GIPSA Forward Contract Definition All Wrong

December 2, 2010 11:11 AM

 In the last days before the comment period for the new GIPSA livestock reporting rules closed last week, ag groups across the nation asked USDA to make changes in the proposal. Iowa Secretary of Agriculture Bill Northey has many concerns about the proposed GIPSA rule for hog and beef producers, but one that sticks out is the government agency’s definition of a forward contract.

Currently, GIPSA defines a forward contract as a "fixed price or basis contract, oral or written, for the purchase of a specified quantity, or lot or lots of swine, where delivery will occur more than 14 days after the agreement is entered." "The 14 day period as is currently proposed is too short and the definition should be set for both beef and pork as greater than 30 days prior to delivery," Northey says. " Few industry forward contracts are entered into with as little as 15 days for delivery and as a result changing it to 30 days would better serve the industry."

Northey is not alone. Kansas Farm Bureau president Steve Baccus says his greatest discomfort with the proposed GIPSA rule is definitions related to forward contracts and marketing agreements.

"We are mindful of the difficulties inherent in drafting definitions. Hwoever, since these specific definitions ultimately control the sweep and full panoply of these regulations relating to contracting arrangements, the clarity of each term is critical," says Baccus. The critics have gotten the attention of GIPSA, as the agency has put a lot of effort into defending the plan. On their website, there are two different documents which answer questions about the proposal. One is a simple question and answer format, while the other seeks to address what GIPSA says are "misconceptions" about the plan.

Questions and Answers about GIPSA Rules.

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