[Code of Federal Regulations]

[Title 9, Volume 2]

[Revised as of January 1, 2007]

From the U.S. Government Printing Office via GPO Access

[CITE: 9CFR203.18]



[Page 58-59]

 

                  TITLE 9--ANIMALS AND ANIMAL PRODUCTS

 

  CHAPTER II--GRAIN INSPECTION, PACKERS AND STOCKYARDS ADMINISTRATION 

      (PACKERS AND STOCKYARDS PROGRAMS), DEPARTMENT OF AGRICULTURE

 

PART 203_STATEMENTS OF GENERAL POLICY UNDER THE PACKERS

AND STOCKYARDS ACT--Table of Contents

 

Sec. 203.18  Statement with respect to packers engaging in the business of custom feeding livestock.



    (a) In its administration of the Packers and Stockyards Act, the 

Grain Inspection, Packers and Stockyards Administration (Packers and 

Stockyards Programs) has sought to promote and maintain open and fair 

competition in the livestock and packing industries, and to prevent 

unfair or anticompetitive practices when they are found to exist. It is 

the opinion of the Administration that the ownership or operation of 

custom feedlots by packers presents problems which may, under some 

circumstances, result in violations of the Packers and Stockyards Act.

    (b) Packers contemplating entering into such arrangements with 

custom feedlots are encouraged to consult with the Administration prior 

to the commencement of such activities. Custom feedlots are not only 

places of production, but are also important marketing centers, and in 

connection with the operation of a custom feedlot, it is customary for 

the feedlot operator to assume responsibility for marketing fed 

livestock for the accounts of feedlot customers. When a custom feedlot 

is owned or operated by a packer, and when such packer purchases fed 

livestock from the feedlot, this method of operation potentially gives 

rise to a conflict of interest. In such situations, the packer's 

interest in the fed livestock as a buyer is in conflict with its 

obligations to feedlot customers to market their livestock to the 

customer's best advantage. Under these circumstances, the packer should 

take appropriate measures to eliminate any



[[Page 59]]



conflict of interest. At a minimum, such measures should insure:

    (1) That feedlot customers are fully advised of the common ties 

between the feedlot and the packer, and of their rights and options with 

respect to the marketing of their livestock;

    (2) That all feedlot customers are treated equally by the packer/

custom feedlot in connection with the marketing of fed livestock; and

    (3) That marketing decisions rest solely with the feedlot customer 

unless otherwise expressly agreed.

    (c) Packer ownership or operation of custom feedlots may also give 

rise to competitive problems in some situations. Packers contemplating 

or engaging in the business of operating a custom feedlot should 

carefully review their operations to assure that no restriction of 

competition exists or is likely to occur.

    (d) The Grain Inspection, Packers and Stockyards Administration 

(Packers and Stockyards Programs) does not consider the existence of 

packer/custom feedlot relationships, by itself, to constitute a 

violation of the Act. In the event it appears that a packer/custom 

feedlot arrangement gives rise to a violation of the Act, an 

investigation will be made on a case-by-case basis, and, where 

warranted, appropriate action will be taken.



(Approved by the Office of Management and Budget under control number 

0580-0015)



(7 U.S.C. 203, 204, 207, 217a, 222 and 228)



[49 FR 33004, Aug. 20, 1984, as amended at 68 FR 75388, Dec. 31, 2003]