Attorney General's News Release

September 13, 2000

Nixon announces draft model legislation to protect farmers and benefit consumers

Jefferson City, Mo. — Attorney General Jay Nixon announced today that he and colleagues from 15 states have drafted model state legislation designed to protect contract producers and growers, the growing number of farmers and ranchers who are producing livestock or grain on contract with large contractor companies.

Nixon and the other Attorneys General issued a 13-page detailed model "Producer Protection Act" and a joint statement saying the legislation would "help preserve competition in agriculture for the benefit of farmers and consumers." The Attorneys General cited their concern about "the rapid trend toward consolidation in agriculture" and that fewer and fewer firms control the production, processing, preparation and retailing of agricultural commodities and food.

The rapid rise of production contracts and marketing contracts has dramatically increased vertical integration in U.S. agriculture, and it poses serious risks for producers and consumers, the Attorneys General said. "We worry that this conglomeration of economic power may lead to anti-competitive practices and adversely affect the prices paid to farmers for commodities and the prices paid by consumers for food," they wrote.

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

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

Key provisions of the model state legislation "Producer Protection Act" would:

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

In addition to Nixon, the model legislation was endorsed by the Attorneys General of Colorado, Indiana, Iowa, Kentucky, Minnesota, Mississippi, Montana, Nebraska, Nevada, North Dakota, Oklahoma, Vermont, West Virginia, Wisconsin and Wyoming.

Inquiries from consumers should be directed to consumer@ago.mo.gov or 1-800-392-8222 (from within Missouri) or 573-751-3321 (outside Missouri).

All media inquiries should be directed to Press Secretary John Fougere.

E-mail      Phone: 573-751-8844         Fax: 573-751-5818