With the growing trend of ranchers and small producers of livestock developing their own brands and selling directly to retail stores, it’s worth noting a word of warning to those selling direct to retailers or into HRI that they need to be extra careful with credit terms. You are not protected by the Packers and Stockyards Act for help with payments.

The Packers and Stockyards Act of 1921 (P&S Act) provisions:

• Assuring fair competition and trade practices

• Safeguarding farmers and ranchers

• Protecting consumers

• Protecting livestock, meat, and poultry industry members from unfair, deceptive, unjustly discriminatory, and monopolistic practices

This information is available from the USDA and you can read more about the P&S Act here.

My limited experience with the P&S Act began about 9 years ago, when I was working for a beef packer and we had to get bonded. We were subject to the terms of the P&S Act when buying live cattle directly from producers. Once, I got into a contract squabble over beef quality with a producer, and we used the USDA to help negotiate a fair payment settlement over the load of beef which contained an exceptional amount of dark-cutter carcasses.

More recently I called the USDA’s Packers and Stockyards division to seek help with a small retail store chain in Colorado called Alfalfa’s. Alfalfa’s abruptly closed their three Colorado stores in March and April of this year — leaving my company, and friend of mine who raised and sold beef directly to Alfalfa’s, ‘holding the bag’ on many thousands of dollars of unpaid invoices for meat.

I was hopeful that the USDA, under the P&S Act, would be able to help me and my beef producer friend get paid, but we learned the hard way that there is no protection afforded to any meat processors, distributors or even ranchers when they sell to a retail store. This was a huge disappointment to us.

In February of this year, a Colorado produce company was also having trouble getting paid tens of thousands of dollars in past due invoices from Alfalfa’s. The owner of the produce company hired an ag attorney, and the attorney was successful at getting Alfalfa’s to pay up because of the protections provided for produce companies by The Perishable Agricultural Commodities Act (PACA).

From the USDA, “The Perishable Agricultural Commodities Act (PACA) establishes a code of fair trade practices covering the marketing of fresh and frozen fruits and vegetables in interstate and foreign commerce. The PACA protects growers, shippers, distributors, and retailers dealing in those commodities by prohibiting unfair and fraudulent trade practices.”

I called the same ag attorney the produce company used to get paid from Alfalfas, to see if he could help my friend and I get paid.

He explained that PACA has provisions that protect a produce wholesaler (mind you, not even a produce grower, but a small distributor of produce), whereas processors and distributors of meats are not afforded similar protections under the P&S Act. In short, he said (after a hefty up-front retainer to look in to the whole mess), “PACA has more ‘beef’ - if you will, in their protections than the P&S Act has for situations like this.”

This seems ludicrous to me. For one, meat costs far more than produce, and the dollar amounts are much higher. Secondly, why wouldn’t a meat distributor or rancher be afforded protections like a produce distributor or grower?

PACA clearly has better legal protections for produce than the P&S Act has for meat distributors, processors and producers. I think NAMI, the NCBA, and other beef, pork and meat associations should lobby hard to correct this imbalance.

Until they do, sellers of meats — especially producers and small plants — need to be very careful of credit terms to retail stores. It only takes a couple of weeks of selling expensive beef to a multi-store retail chain, and before you know it they owe you tens of thousands.

What’s been your experience using the P&S Act to resolve disputes or get paid? Do you think our industry should lobby to have the P&S Act improved and amended?

What produce has over meat: Limited protections from the Packers and Stockyards Act

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