.104
----------------------------------------------------------------------------------------------------------------
                                                           Regulated live
                      Type of cost                        poultry dealers      Unregulated      Total (dollars)
                                                             (dollars)      growers (dollars)
----------------------------------------------------------------------------------------------------------------
Alternative Sec.   201.102:
    First-year Cost....................................            116,000             34,000            150,000
    First Year-Cost Per Firm...........................              6,000                 43                 NA
    PV of Ten-year Cost Discounted at 3 Percent........            342,000             81,000            422,000
    PV of Ten-year Cost Discounted at 7 Percent........            293,000             71,000            364,000
    Ten-year Cost Annualized at 3 Percent..............             40,000              9,000             50,000
    Ten-year Cost Annualized at 7 Percent..............             42,000             10,000             52,000
    Average Ten-Year Cost per Firm Annualized at 3                   2,000                 12                 NA
     Percent...........................................
    Average Ten-Year Cost per Firm Annualized at 7                   2,100                 13                 NA
     Percent...........................................
Alternative Sec.   201.104:
    First-year Cost....................................             33,000             21,000             54,000
    First Year-Cost Per Firm...........................              2,000                 26                 NA
    PV of Ten-year Cost Discounted at 3 Percent........             71,000            149,000            220,000
    PV of Ten-year Cost Discounted at 7 Percent........             62,000            123,000            185,000
    Ten-year Cost Annualized at 3 Percent..............              8,000             17,000             26,000
    Ten-year Cost Annualized at 7 Percent..............              9,000             17,000             26,000
    Average Ten-Year Cost per Firm Annualized at 3                     400                 22                 NA
     Percent...........................................
    Average Ten-Year Cost per Firm Annualized at 7                     500                 22                 NA
     Percent...........................................
Alternative Sec.  Sec.   201.102 and 201.104:
    First-year Cost....................................            150,000             55,000            204,000
    First Year-Cost Per Firm...........................              7,000                 69                 NA
    PV of Ten-year Cost Discounted at 3 Percent........            413,000            229,000            642,000
    PV of Ten-year Cost Discounted at 7 Percent........            355,000            193,000            549,000
    Ten-year Cost Annualized at 3 Percent..............             48,000             27,000             75,000
    Ten-year Cost Annualized at 7 Percent..............             51,000             28,000             78,000
    Average Ten-Year Cost per Firm Annualized at 3                   2,400                 34                 NA
     Percent...........................................
    Average Ten-Year Cost per Firm Annualized at 7                   2,600                 35                 NA
     Percent...........................................
----------------------------------------------------------------------------------------------------------------

    Net sales for small live poultry dealers that will be required to 
make disclosure under alternative Sec. Sec.  201.102 and 201.104 
averaged $159 million for their fiscal year 2020. Expected first-year 
cost per live poultry dealer will be well below 0.1 percent. Clearly, 
exempting live poultry dealers that process less than 2 million pounds 
of poultry per week will reduce cost to small live poultry dealers, but 
the benefits of the rule will also be less. AMS prefers the final 
Sec. Sec.  201.102 and 201.104 to the alternative because it considers 
the information in the disclosures to be important for broiler growers 
for making investment and production decisions and necessary for the 
efficient functioning of the market.
    AMS made considerations for small live poultry dealers in drafting 
Sec. Sec.  201.102 and 201.104. Section 201.102 makes several 
exemptions for live poultry dealers producing less than 2 million 
pounds of poultry per week. AMS chose not to make the final rule 
applicable to live poultry dealers that deal in turkeys, ducks, geese, 
or other fowl, which were some of the smallest live poultry dealers.
    Although costs would be smaller with the alternative, the costs 
associated with Sec. Sec.  201.102 and 201.104 are relatively small. 
The rule seeks only to require live poultry dealers to provide its 
contract growers with information relevant to their operations, and AMS 
made every effort to limit the disclosures to information that live 
poultry dealer already possessed. First-year costs to regulated live 
poultry dealers are expected to be $578,000,

[[Page 83287]]

which would be about $29,000 per firm. Present value of ten-year costs 
annualized at 7 percent are expected to be $1.6 million, and ten-year 
costs annualized at 7 percent are expected to be $233,000. These 
amounts are small considering that small live poultry dealers averaged 
nearly $60 million in sales annually. Although estimates of costs 
relative net sales increase for the smallest live poultry dealers, 
Sec. Sec.  201.102 and 201.104 only apply to tournament contracts. Some 
of the smallest live poultry dealers do not use tournament contracts 
and will not incur any costs. While Sec. Sec.  201.102 and 201.104 
would have an effect on a substantial number (20) of small businesses, 
the economic impact would not be significant.
    Costs to growers will be limited to the time required to review the 
disclosure and acknowledge receipt of the disclosures. AMS expects that 
Sec. Sec.  201.102 and 201.104 will have effects on a substantial 
number of growers however, the costs will not be significant for any of 
them.
    Based on the above analyses regarding Sec. Sec.  201.102 and 
201.104, this rule is not expected to have a significant economic 
impact on a substantial number of small business entities as defined in 
the Regulatory Flexibility Act (5 U.S.C. 601 et seq.)

D. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), AMS published a 60-day notice and requested comments on 
the information collection and recordkeeping requirements of the 
proposed rule when it proposed revisions to Sec. Sec.  201.100 and 
201.214 in the Federal Register on June 8, 2022 (87 FR 34980).\187\ The 
proposed information collection was for a total of 19,993 hours for the 
first year, and 6,066 hours per year thereafter. In response to 
comments, AMS revised the information collection requirements for the 
final rule and recalculated the information collection burden estimates 
accordingly, for a total of 17,205 hours for the first year, and 6,615 
hours thereafter. The comment period was open for 60 days and was 
extended for an additional 15 days. The comment period closed on August 
23, 2022. Below is a summary of the final rule's information collection 
requirements, the comments AMS received relating to the information 
collection requirements of the proposed rule, and any changes AMS made 
in response to the comments.
---------------------------------------------------------------------------

    \187\ The new sections that AMS proposed in Sec. Sec.  201.100 
and 201.214 are now Sec. Sec.  201.102 and 201.104 in the final 
rule, respectively.
---------------------------------------------------------------------------

    This final rule requires live poultry dealers engaged in the 
production of broilers to provide certain disclosures to broiler 
growers in advance of entering into production contracts. Under the 
final rule, live poultry dealers engaged in the production of broilers 
are required to make certain disclosures to poultry growers with whom 
they contract. To assist with compliance, AMS is providing Form PSD 
6100 (Live Poultry Dealer Disclosure Document Form Instructions), which 
includes instructions for developing the Disclosure Document and 
performing necessary calculations.
    This final rule also requires live poultry dealers engaged in the 
production of broilers who group and rank broiler growers for 
settlement purposes to disclose essential information to broiler 
growers about the flocks placed with individual growers at the time of 
placement. Live poultry dealers are also required to disclose 
information about the flocks and associated production inputs delivered 
to all broiler growers in the settlement group, as well as each 
grower's ranking within the group, at the time of settlement. Broiler 
growers are not required to provide information but can use the 
information provided by live poultry dealers to improve flock 
management practices and evaluate grower treatment under broiler grower 
ranking systems.
    Summary information on the burdens of these new information 
collection and recordkeeping requirements follows below. Additional 
detail can be found in the Regulatory Impact Analysis (RIA).
    AMS estimates each of 42 live poultry dealers engaged in the 
production of broilers would develop an average of 472 Disclosure 
Documents for broiler growers relating to new, renewed, revised, or 
updated broiler growing arrangements, as required under Sec.  201.102. 
AMS arrived at its estimate of 472 developed Disclosure Documents per 
live poultry dealer from AMS records which show 42 live poultry dealers 
engaged in the production of broilers filed annual reports with AMS, 
and their reports indicate that they had 19,808 growing contracts with 
broiler growers during their fiscal year 2021. AMS divided the 19,808 
growing contracts by the 42 live poultry dealers to arrive at 472 
Disclosure Documents per live poultry dealer.
    Live poultry dealers with current contracts with broiler growers 
would not be required to provide the Disclosure Document to those 
growers unless the dealer is renewing, revising, or replacing an 
existing contract or proposing modifications to the broiler housing 
specifications under the existing contract. AMS estimates first year 
development, production, and distribution of the Disclosure Documents 
in Sec.  201.102, including management, legal, administrative, and 
information technology time, would require an average 0.59 hours each, 
while ongoing annual production and distribution of each Disclosure 
Document would take 0.20 hours. AMS arrived at the estimates of the 
number of hours per response to set up, produce, distribute, and 
maintain each Disclosure Document by dividing the annual number of 
hours to set up, produce, and distribute the disclosures (11,709 first 
year hours and 3,975 ongoing hours) by the annual number of responses 
for all live poultry dealers (19,808). AMS estimated the number of 
hours for all live poultry dealers to develop, produce, distribute, and 
maintain each Disclosure Document required under Sec.  201.102 from the 
number of hours estimated and the expected cost estimates in Tables 1 
and 2 in Appendix 1.
    AMS estimates 42 live poultry dealers engaged in the production of 
broilers would each provide placement and settlement records to an 
average of 628 broiler growers annually under tournament ranking 
systems, as required under Sec.  201.104. AMS estimated the annual 
number of placement and settlement records by multiplying the number of 
relevant slaughter plants in AMS records from the reports that live 
poultry dealers file with AMS (188) by the average number of 
tournaments at each plant per week from AMS subject matter experts 
(1.35) by 52 weeks. This product is then multiplied by two to account 
for both placement and settlement records. AMS then divided the 
estimated annual number of responses (26,395) by the number of live 
poultry dealers (42) engaged in the production of broilers to arrive at 
its estimate of 628 placement and settlement disclosure records for 
each live poultry dealer on an annual basis.
    AMS estimates first year development, production, and distribution 
of the required placement and settlement records, as required under 
Sec.  201.104, including management, legal, administrative, and 
information technology time, will require approximately 0.21 hours. AMS 
estimates ongoing annual production and distribution of required 
tournament placement and settlement information would require an 
average of 0.10 hours. AMS arrived at the estimates of the number of 
hours per response to set up,

[[Page 83288]]

produce, distribute, and maintain each disclosure document by dividing 
the annual number of hours to set up, produce, and distribute the 
disclosures (5,496 first year hours and 2,640 ongoing hours) by the 
annual number of responses for live poultry dealers (26,395). AMS 
estimated the number of hours for all live poultry dealers engaged in 
the production of broilers to develop, produce, and distribute each 
placement and settlement disclosure document required under Sec.  
201.104 from the number of hours estimated and the expected cost 
estimates in Tables 3 and 4 in Appendix 1.
    Under Sec.  201.102, live poultry dealers are required to certify 
as to the accuracy of the Disclosure Documents and are required to 
maintain records relating to the Disclosure Documents for three years 
following expiration of the broiler growing arrangement. Under Sec.  
201.104, live poultry dealers are required to maintain records related 
to broiler grower tournament placements and settlement for 5 years.
    The required disclosures under Sec.  201.102 include essential 
information about the contract, the live poultry dealer's business 
history, and financial projections the grower could use to evaluate 
entering into the contract. Under the rule, live poultry dealers are 
required to provide the Disclosure Documents, which include specified 
information and boilerplate grower notifications. AMS will make 
available PSD Form 6100 that dealers can download from the AMS website 
to assist with development of the required Disclosure Document. Live 
poultry dealers are required to obtain grower signatures as evidence of 
the grower's receipt of the Disclosure Document, or obtain alternative 
documentation to evidence delivery and that best efforts were used to 
obtain grower receipt. Live poultry dealers are also required to retain 
the signature pages for three years following contract expiration.
    Section 201.104 requires live poultry dealers engaged in the 
production of broilers who group or rank broiler growers for settlement 
purposes to disclose information about each flock of broiler placed 
with growers for growout at the time of placement. Additionally, live 
poultry dealers are required to provide to each broiler grower in the 
group, at the time of settlement, information about the flocks placed 
with every grower in the group, as well as each grower's performance 
ranking within the group. Growers can use placement disclosures to 
inform flock management decisions during growout, and can use 
settlement disclosures to evaluate their growout performance, 
potentially improve future performance, and evaluate whether group 
members are treated fairly. Live poultry dealers are required to 
maintain records related to these disclosures for 5 years following 
settlement.
Costs of Final Sec. Sec.  201.102 and 201.104
    The combined costs to live poultry dealers engaged in the 
production of broilers for compliance with the reporting and 
recordkeeping requirements of final Sec. Sec.  201.102 and 201.104 are 
expected to be $1,437,096 in the first year, and $511,788 in subsequent 
years. The total hours estimated for the live poultry dealers to 
create, produce, distribute, and maintain these documents are 17,205 in 
the first year, and 6,615 in subsequent years. Complete details showing 
how AMS arrived at these cost estimates appear in Tables 1-4 in 
Appendix 1.
Comments From the Proposed Rule and Changes to the Final Rule
    After consideration of public comments, AMS determined to adopt the 
proposed rule as a final rule with several modifications. This section 
provides an overview of the comments and how the final rule differs 
from the proposed rule.
    The proposed rule would have required all live poultry dealers, and 
not just those engaged in the production of broilers, to provide the 
new disclosures required in revised Sec.  201.102 and new Sec.  
201.104. Based on public comments and other information, AMS 
subsequently decided to require the new disclosures only of live 
poultry dealers involved in broiler production. Thus, the number of 
entities affected by the final rule is substantially lower than 
originally estimated. This change significantly reduced the 
recordkeeping burden. This and other changes between the proposed and 
final rule are discussed in more detail below.
    Live poultry dealers commented that the full cost of the proposed 
rule would likely be many times greater than predicted by AMS. The 
commenters asserted AMS greatly underestimated the costs of creating 
the recordkeeping systems needed to comply with the proposed rule.
    In drafting and in estimating the costs of proposed Sec. Sec.  
201.100 and 201.214, AMS consulted auditors and supervisors who are 
familiar with live poultry dealers' records from many years of 
experience in auditing live poultry dealers for compliance with the 
Act. AMS expects that recordkeeping systems that most live poultry 
dealers already have in place will enable them to gather much of the 
information in the disclosures from records they already have available 
to them and limit the necessity of developing new recordkeeping 
systems. Thus, AMS made no changes to the information collection 
requirements of the proposed rule based on this comment.
    As mentioned above and will be explained in further detail below, 
AMS did change the language of the proposed rule to limit its 
application to broiler production. In order to make compliance with the 
final rule as easy as possible for regulated entities to follow, AMS 
reorganized the final rule by moving the new disclosures required into 
revised Sec.  201.102 and new Sec.  201.104.
    In the final rule, AMS removed the proposed revisions to Sec.  
201.100 requiring all live poultry dealers to provide certain 
additional disclosures to prospective or current growers and placed the 
requirements in new Sec.  201.102. AMS also amended the proposed 
requirements to apply exclusively to live poultry dealers engaged in 
the production of broilers who use a broiler growing ranking system to 
calculate grower payments, and moved the requirements from proposed new 
Sec.  201.214 to new Sec.  201.104. This reorganization of the rule 
does not impact the recordkeeping requirements or costs of the final 
rule.
    A commenter representing the turkey industry noted the proposed 
rule was largely based on research into the broiler industry. The 
commenter asserted it would be extremely difficult for turkey companies 
to implement the rule due to differences between turkey and chicken 
production. AMS analyzed a sample of turkey production contracts from 
across the country and concluded that, although research suggests 
broiler grower contract payments span a wide range, a similar disparity 
is not readily apparent in turkey production. Based on the comment and 
our further study, AMS has limited the applicability of final 
Sec. Sec.  201.102 and 201.104 to live poultry dealers engaged in the 
production of broilers. The final rule does not apply to live poultry 
dealers engaged in the production of turkeys, ducks, geese, and other 
domestic fowl. This change reduced the information collection burden 
from 89 respondents made up of live poultry dealers engaged in the 
production of broilers, turkeys, ducks, geese, and other domestic fowl 
to 42 live poultry dealers engaged in the production of broilers. 
Accordingly, this change reduced the information collection burden on 
live poultry dealers between the proposed Sec. Sec.  201.100 and 
201.214 and final Sec. Sec.  201.102 and 201.104.

[[Page 83289]]

    AMS proposed to require live poultry dealers to make various 
financial disclosures to broiler growers, including a table showing 
``average annual gross payments'' made to growers at all complexes 
owned or operated by the live poultry dealer for the previous calendar 
year, as well as to growers at the local complex. Poultry and meat 
trade associations suggested AMS require dealers to disclose average 
annual gross payments only for the grower's local complex. These 
commenters noted that complexes in different geographic areas face 
different economic conditions, arguing that information about payments 
at other complexes would not be useful and would potentially confuse 
growers. Therefore, AMS removed the requirement proposed in Sec.  
201.100(d)(1) to disclose payment information for all complexes owned 
or operated by the dealer. AMS maintains the requirement proposed in 
Sec.  201.100(d)(2) for live poultry dealers engaged in the production 
of broilers to disclose payment information only relating to the 
broiler grower's local complex at Sec.  201.102(d)(1) of the final 
rule. Accordingly, this change reduced the information collection 
burden on live poultry dealers between the proposed and final rule.
    Both growers and live poultry dealers also requested in comments 
that AMS provide more specificity on how to calculate average annual 
gross payments. While the proposed rule provided detail on 
calculations, the commenters felt the instructions lacked sufficient 
specificity to assure that live poultry dealers could comply and that 
broiler growers received adequate data on which to base business 
decisions. Therefore, AMS developed more in-depth instructions on how 
to calculate them, which are included in Form PSD 6100 (Live Poultry 
Dealer Disclosure Document Form Instructions). AMS added a modest 
amount of time to its cost estimates for live poultry dealers to review 
the instructions.
    Several commenters recommended that AMS also require the disclosure 
of grower turnover data. Grower turnover rates relate to the general 
risk of termination and non-renewal of contracts with a live poultry 
dealer. This information would allow growers to compare the turnover 
rates of multiple live poultry dealers as a risk factor when making 
contracting decisions. Therefore, AMS added a provision at Sec.  
201.102(c)(5) of the final rule requiring live poultry dealers engaged 
in the production of broilers to disclose average annual broiler grower 
turnover rates for the previous calendar year and the average of the 5 
previous calendar years at both the company level and the local complex 
level. AMS developed instructions for how to calculate average annual 
broiler grower turnover rates, which are included in Form PSD 6100. AMS 
added a modest amount of time to its cost estimates for live poultry 
dealers to review the instructions and calculate grower turnover rates.
    Numerous commenters from the grower and live poultry dealer sectors 
expressed that these provisions should be in plain and unambiguous 
language to avoid discrepancies in interpretation among the various 
parties, regulators, and courts. Some commenters also indicated a need 
to ensure growers who are not native speakers of English can understand 
the disclosures. Therefore, AMS added a provision at Sec.  
201.102(g)(3) of the final rule to require live poultry dealers engaged 
in the production of broilers to present the information in the 
Disclosure Document in a clear, concise, and understandable manner for 
growers.
    AMS also added a provision at Sec.  201.102(g)(4) to require that 
the live poultry dealer must make reasonable efforts to ensure that 
growers are aware of their right to request translation assistance, and 
to assist the grower in translating the Disclosure Document at least 14 
calendar days before the live poultry dealer executes the broiler 
growing arrangement although the grower can waive 7 calendar days of 
that time period. Reasonable efforts include but are not limited to 
providing current contact information for professional translation 
service providers, trade associations with translator resources, 
relevant community groups, or any other person or organization that 
provides translation services in the broiler grower's geographic area. 
A live poultry dealer may not restrict a broiler grower or prospective 
broiler grower from discussing or sharing the Disclosure Document for 
purposes of translation with a person or organization that provides 
language translation services. Nothing in the rule prevents companies 
from providing a translation provided it is complete, accurate, and not 
misleading. AMS added a modest amount of time to its cost estimates for 
live poultry dealers to comply with these new requirements.
    In the proposed rule, AMS did not specifically propose to require 
live poultry dealers to disclose their policies on grower payments with 
respect to increased lay-out time, diseased flocks, natural disasters 
and other depopulation events, feed issues or outages, or policies on 
grower appeal rights and processes. Multiple commenters suggested AMS 
include these disclosures. In the final rule, AMS added a provision at 
Sec.  201.102(c)(4) requiring live poultry dealers engaged in the 
production of broilers to disclose policies and procedures on increased 
lay-out time; sick, diseased, or high early mortality flocks; natural 
disasters, weather events, or other events adversely affecting the 
physical infrastructure of the local complex or the grower facility; 
other events potentially resulting in massive depopulation of flocks, 
affecting grower payments; feed outages including outage times; and 
grower complaints relating to feed quality, formulation, or 
suitability, as well as any appeal rights arising out of these events. 
AMS added a modest amount of time to its cost estimates for live 
poultry dealers to comply with this new requirement.
    The proposed rule would have required live poultry dealers to 
provide growers with copies of the disclosure document and a true 
written copy of the contract 7 calendar days prior to executing the 
contract. The final rule changes the 7-day requirement to a 14-day 
requirement, but the broiler grower has the option to waive 7 calendar 
days of that time period.
    The proposed rule also would have required live poultry dealers to 
obtain the broiler grower's or prospective broiler grower's dated 
signature as evidence of receipt or obtain alternative documentation 
acceptable to the Administrator as evidence of receipt. The final rule 
will require live poultry dealers to obtain the broiler grower's or 
prospective broiler grower's dated signature as evidence of receipt or 
obtain alternative documentation to evidence delivery and that best 
efforts were used to obtain grower receipt.
    AMS proposed in Sec.  201.100(f)(1)(i) to require live poultry 
dealers to establish, maintain, and enforce a governance framework 
reasonably designed to audit the accuracy and completeness of the 
disclosures in the Disclosure Document, which must include audits and 
testing, as well as reviews of an appropriate sampling of Disclosure 
Documents by the principal executive officer or officers. AMS 
determined that the requirement in Sec.  201.102(f)(2) for the 
principal executive officer or officers to certify the governance 
framework and the accuracy of the Disclosure Document adequately covers 
the intended requirement for officers of this level to be focused on 
the effectiveness of the governance framework. AMS concluded that this 
level of detail about the audit process for the Disclosure

[[Page 83290]]

Document was not necessary, particularly as AMS seeks to balance the 
need to ensure reliability of these statements with the burden on the 
principal executive officers regarding details of the governance 
process. Therefore, AMS removed the requirement proposed in Sec.  
201.100(f)(1)(i) for audit, testing, and reviews of an appropriate 
sampling of Disclosure Documents by the principal executive officer or 
officers.

E. E-Government Act

    USDA is committed to complying with the E-Government Act by 
promoting the use of the internet and other information technologies to 
provide increased opportunities for citizen access to Government 
information and services, and for other purposes.

F. Executive Order 12988--Civil Justice Reform

    This final rule has been reviewed under Executive Order 12988--
Civil Justice Reform. This rule is not intended to have retroactive 
effect. This rule does not preempt State or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule. There are no administrative procedures that must be exhausted 
prior to any judicial challenge to the provisions of this rule. Nothing 
in this final rule is intended to interfere with a person's right to 
enforce liability against any person subject to the Act under authority 
granted in section 308 of the Act.

G. Executive Order 13175--Consultation and Coordination With Tribal 
Indian Governments

    This rule has been reviewed in accordance with the requirements of 
Executive Order 13175--Consultation and Coordination with Indian Tribal 
Governments. Executive Order 13175 requires Federal agencies to consult 
with Tribes on a government-to-government basis on policies that have 
Tribal implications, including regulations, legislative comments or 
proposed legislation, and other policy statements or actions that have 
substantial direct effects on one or more Indian Tribes, on the 
relationship between the Federal Government and Indian Tribes or the 
distribution of power and responsibilities between the Federal 
Government and Indian Tribes.
    AMS has determined that this final rule does not have substantial 
direct effects on one or more Tribes that would require consultation. 
If a Tribe requests consultation, AMS will work with USDA's Office of 
Tribal Relations to ensure meaningful consultation is provided where 
changes, additions, and modifications identified herein are not 
expressly mandated by Congress. AMS will also conduct outreach to 
ensure that Tribes and Tribal members are aware of the requirements and 
benefits under this final rule.

H. Civil Rights Impact Analysis

    AMS has considered the potential civil rights implications of this 
final rule on members of protected groups to ensure that no person or 
group will be adversely or disproportionately at risk or discriminated 
against on the basis of race, color, national origin, gender, religion, 
age, disability, sexual orientation, marital or family status, or 
protected genetic information. The rule does not create a program that 
would recruit or require the opt-in participation of poultry producers, 
growers, or live poultry dealers. This rule does not contain any 
requirements related to eligibility, benefits, or services that will 
have the purpose or effect of excluding, limiting, or otherwise 
disadvantaging any individual, group, or class of persons on one or 
more prohibited bases. In fact, the regulation will create means by 
which AMS may be able to address potential civil rights issues in 
violation of the Act.
    In its review, AMS conducted a disparate impact analysis, using the 
required calculations, which resulted in a finding that Asian 
Americans, Pacific Islanders, and Native Hawaiians were 
disproportionately impacted by the rule, insofar as fewer farmers in 
those groups participate in poultry production than would be expected 
by their representation among U.S. farmers in general and therefore are 
less likely to benefit from the enhanced transparency provided by the 
rule. The final regulations will nevertheless provide benefits to all 
poultry growers. AMS will institute enhancement efforts to notify the 
groups found to be disproportionately impacted of the regulations and 
their implications. AMS outreach will specifically target several 
organizations that regularly engage with or otherwise may represent the 
interests of these impacted groups.

I. Congressional Review Act

    Pursuant to Subtitle E of the Small Business Regulatory Enforcement 
Fairness Act of 1996, also known as the Congressional Review Act (5 
U.S.C. 801 et seq.), the Office of Information and Regulatory affairs 
designated this final rule as not a major rule as defined by 5 U.S.C. 
804(2).

List of Subjects in 9 CFR Part 201

    Confidential business information, Reporting and recordkeeping 
requirements, Stockyards, Surety bonds, Trade practices.
    For the reasons set forth in the preamble, the Agricultural 
Marketing Service amends 9 CFR part 201 as follows:

PART 201--ADMINISTERING THE PACKERS AND STOCKYARDS ACT

0
1. The authority citation for 9 CFR part 201 continues to read as 
follows:

    Authority: 7 U.S.C. 181-229c.

0
2. Section 201.2 is revised to read as follows:


Sec.  201.2  Terms defined.

    The definitions of terms contained in the Act shall apply to such 
terms when used in Administering the Packers and Stockyards Act, 9 CFR 
part 201; Rules of Practice Governing Proceedings Under the Packers and 
Stockyards Act, 9 CFR part 202; and Statements of General Policy Under 
the Packers and Stockyards Act, 9 CFR part 203. In addition, the 
following terms used in these parts shall be construed to mean:
    Act means the Packers and Stockyards Act, 1921, as amended and 
supplemented (7 U.S.C. 181 et seq.).
    Additional capital investment means a combined amount of $12,500 or 
more per structure paid by a poultry grower or swine production 
contract grower over the life of the poultry growing arrangement or 
swine production contract beyond the initial investment for facilities 
used to grow, raise, and care for poultry or swine. Such term includes 
the total cost of upgrades to the structure, upgrades of equipment 
located in and around each structure, and goods and professional 
services that are directly attributable to the additional capital 
investment. The term does not include costs of maintenance or repair.
    Administrator or agency head means the Administrator of the 
Agricultural Marketing Service or any person authorized to act for the 
Administrator.
    Agency means the Agricultural Marketing Service of the United 
States Department of Agriculture.
    Breeder facility identifier means the identification that a live 
poultry dealer permanently assigns to distinguish among breeder 
facilities supplying eggs for the poultry placed at the poultry 
grower's facility.
    Breeder flock age means the age in weeks of the egg-laying flock 
that is the source of poultry placed at the poultry grower's facility.
    Broiler means any chicken raised for meat production.

[[Page 83291]]

    Broiler grower means a poultry grower engaged in the production of 
broilers.
    Broiler growing arrangement means a poultry growing arrangement 
pertaining to the production of broilers.
    Commerce means commerce between any State, Territory, or 
possession, or the District of Columbia, and any place outside thereof; 
or between points within the same State, Territory, or possession, or 
the District of Columbia, but through any place outside thereof; or 
within any Territory or possession, or the District of Columbia.
    Complex means a group of local facilities under the common 
management of a live poultry dealer. A complex may include, but not be 
limited to, one or more hatcheries, feed mills, slaughtering 
facilities, or poultry processing facilities.
    Custom feedlot means any facility which is used in its entirety or 
in part for the purpose of feeding livestock for the accounts of 
others, but does not include feeding incidental to the sale or 
transportation of livestock.
    Department means the United States Department of Agriculture.
    Gross payments are the total compensation a poultry grower receives 
from the live poultry dealer, including, but not limited to, base 
payments, new housing allowances, energy allowances, square footage 
payments, extended lay-out time payments, equipment allowances, bonus 
payments, additional capital investment payments, poultry litter 
payments, etc., before deductions or assignments are made.
    Grower variable costs means those costs related to poultry 
production that may be borne by the poultry grower, which may include, 
but are not limited to, utilities, fuel, water, labor, repairs and 
maintenance, and liability insurance.
    Housing specifications means a description of--or a document 
relating to--a list of equipment, products, systems, and other 
technical poultry housing components required by a live poultry dealer 
for the production of live poultry.
    Inputs means the various contributions to be made by the live 
poultry dealer and the poultry grower as agreed upon by both under a 
poultry growing arrangement. Such inputs may include, but are not 
limited to, animals, feed, veterinary services, medicines, labor, 
utilities, and fuel.
    Letter of intent means a document that expresses a preliminary 
commitment from a live poultry dealer to engage in a business 
relationship with a prospective poultry grower and that includes the 
chief terms of the agreement.
    Live poultry dealer means any person engaged in the business of 
obtaining live poultry by purchase or under a poultry growing 
arrangement for the purpose of either slaughtering it or selling it for 
slaughter by another, if poultry is obtained by such person in 
commerce, or if poultry obtained by such person is sold or shipped in 
commerce, or if poultry products from poultry obtained by such person 
are sold or shipped in commerce.
    Live Poultry Dealer Disclosure Document means the complete set of 
disclosures and statements that the live poultry dealer must provide to 
the poultry grower.
    Minimum number of placements means the least number of flocks of 
poultry the live poultry dealer will deliver to the grower for growout 
annually under the terms of the poultry growing arrangement.
    Minimum stocking density means the ratio that reflects the minimum 
weight of poultry per facility square foot the live poultry dealer 
intends to harvest from the grower following each growout.
    Number of placements means the number of flocks of poultry the live 
poultry dealer will deliver to the grower for growout during each year 
of the poultry growing arrangement period.
    Original capital investment means the initial financial investment 
for facilities used to grow, raise, and care for poultry or swine.
    Packers and Stockyards Division (PSD) means the Packers and 
Stockyards Division of the Fair Trade Practices Program (FTPP), 
Agricultural Marketing Service.
    Person means individuals, partnerships, corporations, and 
associations.
    Placement means delivery of a poultry flock to the poultry grower 
for growout in accordance with the terms of a poultry growing 
arrangement.
    Poultry grower means any person engaged in the business of raising 
and caring for live poultry for slaughter by another, whether the 
poultry is owned by such person or by another, but not an employee of 
the owner of such poultry.
    Poultry grower ranking system means a system where the contract 
between the live poultry dealer and the poultry grower provides for 
payment to the poultry grower based upon a grouping, ranking, or 
comparison of poultry growers delivering poultry during a specified 
period.
    Poultry growing arrangement means any growout contract, marketing 
agreement, or other arrangement under which a poultry grower raises and 
cares for live poultry for delivery, in accord with another's 
instructions, for slaughter.
    Poultry growout means the process of raising and caring for poultry 
in anticipation of slaughter.
    Poultry growout period means the period of time between placement 
of poultry at a grower's facility and the harvest or delivery of such 
animals for slaughter, during which the feeding and care of such 
poultry are under the control of the grower.
    Principal part of performance means the raising of and caring for 
livestock or poultry, when used in connection with a livestock or 
poultry production contract.
    Prospective broiler grower means a person or entity with whom the 
live poultry dealer is considering entering into a broiler growing 
arrangement.
    Prospective poultry grower means a person or entity with whom the 
live poultry dealer is considering entering into a poultry growing 
arrangement.
    Regional director means the regional director of the Packers and 
Stockyards Division (PSD) for a given region or any person authorized 
to act for the regional director.
    Registrant means any person registered pursuant to the provisions 
of the Act and the regulations in this part.
    Schedule means a tariff of rates and charges filed by stockyard 
owners and market agencies.
    Secretary means the Secretary of Agriculture of the United States, 
or any officer or employee of the Department authorized to act for the 
Secretary.
    Stocking density means the ratio that reflects the number of birds 
in a placement, expressed as the number of poultry per facility square 
foot.
    Stockyard means a livestock market which has received notice under 
section 302(b) of the Act that it has been determined by the Secretary 
to come within the definition of ``stockyard'' under section 302(a) of 
the Act.

0
3. Amend Sec.  201.100 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  201.100  Records to be furnished poultry growers and sellers.

    (a) Poultry growing arrangement; timing of disclosure. A live 
poultry dealer who offers a poultry growing arrangement to a poultry 
grower must provide the poultry grower with a true written copy of the 
offered poultry growing arrangement on the date the dealer provides the 
poultry grower with poultry housing specifications.
    (b) Right to discuss the terms of poultry growing arrangement 
offer. A live poultry dealer, notwithstanding any confidentiality 
provision in the poultry

[[Page 83292]]

growing arrangement, may not prohibit a poultry grower or prospective 
poultry grower from discussing the terms of a poultry growing 
arrangement offer or, if applicable, the accompanying Live Poultry 
Dealer Disclosure Document described in Sec.  201.102 (b) through (d) 
of this part with any of the following:
    (1) A Federal or State agency.
    (2) The grower's financial advisor or lender.
    (3) The grower's legal advisor.
    (4) An accounting services representative hired by the grower.
    (5) Other growers for the same live poultry dealer.
    (6) A member of the grower's immediate family or a business 
associate. A business associate is a person not employed by the grower, 
but with whom the grower has a valid business reason for consulting 
with when entering into or operating under a poultry growing 
arrangement.
* * * * *

0
4. Add Sec.  201.102 to read as follows:


Sec.  201.102  Disclosures for broiler production.

    (a) Obligation to furnish information and documents. In addition to 
the requirements of Sec.  201.100 of this part, a live poultry dealer 
engaged in the production of broilers must provide the documents 
described in this section to the prospective or current broiler grower.
    (1) Except as provided in paragraph (e) of this section, when a 
live poultry dealer seeks to renew, revise, or replace an existing 
broiler growing arrangement, or to establish a new broiler growing 
arrangement that does not contemplate modifications to the existing 
housing specifications, the live poultry dealer must provide the 
following documents at least 14 calendar days before the live poultry 
dealer executes the broiler growing arrangement (provided that the 
grower may waive up to 7 calendar days of that time period):
    (i) A true, written copy of the renewed, revised, replacement, or 
new broiler growing arrangement.
    (ii) The Live Poultry Dealer Disclosure Document, as described in 
paragraphs (b), (c), and (d) of this section.
    (2) When a live poultry dealer seeks to enter a broiler growing 
arrangement with a broiler grower or prospective broiler grower that 
will require an original capital investment, the live poultry dealer 
must provide the following to the broiler grower or prospective broiler 
grower simultaneously with the housing specifications:
    (i) A copy of the broiler growing arrangement that is affiliated 
with the current housing specifications.
    (ii) The Live Poultry Dealer Disclosure Document, as described in 
paragraphs (b), (c), and (d) of this section.
    (iii) A letter of intent that can be relied upon to obtain 
financing for the original capital investment.
    (3) When a live poultry dealer seeks to offer or impose 
modifications to existing housing specifications that could reasonably 
require a broiler grower or prospective broiler grower to make an 
additional capital investment, the live poultry dealer must provide the 
following to the broiler grower or prospective broiler grower 
simultaneously with the modified housing specifications:
    (i) A copy of the broiler growing arrangement that is affiliated 
with the modified housing specifications.
    (ii) The Live Poultry Dealer Disclosure Document, as described in 
paragraphs (b), (c), and (d) of this section.
    (iii) A letter of intent that can be relied upon to obtain 
financing for the additional capital investment.
    (b) Prominent Disclosures. The Live Poultry Dealer Disclosure 
Document must include a cover page followed by the disclosures as 
required in paragraphs (c) and (d) of this section. The order, form, 
and content of the cover page shall be and include:
    (1) The title ``LIVE POULTRY DEALER DISCLOSURE DOCUMENT'' in 
capital letters and bold type.
    (2) The live poultry dealer's name, type of business organization, 
principal business address, telephone number, email address, and, if 
applicable, primary internet website address.
    (3) The length of the term of the broiler growing arrangement.
    (4) The following statement: ``The income from your poultry farm 
may be significantly affected by the number of flocks the poultry 
company places on your farm each year, the density or number of birds 
placed with each flock, and the target weight at which poultry is 
caught. The poultry company may have full discretion and control over 
these and other factors. Please carefully review the information in 
this document.''
    (5) The following minimums established under the terms of the 
broiler growing arrangement:
    (i) The minimum number of placements on the broiler grower's farm 
annually.
    (ii) The minimum stocking density for each flock to be placed on 
the broiler grower's farm.
    (6) The applicable of the following two statements:
    (i) ``This disclosure document summarizes certain provisions of 
your broiler growing arrangement and other information. You have the 
right to read this disclosure document and all accompanying documents 
carefully. At least 14 calendar days before the live poultry dealer 
executes the broiler growing arrangement (provided that the grower may 
waive up to 7 calendar days of that time period), the poultry company 
is required to provide you with: (1) this disclosure document, and (2) 
a copy of the broiler growing arrangement.'' or
    (ii) ``This disclosure document summarizes certain provisions of 
your broiler growing arrangement and other information. You have the 
right to read this disclosure document and all accompanying documents 
carefully. The live poultry dealer is required to provide this 
disclosure document to you simultaneously with (a) a copy of the 
broiler growing arrangement, (b) any new or modified housing 
specifications that would require you to make an original or additional 
capital investment, and (c) a letter of intent.''
    (7) The following statement: ``Even if the broiler growing 
arrangement contains a confidentiality provision, by law you still 
retain the right to discuss the terms of the broiler growing 
arrangement and the Live Poultry Dealer Disclosure Document with a 
Federal or State agency, your financial advisor or lender, your legal 
advisor, your accounting services representative, other growers for the 
same live poultry dealer, and your immediate family or business 
associates. A business associate is a person not employed by you but 
with whom you have a valid business reason for consulting when entering 
into or operating under a broiler growing arrangement.''
    (8) The following statement in bold type: ``Note that USDA has not 
verified the information contained in this document. If this disclosure 
by the live poultry dealer contains any false or misleading statement 
or a material omission, a violation of Federal and/or State law may 
have occurred.''
    (c) Required disclosures following the cover page. The live poultry 
dealer shall disclose, in the Live Poultry Dealer Disclosure Document 
following the cover page, the following information:
    (1) A summary of litigation over the prior 5 years between the live 
poultry dealer and any broiler grower, including the nature of the 
litigation, its location, the initiating party, a brief description of 
the controversy, and any resolution.
    (2) A summary of all bankruptcy filings in the prior 5 years by the 
live poultry dealer and any parent,

[[Page 83293]]

subsidiary, or related entity of the live poultry dealer.
    (3) A statement that describes the live poultry dealer's policies 
and procedures regarding the potential sale of the broiler grower's 
facility or assignment of the broiler growing arrangement to another 
party, including the circumstances under which the live poultry dealer 
will offer the successive buyer a broiler growing arrangement.
    (4) A statement describing the live poultry dealer's policies and 
procedures, as well as any appeal rights arising from the following 
events described in paragraphs (c)(4)(i) through (c)(4)(vi) of this 
section. If no policy or procedure exists, the live poultry dealer will 
acknowledge ``no policy exists'' relating to the items in paragraphs 
(c)(4)(i) through (c)(4)(vi) of this section.
    (i) Increased lay-out time.
    (ii) Sick, diseased, and high early-mortality flocks.
    (iii) Natural disasters, weather events, or other events adversely 
affecting the physical infrastructure of the local complex or the 
grower facility.
    (iv) Other events potentially resulting in massive depopulation of 
flocks, affecting grower payments.
    (v) Feed outages, including outage times.
    (vi) Grower complaints relating to feed quality, formulation, or 
suitability.
    (5) A table showing the average annual broiler grower turnover 
rates for the previous calendar year and the average of the 5 previous 
calendar years at a company level and at a local complex level.
    (d) Financial Disclosures. The live poultry dealer must include in 
the Live Poultry Dealer Disclosure Document the following information:
    (1) Tables showing average annual gross payments to broiler growers 
at the local complex for each of the 5 previous years. The tables must 
express average payments in U.S. dollars per farm facility square foot. 
The tables must be organized to present the following elements:
    (i) Year.
    (ii) Housing specification tier (lowest to highest).
    (iii) Distribution of payments, specifically either--
    (A) Quintile (lowest to highest), for a local complex comprising 10 
or more growers, or
    (B) Mean and one standard deviation from the mean, for a local 
complex comprising 9 or fewer growers.
    (2) If poultry housing specifications for broiler growers under 
contract with the complex are modified such that an additional capital 
investment may be required, or if the 5-year averages provided under 
paragraph (d)(1) of this section do not accurately represent projected 
grower gross annual payments under the terms of the applicable broiler 
growing arrangement for any reason, the live poultry dealer must 
provide the following information:
    (i) Tables providing projections of average annual gross payments 
to broiler growers under contract with the complex with the same 
housing specifications for the term of the broiler growing arrangement 
at five quintile levels or by mean and standard deviation expressed as 
dollars per farm facility square foot.
    (ii) An explanation of why the annual gross payment averages for 
the previous 5 years, as provided under paragraph (d)(1) of this 
section, do not provide an accurate representation of projected future 
payments, including the basic assumptions underlying the projections 
provided under paragraph (d)(2)(i) of this section.
    (3) A summary of information the live poultry dealer collects or 
maintains relating to grower variable costs inherent in broiler 
production.
    (4) Current contact information for the State university extension 
service office or the county farm advisor's office that can provide 
relevant information about broiler grower costs and broiler farm 
financial management in the broiler grower's geographic area.
    (e) Small Live Poultry Dealer Financial Disclosures. A live poultry 
dealer engaged in the production of broilers is exempt from the 
requirements in paragraph (a)(1) of this section if the live poultry 
dealer, together with all companies controlled by or under common 
control with the live poultry dealer, slaughters fewer than 2 million 
live pounds of broilers weekly (104 million pounds annually).
    (f) Governance and Certification. (1) The live poultry dealer 
engaged in the production of broilers must establish, maintain, and 
enforce a governance framework that is reasonably designed to:
    (i) Audit the accuracy and completeness of the disclosures required 
under paragraphs (a) through (d) of this section.
    (ii) Ensure compliance with all obligations under the Packers and 
Stockyards Act and regulations thereunder.
    (2) The principal executive officer or officers, or persons 
performing similar functions, must certify in the Live Poultry Dealer 
Disclosure Document that the live poultry dealer has established, 
maintains, and enforces the governance framework and that, based on the 
officer's knowledge, the Live Poultry Dealer Disclosure Document does 
not contain any untrue statement of a material fact or omit to state a 
material fact which would render it misleading.
    (g) Receipt by Growers. (1) The Live Poultry Dealer Disclosure 
Document must include a broiler grower's signature page that contains 
the following statement: ``If the live poultry dealer does not deliver 
this disclosure document within the timeframe specified herein, or if 
this disclosure document contains any false or misleading statement or 
a material omission (including any discrepancy with other oral or 
written statements made in connection with the broiler growing 
arrangement), a violation of Federal and State law may have occurred. 
Violations of Federal and State laws may be determined to be unfair, 
unjustly discriminatory, or deceptive and unlawful under the Packers 
and Stockyards Act, as amended. You may file a complaint at 
farmerfairness.gov or call 1-833-DIAL-PSD (1-833-342-5773) if you 
suspect a violation of the Packers and Stockyards Act or any other 
Federal law governing fair and competitive marketing, including 
contract growing, of livestock and poultry. Additional information on 
rights and responsibilities under the Packers and Stockyards Act may be 
found at www.ams.usda.gov.''
    (2) The live poultry dealer must obtain the broiler grower's or 
prospective broiler grower's dated signature on the broiler grower's 
signature page in paragraph (g)(1) of this section as evidence of 
receipt or obtain alternative documentation to evidence delivery and 
that best efforts were used to obtain grower receipt. The live poultry 
dealer must provide a copy of the dated signature page or alternative 
documentation to the broiler grower or prospective broiler grower and 
must retain a copy of the dated signature page or alternative 
documentation in the dealer's records for 3 years following expiration, 
termination, or non-renewal of the broiler growing arrangement.
    (3) Information in the Live Poultry Dealer Disclosure Document must 
be presented in a clear, concise, and understandable manner for 
growers. Live poultry dealers may refer to Form PSD 6100 for further 
instructions on the presentation of information and certain 
calculations.
    (4) The live poultry dealer must make reasonable efforts to ensure 
that growers are aware of their right to request translation 
assistance, and to assist the grower in translating the Disclosure 
Document at least 14 calendar days before the live poultry dealer 
executes

[[Page 83294]]

the broiler growing arrangement that does not contemplate modifications 
to the existing housing specifications (provided that the grower may 
waive up to 7 calendar days of that time period) or where modifications 
to the existing housing specifications are contemplated when the live 
poultry dealer provides the grower with the Disclosure Document. 
Reasonable efforts include but are not limited to providing current 
contact information for professional translation service providers, 
trade associations with translator resources, relevant community 
groups, or any other person or organization that provides translation 
services in the broiler grower's geographic area. A live poultry dealer 
may not restrict a broiler grower or prospective broiler grower from 
discussing or sharing the Disclosure Document for purposes of 
translation with a person or organization that provides language 
translation services.
    (h) Contract terms. A live poultry dealer engaged in the production 
of broilers must specify in the true written copy of the broiler 
growing arrangement the following:
    (1) The minimum number of placements of poultry at the broiler 
grower's facility annually.
    (2) The minimum stocking density for each flock placed with the 
broiler grower under the broiler growing arrangement.

0
5. Add Sec.  201.104 to read as follows:


Sec.  201.104  Disclosures for broiler grower ranking system payments.

    (a) Poultry grower ranking system records. If a live poultry dealer 
engaged in the production of broilers uses a poultry grower ranking 
system to calculate broiler grower payments, the live poultry dealer 
must produce records in accordance with paragraphs (b) and (c) of this 
section. The live poultry dealer must maintain these records for 5 
years.
    (b) Placement Disclosure. Within 24 hours of flock delivery to a 
broiler grower's facility, the live poultry dealer must provide all the 
following information to the broiler grower regarding the placement:
    (1) The stocking density of the placement.
    (2) Names and all ratios of breeds of the poultry delivered.
    (3) If the live poultry dealer has determined the sex of the birds, 
all ratios of male and female poultry delivered.
    (4) The breeder facility identifier.
    (5) The breeder flock age.
    (6) Information regarding any known health impairments of the 
breeder flock or of the poultry delivered.
    (7) Adjustments, if any, that the live poultry dealer may make to 
the calculation of the grower's pay based on the inputs in paragraphs 
(b)(1) through (b)(6) of this section.
    (c) Poultry grower ranking system settlement documents. In addition 
to the requirements of Sec.  201.100 of this part, a live poultry 
dealer must provide disclosures to all broiler growers on the grouping 
or ranking sheets as described in paragraphs (c)(1) and (c)(2) of this 
section. The disclosures need not show the names of other growers.
    (1) Live poultry dealers must disclose the housing specification 
for each broiler grower grouped or ranked during the specified period.
    (2) Live poultry dealers must disclose all the following 
information to each broiler grower participant ranked under a poultry 
grower ranking system:
    (i) The stocking density for each placement in the ranking.
    (ii) The names and all ratios of breeds of the poultry for each 
placement in the ranking.
    (iii) If the live poultry dealer has determined the sex of the 
birds, all ratios of male and female poultry for each placement in the 
ranking.
    (iv) All breeder facility identifiers for each placement in the 
ranking.
    (v) The breeder flock age(s) for each placement in the ranking.
    (vi) The number of feed disruptions each ranked broiler grower 
endured during the growout period where the grower was completely out 
of feed for 12 hours or more.

    Note:  The following appendices will not appear in the Code of 
Federal Regulations.

Appendix 1. Details of the Estimated One-Time, First-Year Costs and On-
Going Annual Costs of Providing Disclosure Documents Required in 
Sec. Sec.  201.102 and 201.104

    Table 1 below provides the details of the estimated one-time, 
first-year costs to live poultry dealers (LPD) of providing 
disclosure documents required in Sec.  201.102. AMS expects that the 
direct costs will consist entirely of the value of the time required 
to produce and distribute the disclosures and maintain proper 
records. The number of hours the second column were provided by AMS 
subject matter experts. These experts were auditors and supervisors 
with many years of experience in auditing live poultry dealers for 
compliance with the Act. They provided estimates of the average 
amount of time that would be necessary for each live poultry dealer 
to meet each of the elements listed in the ``Regulatory 
Requirements'' column. Estimates for the value of the time are U.S. 
Bureau of Labor Statistics Occupational Employment and Wage 
Statistics estimated released May 2022. Wage estimates are marked up 
41.82 percent to account for benefits. The ``Adjustment'' column 
allows for estimation of costs that will only apply to a subset of 
the poultry growers or to the live poultry dealers. A blank value in 
the Adjustment column indicates that no adjustments were made to the 
costs. Each adjustment is different and described in the relevant 
footnote. Expected costs for each ``Regulatory Requirement'' and are 
listed in the ``Expected Cost'' column. Summing the values in the 
``Expected Cost'' column provides the total expected first-year, 
one-time costs for setting-up and producing the disclosure documents 
associated with Sec.  201.102.

                                        Table 1--Expected First-Year Direct Costs Associated With Sec.   201.102
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Number of
          Regulatory requirement            hours required           Profession            Expected wage  Number of LPDs    Adjustment     Expected cost
                                             for each LPD                                       ($)                          (percent)          ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
201.102(b)(1)-(8).........................               1  Manager.....................           84.27              42  ..............           3,539
                                                         4  Lawyer......................          131.38              42  ..............          22,072
201.102(c)(1)-(3).........................              10  Manager.....................           84.27              42  ..............          35,393
                                                         5  Administrative..............           41.71              42  ..............           8,759
                                                        10  Lawyer......................          131.38              42  ..............          55,180
201.102(c)(4).............................               2  Manager.....................           84.27         \a\ 188  ..............          31,685
                                                         4  Manager.....................           84.27              42  ..............          14,157
                                                         1  Lawyer......................          131.38              42  ..............           5,518
201.102(c)(5).............................               1  Manager.....................           84.27         \a\ 188  ..............          15,843
201.102(d)(1)(2)(i).......................              30  Manager.....................           84.27          \b\ 27          \c\ 90          61,432
                                                         8  Administrative..............           41.71          \b\ 27          \c\ 90           8,108
                                                        22  Information Tech............           92.91          \b\ 27          \c\ 90          49,667
201.102(d)(1)(2)(ii)-(v)..................              60  Manager.....................           84.27              42           \d\ 5          10,618
                                                        16  Administrative..............           41.71              42           \d\ 5           1,401

[[Page 83295]]

 
                                                        44  Information Tech............           92.91              42           \d\ 5           8,584
201.102(d)(3).............................              20  Manager.....................           84.27              42           \e\ 5           3,539
                                                         5  Administrative..............           41.71              42           \e\ 5             438
                                                        15  Information Tech............           92.91              42           \e\ 5           2,927
201.102(d)(4).............................               6  Manager.....................           84.27              42  ..............          21,236
                                                         2  Administrative..............           41.71              42  ..............           3,504
201.102(d)(5).............................             0.5  Manager.....................           84.27              42  ..............           1,770
                                                       0.5  Administrative..............           41.71              42  ..............             876
201.102(f)................................              40  Manager.....................           84.27              42  ..............         141,572
                                                        20  Lawyer......................          131.38              42  ..............         110,360
                                                        10  Administrative..............           41.71              42  ..............          17,518
                                                        10  Information Tech............           92.91              42  ..............          39,020
201.102(g)(1)(2)..........................               1  Manager.....................           84.27              42  ..............           3,539
                                                         1  Administrative..............           41.71              42  ..............           1,752
201.102(i)(2).............................               1  Manager.....................           84.27              42  ..............           3,539
                                                         1  Lawyer......................          131.38              42  ..............           5,518
                                           -------------------------------------------------------------------------------------------------------------
    Total Cost............................  ..............  ............................  ..............  ..............  ..............     \f\ 689,063
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ AMS estimated a manager's time required for each of the 188 broiler complexes rather than the 42 live dealer firms.
\b\ 201.102(d)(1)(i) only applies to live poultry dealers that process more than 2 million pounds of broilers per week.
\c\ Reduces estimated costs by 10 percent to exclude the 5 percent for the estimated proportion of growers that require upgrades to poultry housing and
  5 percent for the estimated proportion of growers that enter a contract for the first time.
\d\ Estimates costs for the 5 percent of the growers that require upgrades to poultry housing and enter into contracts for the first time.
\e\ Estimates costs for the 5 percent of the growers that require upgrades to poultry housing.
\f\ Total may not sum due to rounding.

    Table 2 provides the details of the estimated ongoing costs of 
providing disclosure documents required in Sec.  201.102. Table 2 is 
laid out the same as Table 1. AMS subject matter experts provided 
estimates in the second column of the average amount of time that 
would be necessary for each live poultry dealer to meet each of the 
elements listed in the ``Regulatory Requirements'' column. Estimates 
for the value of the time are from U.S. Bureau of Labor Statistics 
Occupational Employment and Wage Statistics released May 2022. Wage 
estimates are marked up 41.82 percent to account for benefits. The 
``Adjustment'' column allows for estimation of costs that will only 
apply to a subset of the poultry growers or to the live poultry 
dealers. Expected costs for each ``Regulatory Requirement'' and are 
listed in the ``Expected Cost'' column. Summing the values in the 
``Expected Cost'' column provides the total expected costs for 
producing and distributing the disclosure documents associated with 
Sec.  201.102 on an ongoing basis.

                                          Table 2--Expected Ongoing Direct Costs Associated With Sec.   201.102
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Number of                                                  Number of LPDs/
          Regulatory requirement            hours required           Profession            Expected wage     number of      Adjustment     Expected cost
                                             for each LPD                                       ($)          contracts       (percent)          ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
201.102(a)(1).............................            0.08  Evenly distributed among           \a\ 72.96          19,417       \b\ 74.72          88,212
                                                             management, administrative,
                                                             and information tech.
201.102(a)(2).............................            0.08  Evenly distributed among           \1\ 72.96          19,808           \c\ 5           6,022
                                                             management, administrative,
                                                             and information tech.
201.102(a)(3).............................            0.08  Evenly distributed among           \1\ 72.96          19,808           \d\ 5           6,022
                                                             management, administrative,
                                                             and information tech.
201.102(b)................................             0.5  Manager.....................           84.27              42  ..............           1,770
                                                       0.5  Administrative..............           41.71              42  ..............             876
201.102(c)(1)-(3).........................               1  Manager.....................           84.27              42  ..............           3,539
                                                         1  Administrative..............           41.71              42  ..............           1,752
                                                         1  Lawyer......................          131.38              42  ..............           5,518
201.102(c)(4).............................             0.5  Manager.....................           84.27         \e\ 188  ..............           7,921
                                                         1  Manager.....................           84.27              42  ..............           3,539
                                                       0.5  Lawyer......................          131.38              42  ..............           2,759
201.102(c)(5).............................             0.5  Manager.....................           84.27         \e\ 188  ..............           7,921
201.102(d)................................  0.17 (10 min.)  Administrative..............           41.71         \e\ 188  ..............           1,307
201.102(d)(1)(i)..........................              15  Manager.....................           84.27          \f\ 27          \g\ 90          30,716
                                                         3  Administrative..............           41.71          \f\ 27          \g\ 90           3,041
                                                         6  Information Tech............           92.91          \f\ 27          \g\ 90          13,546
201.102(d)(1)(ii)-(v).....................              30  Manager.....................           84.27              42           \h\ 5           5,309
                                                         6  Administrative..............           41.71              42           \h\ 5             526
                                                        12  Information Tech............           92.91              42           \h\ 5           2,341
201.102(d)(2).............................              10  Manager.....................           84.27          \f\ 27           \i\ 5           1,770
                                                         2  Administrative..............           41.71          \f\ 27           \i\ 5             175
                                                         4  Information Tech............           92.91          \f\ 27           \i\ 5             780
201.102(d)(3).............................            0.25  Manager.....................           84.27              42  ..............             885
                                                      0.25  Administrative..............           41.71              42  ..............             438
201.102(d)(4).............................            0.25  Manager.....................           84.27              42  ..............             885
                                                      0.25  Administrative..............           41.71              42  ..............             438
201.102(f)................................              20  Manager.....................           84.27              42  ..............          70,786
                                                         5  Lawyer......................          131.38              42  ..............          27,590

[[Page 83296]]

 
                                                         3  Administrative..............           41.71              42  ..............           5,255
                                                         4  Information Tech............           92.91              42  ..............          15,608
201.102(g)................................            0.25  Administrative..............           41.71         \e\ 188  ..............           1,960
                                           -------------------------------------------------------------------------------------------------------------
    Total Cost............................  ..............  ............................  ..............  ..............  ..............     \j\ 319,206
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ $72.96 is the average of the average wages for poultry processing managers, administrative professionals, and information technology staff at
  $84.27, $41.71, and $92.91 respectively.
\b\ 74.72 is the percentage of the existing poultry grower contracts that are expected to come up for renewal each year. It includes all flock-to-flock
  and single year contracts as well as longer term contracts that are expected to expire within a year.
\c\ Estimates cost for the 5 percent of the growers that require upgrades to poultry housing.
\d\ Estimates costs for only the 5 percent of growers that that enter contract for the first time.
\e\ AMS estimated a manager's time required for each of the 188 broiler complexes rather than the 42 live dealer firms.
\f\ 201.102(d)(1)(i) only applies to live poultry dealers that process more than 2 million pounds of poultry per week.
\g\ Reduces estimated cost by 10 percent to exclude the 5 percent for the estimated proportion of growers that require upgrades to poultry housing and 5
  percent for the estimated proportion of growers that enter a contract for the first time.
\h\ Estimates cost for the 5 percent of the growers that require upgrades to poultry housing and enter into contracts for the first time.
\i\ Estimates cost for the 5 percent of the growers that require upgrades to poultry housing.
\j\ Total may not sum due to rounding.

    Table 3 below provides the details of the estimated one-time, 
first-year costs to live poultry dealers of providing disclosure 
documents required in Sec.  201.104. Like the previous tables, AMS 
subject matter experts provided estimates in the second column of 
the average amount of time that would be necessary for each live 
poultry dealer to meet each of the elements listed in the 
``Regulatory Requirements'' column. Values in the ``Expected Wage'' 
column are taken from U.S. Bureau of Labor Statistics Occupational 
Employment and Wage Statistics released May 2022. Wage estimates are 
marked up 41.82 percent to account for benefits. The number of LPDs 
is the number of live poultry dealers that filed annual reports with 
AMS for their 2021 fiscal years. ``Expected Cost'' is the estimate 
of the cost of each ``Regulatory Requirement.'' Summing the 
``Expected Cost'' column provides the total expected first-year, 
one-time costs for setting-up and producing the disclosure documents 
associated with Sec.  201.104.

                        Table 3--One Time First-Year Costs Associated With Sec.   201.104
----------------------------------------------------------------------------------------------------------------
                                   Number of                       Expected wage                   Expected cost
    Regulatory requirement       hours per LPD     Profession           ($)       Number of LPDs        ($)
----------------------------------------------------------------------------------------------------------------
201.104(a)....................               2  Manager.........           84.27              42           7,079
                                             4  Administrative..           41.71              42           7,007
                                             2  Information                92.91              42           7,804
                                                 Technology.
201.104(b)....................               5  Manager.........           84.27              42          17,696
                                             2  Administrative..           41.71              42           3,504
                                            18  Information                92.91              42          70,237
                                                 Technology.
201.104(c)....................               8  Manager.........           84.27              42          28,314
                                             5  Administrative..           41.71              42           8,759
                                            22  Information                92.91              42          85,845
                                                 Technology.
                               ---------------------------------------------------------------------------------
    Total Cost................  ..............  ................  ..............  ..............     \a\ 236,244
----------------------------------------------------------------------------------------------------------------
\a\ Total may not sum due to rounding.

    Table 3 below provides the details of the estimated ongoing 
costs of providing disclosure documents required in Sec.  201.104. 
AMS subject matter experts provided estimates in the second column 
of the average amount of time that would be necessary for each live 
poultry dealer to meet each of the elements listed in the 
``Regulatory Requirements'' column. They also provided the expected 
number of tournaments per plant. The number of processing plants was 
tallied from the annual reports that live poultry dealers file with 
AMS. Values in the ``Expected Wage'' column were found in U.S. 
Bureau of Labor Statistics Occupational Employment and Wage 
Statistics released May 2022. Wage estimates are marked up 41.82 
percent to account for benefits. Multiplying across the row provides 
the ``Cost'' for each ``Regulatory Requirement,'' and summing the 
``Cost'' column provides the total expected costs for producing and 
distributing the disclosure documents associated with Sec.  201.104 
on an ongoing basis.

                                             Table 4--Ongoing Expected Costs Associated With Sec.   201.104
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Number of
      Regulatory requirement             Hours           Profession          Number of      tournaments     Weeks in a     Avg. wage ($)     Cost ($)
                                                                              plants         per plant         year
--------------------------------------------------------------------------------------------------------------------------------------------------------
201.104(b)........................             0.1  Evenly distributed               188            1.35              52       \a\ 72.96          96,291
                                                     among management,
                                                     administrative, and
                                                     information tech.
201.104(c)........................             0.1  Evenly distributed               188            1.35              52       \a\ 72.96          96,291
                                                     among management,
                                                     administrative, and
                                                     information tech.
                                   ---------------------------------------------------------------------------------------------------------------------
    Total Cost....................  ..............  ....................  ..............  ..............  ..............  ..............         192,582
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ $72.96 is the average of the average wages for poultry processing managers, administrative professionals, and information technology staff at
  $84.27, $41.71, and $92.91 respectively.


[[Page 83297]]

Appendix 2. Technical Overview of Estimates of the Economic Benefits of 
Reduction in Profit Uncertainty to Contract Broiler Growers With Rule 
Changes Promoting Greater Transparency in Returns

    A potential benefit of the contract disclosure rules providing 
increased transparency would be that doing so could lower the 
uncertainty in the contract broiler grower's profit stream. 
According to economic principles, a risk averse producer will 
benefit economically from a reduction in profit risk, a component of 
the proposed rule's benefits, discussed above. Given assumptions 
about the level of risk aversion of the producer, the distribution 
of contract grower profit, and the grower's utility function (an 
economic concept that in this case measures the grower's preferences 
over a set of goods), it is possible to calculate the range of 
economic benefits to contract growers of decreased profit 
uncertainty associated with greater transparency. For this analysis, 
we assume that the producer maximizes an absolute risk aversion 
(ARA) utility function. The alternative to an absolute risk aversion 
function is a relative risk aversion function (RRA). For the former, 
the coefficient of risk aversion is the negative of the ratio of the 
second to first derivatives of the utility function with respect to 
the good (e.g., wealth or consumption) while the latter multiples 
this ratio times the level of the good. We could find only two 
papers that used either RRA or ARA for examining North American 
poultry contract growers. Hu (2015) and Hegde and Vukina (2003) 
assume CARA for U.S. broiler contract growers. The former is an 
econometric exercise that does not provide sufficient information to 
obtain a risk aversion parameter for use in a scenario analysis and 
the latter is simply a simulation exercise of a wide range of 
arbitrary parameter values for the absolute risk aversion parameters 
without referring them to a given range of risk aversion premium 
(RAP) levels to provide context.
    A benefit of relative risk aversion is that the relative risk 
aversion parameter is scale free, which represents a convenience for 
analysis. We assume that one reason for the greater use of relative 
risk aversion compared to absolute risk aversion is that it saves 
the researcher the work of having to solve the nonlinear equations 
necessary to scale the risk parameters to the size of the risky bet. 
A nice property of the absolute risk aversion is that the 
preferences for risk aversion are directly reflective of where the 
researcher wants risk preferences to be on a 0%-100% percentage of 
the standard deviation of the gamble that a risk averter would pay 
to avoid the gamble altogether. With relative risk aversion in 
contrast, the researcher instead refers to say, ``typical'' values 
of the relative risk aversion coefficient. Relative risk aversion 
measure is sensitive to what is included or excluded when defining 
or measuring the outcome variable, e.g., whether wealth or profits 
(Meyer and Meyer, 2005). When the focus is on representing and 
measuring the risk preferences of the decision maker, as it is in 
the analysis of broiler growers, either relative or absolute risk 
aversion is sufficient as the basis for the analysis, and since 
simple arithmetic allows one to go from model to the other, only one 
of these approaches is needed (ibid.).
    Another decision to be made is how the producer's risk aversion 
changes with wealth. Under constant absolute risk aversion (CARA), 
the grower's risk aversion does not change as wealth increases. 
Decreasing absolute risk aversion (DARA) assumes that the grower's 
risk aversion increases as wealth increases. Another possibility is 
that the grower's risk aversion is increasing in wealth (IARA). 
While no evidence exists one way or another for how risk preferences 
of broiler contract growers change with wealth, the agricultural 
economics literature generally assumes DARA over IARA. We have no 
information one way or another on how the risk aversion of contract 
growers changes with wealth, and hence, we use both CARA and DARA.
    First, we assume that the grower has constant absolute risk 
aversion (CARA) and makes management decisions to maximize the 
expected value of a negative exponential utility function over N 
simulated returns, or

U(w) = (1-e<SUP>-</SUP>[lambda]w)

where [lambda] is the grower's absolute risk aversion coefficient 
and w is the grower's wealth that proxies for a set of goods and 
services. The higher is [lambda], the higher the grower's aversion 
variability in w. Wealth w is a stochastic variable defined as the 
grower's initial (fixed) wealth w<INF>0</INF> plus the stochastic 
net returns. A negative exponential utility function conforms to the 
hypothesis that growers prefer less risk to more given the same 
expected, or average, return.
    The specific functional form in the equation above also assumes 
that growers view the riskiness of profit variability the same 
without regard for their level of wealth, i.e., CARA (e.g., Goodwin, 
2009). A risk averse grower will be willing to accept lower mean net 
returns in exchange for lower variability in returns w. Let U0 be 
the grower's current utility and U1 be the grower's utility with the 
new contract rules and their associated lower variability of w. 
Assuming mean w is constant between states, for the risk averse 
grower, U1 > U0. The question then becomes how to translate the 
benefit U1-U0 into a dollar value. We define the Risk Premium (RP), 
or the dollar benefit to growers of decreased profit risk, as the 
amount of mean profit they would be willing to give up such that U1 
= U0, i.e., such that they are indifferent between the two states 
(e.g., Sproul et al. 2013; Schnitkey et al., 2003).\188\
---------------------------------------------------------------------------

    \188\ This Risk Premium may be considered a special case of the 
compensating variation concept in economics. With the proposed rule 
changes leading to greater transparency in returns, the grower would 
be getting a decrease in revenue variability but would not have to 
pay to get this. Hence the Risk Premium is a measure of benefit to 
the grower of being under the new contract rules.
---------------------------------------------------------------------------

    The first step is to construct an empirical distribution of 
grower profit or net revenue. The market value of contracted share 
of broilers in 2020 was $20.9 billion given NASS data on their total 
value of production and the 96.3 percent shares that are contract. 
Eleven percent of this value goes to contract growers, based on the 
ratio of the USDA's Livestock Indemnity Program (LIP) payment rate 
for contract growers divided by the rate for livestock owners, 
leading to a mean gross revenue of $2.3 billion for broiler growers. 
Variable and fixed costs are assumed to be non-stochastic and are 
set at 24 and 19 percent of the 2020 mean gross revenue, based on 
the proportions from Table 1 in Maples et al. (2020), and net 
revenue is the gross revenue less the variable and fixed costs. 
Initial (non-stochastic) wealth w0 is set equal to 2020 mean net 
revenue.\189\ Grower net revenue is assumed to follow a normal 
distribution. A normal distribution of net revenue will approximate 
the distribution in cumulative distribution function of net revenue 
in Figure 1 of Maples et al. (2020) with a coefficient of variation 
of revenue of 0.16.\190\ Given this estimate of the coefficient of 
variation of net revenue, and the mean net revenue of $1.33 billion 
for broiler contract grower net revenue, the standard deviation can 
be simply found as the coefficient of variation of net revenue times 
this mean.
---------------------------------------------------------------------------

    \189\ The academic literature tends to be vague as to setting 
w0, with it either set at $0 or some unspecified amount. In 
principle, it could be set at the producer's net equity going into 
the year, but if one wants initial wealth for the proposes of 
utility analysis to be relative liquid assets, net equity maybe too 
high a value.
    \190\ To put this coefficient of variation of broiler revenue of 
0.16 in perspective, note that the lower-end estimate of the 
coefficient of variation of farm level revenue for major row crops 
is considerably higher as one might expect, at 0.25 even with crop 
insurance (Cooper 2010; Belasco, Cooper, and Smith, 2019).
---------------------------------------------------------------------------

    The associated absolute risk aversion coefficient l is 
associated with a grower's risk aversion premium (RAP), a value that 
varies between 0 and 100 percent (of the potential loss) and 
reflects the amount the grower is willing to pay to avoid the 
potential loss, with higher values reflecting higher risk aversion. 
The l is linked to the RAP on a theoretical basis outlined in 
Babcock, Choi, and Feinerman (1993). The associated absolute risk 
aversion coefficient l is scaled to the standard deviation of net 
revenue using the approach in Babcock, Choi, and Feinerman (1993). 
Note that since l is scaled to the standard deviation of net 
revenue, the calculation of the total Risk Premium across all 
growers, or RP = [Sigma]i RPi, i = 1 . . . , G equal size growers is 
invariant to assumptions about the total number of growers G, 
whether set to an arbitrary value or to the 16,524 contract broiler 
growers per the 2017 Agricultural Census.\191\ The estimated value 
of l is 1.10E-09, 1.10E-06, and 1.1E-05 for G = 1, 1,000, and 10,000 
equal sized growers, respectively, with an RAP of 20 percent.\192\ A 
von Neumann-Morgenstern expected utility is estimated over N = 1,000 
draws of wj where EU0 is
---------------------------------------------------------------------------

    \191\ USDA, NASS. 2017 Census of Agriculture: United States 
Summary and State Data, (April 2019).
    \192\ For estimation, G = 10,000 is used to allow for a larger l 
and reduce the potential for machine error in rounding.

---------------------------------------------------------------------------

[[Page 83298]]

[GRAPHIC] [TIFF OMITTED] TR28NO23.000

and EU1 is
[GRAPHIC] [TIFF OMITTED] TR28NO23.001

where w1j are draws from the normal distribution given an assumption 
for a lower coefficient of variation of gross revenue with the new 
rules, but with the same initial wealth, costs, and mean gross 
revenue as in the base case. The risk premium RP that solves EU1(w1) 
= EU0(w) is found using a numerical search routine.
    For the DARA scenario, we follow Hennessy (1998), and the CARA 
utility function becomes

U (w) = (1-e<SUP>-</SUP><SUP>[lgr]</SUP>w) + bw

where b is greater than zero. Let r(w) be the risk aversion 
coefficient under DARA, i.e., r(w) is decreasing in w. Hennessy 
(ibid.) shows that r(w) is a function of l and b as
[GRAPHIC] [TIFF OMITTED] TR28NO23.002

Per Hennessy (ibid.), we solve for the values of l and b to 
simultaneously satisfy a r(w = 0) associated with a RAP of 40 
percent and a r(w = w) associated with a RAP of 20 percent. Like 
Hennessy (ibid.), we assume that the Babcock, Choi, and Feinerman 
approach to relate the risk coefficient to the RAP level holds 
approximately for DARA preferences. The rest of the approach for 
finding the risk premium RP that solves EU1(w1) = EU0(w) is the same 
as for the CARA scenarios. Appendix Table A1 summarizes the 
parameters and risk attitudes used in the analysis, with the RAP 
value denoted as u.

                              Appendix Table A1--Nature of Chosen Utility Functions
----------------------------------------------------------------------------------------------------------------
             Parameters and risk attitudes                  Low and CARA      High and CARA           DARA
----------------------------------------------------------------------------------------------------------------
l......................................................       1.099164E-05        2.40788E-05      2.0533761e-05
b......................................................                  0                  0      3.9580000e-09
u[w = 0]...............................................               0.20               0.40               0.40
u[w = w]...............................................               0.20               0.40               0.20
r[w = 0]...............................................       1.099164E-05        2.40788E-05      2.0529804e-05
r[w = w]...............................................       1.099164E-05        2.40788E-05      1.0991640e-05
----------------------------------------------------------------------------------------------------------------

References

Babcock, B.E. Choi, and E. Feinerman, ``Risk and Probability 
Premiums for CARA Utility Functions'', J. Agric. & Res. Econ., Vol 
18(1):17-24. 1993.
Belasco, Eric, Joseph Cooper, and Vincent Smith. ``The Development 
of a Weather-based Crop Disaster Program,'' American Journal of 
Agricultural Economics Vol. 102/1(August 2019):240-258.
Cooper, Joseph. ``Average Crop Revenue Election: A Revenue-Based 
Alternative to Price-Based Commodity Payment Programs,'' American 
Journal of Agricultural Economics, Vol. 92/4 (July 2010): 1214-1228.
Goodwin, B. ``Payment Limitations and Acreage Decisions Under Risk 
Aversion: A Simulation Approach,'' American Journal of Agricultural 
Economics, 91(1) (February 2009): 19-41.
Hegde, S. Aaron, and Tomislav Vukina. 2003. Risk Sharing in Broiler 
Contracts: A Welfare Comparison of Payment Mechanisms Paper prepared 
for presentation at the American Agricultural Economics Association 
Annual Meeting, Montreal, Canada, July 27-30, 2003.
Hennessy, D.A. 1998. ``The Production Effects of Agricultural Income 
Support Policies under Uncertainty.'' American Journal of 
Agricultural Economics 80:46-57.
Hu, W. (2015) The role of risk and risk-aversion in adoption of 
alternative marketing arrangements by the U.S. farmers, Applied 
Economics 47:27, 2899-2912
Hurley, T., P. Mitchell, and M. Rice. ``Risk and the Value of Bt 
Corn,'' Am. J. Agric. Econ. Vol 82, no. 2 (May 2004): 345-358.
Maples, Joshua G., Jada M. Thompson, John D. Anderson, and David P. 
Anderson. ``Estimating COVID-19 Impacts on the Broiler Industry,'' 
Applied Economic Perspectives and Policy, September 9, 2020.
Mitchell, P.M. Gray, and K. Steffey. ``A Composed-Error Model for 
Estimating Pest-Damage Functions and The Impact of the Western Corn 
Rootworm Soybean Variant in Illinois,'' Amer. J. Agri. Econ., Vol 
86, no. 2 (May 2004): 332-344.
Schnitkey, Gary, Bruce Sherrick, and Scott Irwin. ``Evaluation of 
Risk Reductions Associated with Multi-Peril Crop Insurance 
Products,'' Agricultural Finance Review, Spring 2003: 1-21.
Sproul, Thomas, David Zilberman, and Joseph Cooper. ``Deductibles 
versus Coinsurance in Shallow-Loss Crop Insurance,'' Choices, 3rd 
Quarter 2013.

Appendix 3. Details of the Estimated One-Time, First-Year Costs and On-
Going Annual Costs of Providing Disclosure Documents Required in 
Sec. Sec.  201.102 and 201.104 Under the Small Business Exemption 
Alternative

    Costs for the alternative that would exempt live poultry dealers 
that produced and average of less than 2 million pounds of broilers 
per week were estimated similarly to cost for the Sec. Sec.  201.102 
and 201.104. AMS subject matter experts provided estimates of the 
average amount of time that would be necessary for each live poultry 
dealer to comply with each new requirement in Sec. Sec.  201.102 and 
201.104, and the hours were multiplied by wage estimates to arrive 
at an expected cost for each regulatory element. The tables are set 
up the same as before. Multiplying across row for each regulatory 
element provides the expected cost for the element. Summing the 
expected costs for element provides the total cost.
    Table 1 below provides the details of the estimated one-time, 
first-year costs of providing disclosure documents required in Sec.  
201.102. AMS expects that the direct costs will consist entirely of 
the value of the time required to produce and distribute the 
disclosures and maintain proper records. The number of hours the 
second column were provided by AMS subject matter experts. These 
experts were auditors and supervisors with many years of experience 
in auditing live poultry dealers for compliance with the Act. They 
provided estimates of the average amount of time that would be 
necessary for each live poultry dealer to meet each of the elements 
listed in the ``Regulatory Requirements'' column. Estimates for the 
value of the time are U.S. Bureau of Labor Statistics Occupational 
Employment and Wage Statistics estimates released May 2022. The wage 
estimates are marked up 41.82 percent to account for benefits. The 
``Adjustment'' column allows for estimation of costs that will only 
apply to a subset of the poultry growers or to the live poultry 
dealers. A blank value in the Adjustment column indicates that no 
adjustments were made to the costs. Each adjustment is different and 
described in the relevant footnote. Expected costs for each 
``Regulatory Requirement'' and are listed in the ``Expected Cost'' 
column. Summing the values in the ``Expected Cost'' column provides 
the total expected first-year, one-time costs for setting-up and 
producing the disclosure documents associated with Sec.  201.102.

[[Page 83299]]



                                        Table 1--Expected First-Year Direct Costs Associated With Sec.   201.102
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Number of
          Regulatory requirement            hours required           Profession            Expected wage  Number of LPDs    Adjustment     Expected cost
                                             for each LPD                                       ($)             \a\          (percent)          ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
201.102(b)(1)-(8).........................               1  Manager.....................           84.27              27  ..............           2,275
                                                         4  Lawyer......................          131.38              27  ..............          14,189
201.102(c)(1)-(3).........................              10  Manager.....................           84.27              27  ..............          22,753
                                                         5  Administrative..............           41.71              27  ..............           5,631
                                                        10  Lawyer......................          131.38              27  ..............          35,473
201.102(c)(4).............................               2  Manager.....................           84.27         \b\ 121  ..............          20,369
                                                         4  Manager.....................           84.27              27  ..............           9,101
                                                         1  Lawyer......................          131.38              27  ..............           3,547
201.102(c)(5).............................               1  Manager.....................           84.27         \b\ 121  ..............          10,184
201.102(d)(1)(2)(i).......................              30  Manager.....................           84.27              27          \c\ 90          61,432
                                                         8  Administrative..............           41.71              27          \c\ 90           8,108
                                                        22  Information Tech............           92.91              27          \c\ 90          49,667
201.102(d)(1)(2)(ii)-(v)..................              60  Manager.....................           84.27              27           \d\ 5           6,826
                                                        16  Administrative..............           41.71              27           \d\ 5             901
                                                        44  Information Tech............           92.91              27           \d\ 5           5,519
201.102(d)(3).............................              20  Manager.....................           84.27              27           \f\ 5           2,275
                                                         5  Administrative..............           41.71              27           \f\ 5             282
                                                        15  Information Tech............           92.91              27           \f\ 5           1,881
201.102(d)(4).............................               6  Manager.....................           84.27              27  ..............          13,652
                                                         2  Administrative..............           41.71              27  ..............           2,252
201.102(d)(5).............................             0.5  Manager.....................           84.27              27  ..............           1,138
                                                       0.5  Administrative..............           41.71              27  ..............             563
201.102(f)(1)(2)..........................              40  Manager.....................           84.27              27  ..............          91,010
                                                        20  Lawyer......................          131.38              27  ..............          70,946
                                                        10  Administrative..............           41.71              27  ..............          11,261
                                                        10  Information Tech............           92.91              27  ..............          25,084
201.102(g)(1)(2)..........................               1  Manager.....................           84.27              27  ..............           2,275
                                                         1  Administrative..............           41.71              27  ..............           1,126
201.102(i)(2).............................               1  Manager.....................           84.27              27  ..............           2,275
                                                         1  Lawyer......................          131.38              27  ..............           3,547
                                           -------------------------------------------------------------------------------------------------------------
    Total Cost............................  ..............  ............................  ..............  ..............  ..............     \g\ 485,543
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Annual reports filed by live poultry dealers indicated 27 processed an average of more than 2 million pounds of broilers per week.
\b\ AMS estimated a manager's time required for each of the 121 broiler complexes rather than the 27 live dealer firms.
\c\ 201.102(d)(1)(i) exempts live poultry dealers that process less than 2 million pounds of broilers per week.
\d\ Reduces estimated costs by 10 percent to exclude the 5 percent for the estimated proportion of growers that require upgrades to poultry housing and
  5 percent for the estimated proportion of growers that enter a contract for the first time.
\e\ Estimates costs for the 5 percent of the growers that require upgrades to poultry housing and enter into contracts for the first time.
\f\ Estimates costs for the 5 percent of the growers that require upgrades to poultry housing.
\g\ Total may not sum due to rounding.

    Table 2 provides the details of the estimated ongoing costs of 
providing disclosure documents required in Sec.  201.102. Table 2 is 
laid out the same as Table 1. AMS subject matter experts provided 
estimates in the second column of the average amount of time that 
would be necessary for each live poultry dealer to meet each of the 
elements listed in the ``Regulatory Requirements'' column. Estimates 
for the value of the time are from U.S. Bureau of Labor Statistics 
Occupational Employment and Wage Statistics released May 2022. The 
wage estimates are marked up 41.82 percent to account for benefits. 
The ``Adjustment'' column allows for estimation of costs that will 
only apply to a subset of the poultry growers or to the live poultry 
dealers. Expected costs for each ``Regulatory Requirement'' and are 
listed in the ``Expected Cost'' column. Summing the values in the 
``Expected Cost'' column provides the total expected costs for 
producing and distributing the disclosure documents associated with 
Sec.  201.102 on an ongoing basis.

                                          Table 2--Expected Ongoing Direct Costs Associated With Sec.   201.102
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Number of                                                  Number of LPDs/
          Regulatory requirement            hours required           Profession            Expected wage     number of      Adjustment     Expected cost
                                             for each LPD                                       ($)          contracts       (percent)          ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
201.102(a)(1).............................            0.08  Evenly distributed among           \a\ 72.96          19,417       \b\ 74.72          88,212
                                                             management, administrative,
                                                             and information tech.
201.102(a)(2).............................            0.08  Evenly distributed among           \a\ 72.96          19,417           \c\ 5           5,903
                                                             management, administrative,
                                                             and information tech.
201.102(a)(3).............................            0.08  Evenly distributed among           \a\ 72.96          19,417           \d\ 5           5,903
                                                             management, administrative,
                                                             and information tech.
201.102(b)................................             0.5  Manager.....................           84.27              27  ..............           1,138
                                                       0.5  Administrative..............           41.71              27  ..............             563
201.102(c)(1)-(3).........................               1  Manager.....................           84.27              27  ..............           2,275
                                                         1  Administrative..............           41.71              27  ..............           1,126
                                                         1  Lawyer......................          131.38              27  ..............           3,547
201.102(c)(4).............................             0.5  Manager.....................           84.27         \e\ 121  ..............           5,092
                                                         1  Manager.....................           84.27              27  ..............           2,275
                                                       0.5  Lawyer......................          131.38              27  ..............           1,774
201.102(c)(5).............................             0.5  Manager.....................           84.27         \e\ 121  ..............           5,092
201.102(d)................................            0.17  Administrative..............           41.71         \e\ 121  ..............             840

[[Page 83300]]

 
201.102(d)(1)(i)..........................              15  Manager.....................           84.27              27          \f\ 90          30,716
                                                         3  Administrative..............           41.71              27          \f\ 90           3,041
                                                         6  Information Tech............           92.91              27          \f\ 90          13,546
201.102(d)(1)(ii)-(v).....................              30  Manager.....................           84.27              27           \g\ 5           3,413
                                                         6  Administrative..............           41.71              27           \g\ 5             338
                                                        12  Information Tech............           92.91              27           \g\ 5           1,505
201.102(d)(2).............................              10  Manager.....................           84.27              27           \h\ 5           1,138
                                                         2  Administrative..............           41.71              27           \h\ 5             113
                                                         4  Information Tech............           92.91              27           \h\ 5             502
201.102(d)(3).............................            0.25  Manager.....................           84.27              27  ..............             569
                                                      0.25  Administrative..............           41.71              27  ..............             282
201.102(d)(4).............................            0.25  Manager.....................           84.27              27  ..............             569
                                                      0.25  Administrative..............           41.71              27  ..............             282
201.102(f)................................              20  Manager.....................           84.27              27  ..............          45,505
                                                         5  Lawyer......................          131.38              27  ..............          17,736
                                                         3  Administrative..............           41.71              27  ..............           3,378
                                                         4  Information Tech............           92.91              27  ..............          10,034
201.102(g)................................            0.25  Administrative..............           41.71         \e\ 121  ..............           1,260
                                           -------------------------------------------------------------------------------------------------------------
    Total Cost............................  ..............  ............................  ..............  ..............  ..............     \i\ 257,665
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ $72.96 is the average of the average wages for poultry processing managers, administrative professionals, and information technology staff at
  $84.27, $41.71, and $92.91 respectively.
\b\ 74.72 is the percentage of the existing poultry grower contracts that are expected to come up for renewal each year. It includes all flock-to-flock
  and single year contracts as well as longer term contracts that are expected to expire within a year.
\c\ Estimates cost for the 5 percent of the growers that require upgrades to poultry housing.
\d\ Estimates costs for only the 5 percent of growers that that enter contract for the first time.
\e\ AMS estimated a manager's time required for each of the 121 broiler complexes rather than the 27 live dealer firms.
\f\ Reduces estimated cost by 10 percent to exclude the 5 percent for the estimated proportion of growers that require upgrades to poultry housing and 5
  percent for the estimated proportion of growers that enter a contract for the first time.
\g\ Estimates cost for the 5 percent of the growers that require upgrades to poultry housing and enter into contracts for the first time.
\h\ Estimates cost for the 5 percent of the growers that require upgrades to poultry housing.
\i\ Total may not sum due to rounding.

    Table 3 below provides the details of the estimated one-time, 
first-year costs of providing disclosure documents required in Sec.  
201.104. Like the previous tables, AMS subject matter experts 
provided estimates in the second column of the average amount of 
time that would be necessary for each live poultry dealer to meet 
each of the elements listed in the ``Regulatory Requirements'' 
column. Values in the ``Expected Wage'' column are taken from U.S. 
Bureau of Labor Statistics Occupational Employment and Wage 
Statistics released May 2022. The wage estimates are marked up 41.82 
percent to account for benefits. The number of LPDs is the number of 
live poultry dealers that filed annual reports with AMS for their 
2020 fiscal years. ``Expected Cost'' is the estimate of the cost of 
each ``Regulatory Requirement.'' Summing the ``Expected Cost'' 
column provides the total expected first-year, one-time costs for 
setting-up and producing the disclosure documents associated with 
Sec.  201.104.

                        Table 3--One Time First-Year Costs Associated With Sec.   201.104
----------------------------------------------------------------------------------------------------------------
                                   Number of                       Expected wage                   Expected cost
    Regulatory requirement       hours per LPD     Profession           ($)       Number of LPDs        ($)
----------------------------------------------------------------------------------------------------------------
201.104(a)....................               2  Manager.........           84.27              27           4,551
                                             4  Administrative..           41.71              27           4,505
                                             2  Information                92.91              27           5,017
                                                 Technology.
201.104(b)....................               5  Manager.........           84.27              27          11,376
                                             2  Administrative..           41.71              27           2,252
                                            18  Information                92.91              27          45,152
                                                 Technology.
                                             8  Manager.........           84.27              27          18,202
201.104(c)....................               5  Administrative..           41.71              27           5,631
                                            22  Information                92.91              27          55,186
                                                 Technology.
                               ---------------------------------------------------------------------------------
    Total Cost................  ..............  ................  ..............  ..............     \a\ 151,871
----------------------------------------------------------------------------------------------------------------
\a\ Total may not sum due to rounding.

    Table 4 below provides the details of the estimated ongoing 
costs of providing disclosure documents required in Sec.  201.104. 
AMS subject matter experts provided estimates in the second column 
of the average amount of time that would be necessary for each live 
poultry dealer to meet each of the elements listed in the 
``Regulatory Requirements'' column. They also provided the expected 
number of tournaments per plant. The number of poultry processing 
plants was tallied from the annual reports that live poultry dealers 
file with AMS. Values in the ``Expected Wage'' column were found in 
U.S. Bureau of Labor Statistics Occupational Employment and Wage 
Statistics released May 2022. The wage estimates are marked up 41.82 
percent to account for benefits. Multiplying across the row provides 
the ``Cost'' for each ``Regulatory Requirement,'' and summing the 
``Cost'' column provides the total expected costs for producing and 
distributing the disclosure documents associated with Sec.  201.104 
on an ongoing basis.

[[Page 83301]]



                                             Table 4--Ongoing Expected Costs Associated With Sec.   201.104
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Number of
      Regulatory requirement             Hours           Profession          Number of      tournaments     Weeks in a     Avg. wage ($)     Cost ($)
                                                                              plants         per plant         year
--------------------------------------------------------------------------------------------------------------------------------------------------------
201.104(b)........................             0.1  Evenly distributed               121            1.35              52       \a\ 72.96         $61,901
                                                     among management,
                                                     administrative, and
                                                     information tech.
201.104(c)........................             0.1  Evenly distributed               121            1.35              52       \a\ 72.96          61,901
                                                     among management,
                                                     administrative, and
                                                     information tech.
                                   ---------------------------------------------------------------------------------------------------------------------
    Total Cost....................  ..............  ....................  ..............  ..............  ..............  ..............     \b\ 123,803
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ $72.96 is the average of the average wages for poultry processing managers, administrative professionals, and information technology staff at
  $84.27, $41.71, and $92.91 respectively.
\b\ Total may not sum due to rounding.


Erin Morris,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2023-24922 Filed 11-27-23; 8:45 am]
BILLING CODE P


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