Swine Contracts and The Packers and Stockyards Act

By Brianna J. Schroeder, Janzen Agricultural Law, LLC 

The Packers and Stockyards Act (the “Act”), a federal law first passed in 1921, is intended to ensure fair trade practices and competitive markets for livestock, meat, and poultry. It imposes requirements on swine growers and on the contracts between integrators and growers. Regulated business entities include livestock market agencies, including auction markets; livestock dealers; stockyards; packers; swine contractors and live poultry dealers, including most poultry slaughterers or integrators. Under the Act, it is illegal for any packer or swine contractor to use any unfair, unjustly discriminatory or deceptive practice or device. These entities process swine and move their products through the meatpacking phases of the livestock marketing channels.

The Act specifically regulates swine contracts. In contract swine finishing, two or more parties share the risks, rewards and responsibilities of producing market hogs. The grower often provides the barns, equipment, manure management, certain record-keeping functions, labor, mortality disposal, utilities and insurance. The contractor typically supplies the pigs, feed, veterinary services, technical support, transportation and other record-keeping functions. Most contracts include the language defining the length of the agreement and the potential for contract renewal. Contracts typically fall into one of three broad categories: the first is a fixed payment contract, where the grower/producer is paid a fixed payment per head, with bonuses and discounts based on performance. The second general type of swine contract is a directed feeding contract, involving a feed dealer that contracts with a grower to finish the hogs. The third type is a profit sharing contract, where the grower and contractor divide the profit in proportion to their inputs.

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