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A public comment period on an interim final rule that restores Small Business Administration affiliate principles and sizing standards that existed prior to 2016 will end on Friday.
The interim final rule was adopted after the Office of the Inspector General released a report in March 2018 that found $ 1.8 billion in SBA loans to contract poultry farmers “did not meet regulatory and SBA eligibility requirements. “. An audit of loans to contract producers found that large poultry companies exercised such control over contract producers that SBA loans primarily subsidized integrators.
The Arkansas Congressional delegation opposed the interim final rule, arguing that it “would effectively end the ability of family farmers and small businesses in Arkansas to use SBA loan programs.” . U.S. Representative Markwayne Mullin, who represents Oklahoma’s 2nd Congressional District, sided with the Arkansas poultry industry as one of 31 signatories to a letter expressing concern that the interim final rule would undermine the SBA’s goals of business growth and job creation.
The American Pastured Poultry Producers Association, however, supports the interim final rule. The APPPA has stated a position that if a candidate “derived more than 85% of their income from another business in the previous three fiscal years …”, they should be considered “economically dependent on the other” and, therefore, “affiliated” and ineligible for SBA loans.
“The growing pasture poultry industry does not depend on contracts with a single producer to produce chicken, eggs, turkey and other poultry,” says the APPPA in its official commentary to the support for the extended membership rule. “It relies rather on regional, decentralized markets directly aimed at consumers”, and “contrasts sharply with the consolidated and disconnected model of the poultry farmer under contract”.
APPPA went on to say that the old rules put taxpayers in a position to assume substantial risk and allow poultry integrators to become “the primary beneficiary of a tightly integrated business model”. The organization argued that this model would perpetuate a decline in the rural US economy by leveraging SBA 7 (A) loans for contract poultry producers and disadvantage the “market in favor of poultry integrators, who can maintain low costs by shifting the riskier part of poultry production. on family farms. ”
The interim final rule is also supported by clean water advocates, who say the proliferation of new chicken coops is contributing to the next wave of pollution and degradation of the state’s natural resources. Residents say new construction of industrial poultry feed operations in recent years in the Illinois Basin and adjacent watersheds is already having an impact on the environment and quality of life.
Denise Deason-Toyne, president of Save the Illinois River Inc., said the citizens’ coalition also supports the SBA’s expansion – or restoration – of its affiliate principles. She said there was no doubt that the poultry producers “in our area of Oklahoma are affiliated with other companies.”
“The poultry integrator producers, including Tyson Foods Inc. and Simmons Foods of Arkansas, don’t own the poultry flocks they get paid for – you could say they just ‘sit’ them down,” he said. said Deason-Toyne. do breeders provide bird feed or medication and expertise to grow integrator birds to maturity? These services are provided by poultry companies including Tyson and Simmons. ”
Deason-Toyne said that once the integrators retrieve the broilers once they have been fed, the producers are only left with the waste generated by the birds while they are kept captive by the producer. Poultry integrators, she said, “deny any responsibility for waste, or poultry litter, produced during the stay.”
The SBA 7 (a) loans, Deason-Toyne said, have been used by poultry farmers affiliated with integrators to fuel the resurgence of industrial poultry feed operations in the Illinois River watershed and in the Northeast. of Oklahoma. She cited reports of 200 new chicken coops built over the past two years in northeast Oklahoma, most in one county, as a cause for alarm.
“These farms have had a negative impact on the quality of life of adjacent owners,” Deason-Toyne says in a formal comment submitted to the SBA. “Manure from mega-poultry farms degrades the water quality of wells and private sources and degrades the air quality as well as local infrastructure.”
SBA released the provisional final rule on February 10 rather than proceeding with a final rule in order to provide an additional opportunity for comment. The rule went into effect on March 11, but compliance with two of the regulatory changes will not be required until October 1.
