Spot market purchases of livestock by packers

Chapter 5 of subtitle B of the Agricultural Marketing Act of 1946 (7 U.S.C. 1636 et seq.) is amended by adding at the end the following:

260.

Spot market purchases of livestock by packers

(a)

Definitions

In this section: (1)

Covered packer

(A)

In general

The term covered packer means a packer that is required under this subtitle to report to the Secretary each reporting day information on the price and quantity of livestock purchased by the packer. (B)

Exclusion

The term covered packer does not include a packer that owns only 1 livestock processing plant. (2)

Nonaffiliated producer

The term nonaffiliated producer means a producer of livestock— (A)that sells livestock to a packer; (B)that has less than 1 percent equity interest in the packer, which packer has less than 1 percent equity interest in the producer; (C)that has no officers, directors, employees, or owners that are officers, directors, employees, or owners of the packer; (D)that has no fiduciary responsibility to the packer; and (E)in which the packer has no equity interest. (3)

Spot market sale

(A)

In general

The term spot market sale means a purchase and sale of livestock by a packer from a producer— (i)under an agreement that specifies a firm base price that may be equated with a fixed dollar amount on the date the agreement is entered into; (ii)under which the livestock are slaughtered not more than 7 days after the date on which the agreement is entered into; and (iii)under circumstances in which a reasonable competitive bidding opportunity exists on the date on which the agreement is entered into. (B)

Reasonable competitive bidding opportunity

For the purposes of subparagraph (A)(iii), circumstances in which a reasonable competitive bidding opportunity shall be considered to exist if— (i)no written or oral agreement precludes the producer from soliciting or receiving bids from other packers; and (ii)no circumstance, custom, or practice exists that— (I)establishes the existence of an implied contract (as determined in accordance with the Uniform Commercial Code); and (II)precludes the producer from soliciting or receiving bids from other packers. (b)

General rule

Of the quantity of livestock that is slaughtered by a covered packer during each reporting day in each plant, the covered packer shall slaughter not less than the applicable percentage specified in subsection (c) of the quantity through spot market sales from nonaffiliated producers. (c)

Applicable percentages

(1)

In general

Except as provided in paragraph (2), the applicable percentage shall be 25 percent. (2)

Exceptions

In the case of a covered packer that reported to the Secretary in the 2006 annual report that more than 75 percent of the livestock of the covered packer were captive supply livestock, the applicable percentage shall be the greater of— (A)the difference between the percentage of captive supply so reported and 100 percent; and (B)(i)during each of calendar years 2008 and 2009, 10 percent; (ii)during each of calendar years 2010 and 2011, 15 percent; and (iii)during calendar year 2012 and each calendar year thereafter, 25 percent. (d)

Nonpreemption

Notwithstanding section 259, this section does not preempt any requirement of a State or political subdivision of a State that requires a covered packer to purchase on the spot market a greater percentage of the livestock purchased by the covered packer than is required under this section. (e)

Relationship to other provisions

Nothing in this section affects the interpretation of any other provision of this Act, including section 202.