OMAHA (DTN) -- USDA will close out the Biden administration this week by finalizing a new rule restricting how poultry integrators score and penalize contract growers under the tournament system.

Outgoing Agriculture Secretary Tom Vilsack, on a call Monday with reporters, said the administration was finalizing its third regulation under the Packers and Stockyards Act to provide more fairness to producers. Vilsack pointed to President Joe Biden's directive to spur more competition and fairness in the marketplace for producers.

"During the course of this administration, we've taken steps to reinvigorate our commitment to Packers and Stockyards by investing in more people who would be charged with the responsibility of enforcing existing rules and regulations under the Packers and Stockyards Act and by providing greater focus on the protections that it does afford," he said.

USDA on Tuesday released the final version of the "Poultry Grower Payment Systems and Capital Improvement Systems" rule. Vilsack said he had heard producers across the country complain about tournament rules by poultry processors that docked producers' payments and were vague about producer requirements under a contract. More details were needed about a company's payment rates under a tournament system, he said.

More than 96% of broiler chicken production nationally is done by growers who contract to deliver chickens to processors, which are classified as live poultry dealers.

Under the tournament system, each producer in an area is weighted against each other's performance in how well they raise their chicks, death losses and weights. There have been complaints about fairness and steep payment losses for producers who fall at the bottom of tournament rankings.

Vilsack noted in his comments on the rule that he had faced stories of producers who lost their life savings or went bankrupt because they were locked into an unfair contract when they agreed to raise animals.

"This is a system that has come under a great deal of concern and criticism by producers across the United States," Vilsack said. He later added, "This rule basically addresses many of the concerns we have heard from rank-and-file producers who just simply want a fair shake. ... The reality is this is a strong rule and a good rule, and it's a rule that bubbled up from the ground up, not the top down."

Under the rule, poultry companies would no longer be able to dock a grower's base pay under a tournament system, but companies could provide bonuses. Poultry companies also would be limited so that the "variability" of performance payments under a tournament system would be capped at 25% of the contract's gross pay annually.

DTN reached out Monday to the National Chicken Council, which has been critical of the Biden administration's rulemaking to weaken the tournament system. NCC sent these comments from President Harrison Kircher:

"The Biden administration, with just six days remaining, is racing to impose the last pieces of its anti-business regulatory agenda.

"This rule -- which Congress never asked for -- will lead to rigid, one-size-fits-all requirements on chicken growing contracts that would stifle innovation, lead to higher costs for consumers, decrease competition, and cost jobs by driving some of the best farmers out of the chicken business.

"The vast majority of chicken farmers in rural America are happy and prosper raising chickens in partnership with companies, and they don't want the government meddling on their farms and telling them how they should run their businesses."

Multiple provisions in the rule were crafted following a 2022 consent decree between the Department of Justice and Cargill as well as Wayne-Sanderson over wage-fixing and Packers and Stockyards violations. Under that decree, Wayne-Sanderson, the third-largest poultry integrator in the country, was barred from deducting producers' base pay based on performance and also were capped at 25% performance incentives compared to a producer's total pay.

"This rule certainly took into account the settlement from the Wayne-Sanderson matter that DOJ secured on behalf of USDA," said Andy Green, a USDA adviser on competition issues.

The rule also requires companies to provide more information about the level of inputs provided in connection to a tournament system. More information also was needed about the extent of capital improvements required for a poultry company to renew a contract.

The rule is the third final rule under the Packers and Stockyards Act and the second one focusing on poultry contracts. In 2023, USDA also finalized the "Transparency in Poultry Grower Contracting and Tournaments" rule, which requires poultry processors to provide more in their contracts to producers about payment and capital demands for their farms. That rule requires companies to break down earnings to producers and detail minimum flock placements as well as lay out other variable costs to farmers.

Last March, USDA also finished the "Inclusive Competition and Market Integrity" rule. That rule prohibits discrimination and bans companies from retaliating against farmers over basic activities like communicating with government agencies, joining producer or grower associations, and asserting legal and contractual rights; it also offers protection against deceptive contracts that are false, misleading and result in harm to producers.  

The new rule doesn't take effect until July 1, 2026. It's possible the incoming Trump administration could put a freeze on the rule, or the rule could be overturned by Congress under the Congressional Review Act.

When it comes to cattle, Vilsack also said on Monday that USDA is withdrawing the proposed "Fair and Competitive Livestock and Poultry Markets" rule, which would have defined more unfair practices and sought to redefine how federal courts handle "harm to competition" cases. USDA received more than 13,000 public comments on that proposal. Vilsack said the complexity and time needed to complete it required that they withdraw the rule.

"Given the fact that there is limited time left, obviously, in this administration, it's a rule that won't be completed, and by virtue of that, will be withdrawn," he said.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on social platform X @ChrisClaytonDTN

(c) Copyright 2025 DTN, LLC. All rights reserved.