An economic analysis of the U.S. Department of Agriculture’s (USDA’s) livestock procurement rule estimates a $1.5 billion reduction in U.S. annual gross domestic product, leading to a call for USDA to withdraw the much-assailed plan.
Informa Economics prepared an economic analysis for the National Meat Association (NMA) and other industry groups. Their report projected a loss of nearly 23,000 jobs and $359 million in tax revenues, supported by expected reductions in marketing agreements that generate premiums and related declines in demand for beef, pork and poultry.
A similar study funded last month by the American Meat Institute projected the Grain Inspection, Packers and Stockyards Administration (GIPSA) proposal would cost the gross domestic product $14 billion, $1.36 billion in lost tax revenue and 104,000 U.S. jobs.
Both studies provide a sharp contrast with GIPSA’s analysis that the proposed rules would cost less than $100 million, below the threshold that would mandate USDA conduct a further economic impact study.
At a news conference Wednesday in Kansas City, Rob Murphy, senior vice president for Informa, said that the indirect costs, such as lost efficiencies and damage to demand, are where real losses occur: $800 million annually in beef, $335 million per year in pork and $341 million per year in poultry.
“Beef will suffer the most in terms of what we like to describe as demand destruction as packers pull back on use of alternative marketing agreements,” Murphy said. The costs for all species will be in effect for 10 years, peaking at about the third or fourth year following implementation.
Informa predicted as a result of the GIPSA rule that packers will reduce marketing agreements to avoid the potential legal liability due to a provision in the rule that makes it easier for contractors to sue packers for paying different prices to different contractors.
The NMA, the National Cattlemen’s Beef Association, National Pork Producers Council and National Turkey Federation called on USDA to withdraw the proposed rule and start the process over.
The Informa study will be sent to the Office of Management and Budget for consideration.