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UPDATE 2-GIPSA rules could shrink US meat industry-study

* Industry-backed study says GIPSA rules would add costs

* Informa study estimates 22,800 meat sector jobs at risk

* Costs, job losses would be over 2 to 3 years

(Adds comments throughout, byline)

By Bob Burgdorfer

CHICAGO, Nov 10 (Reuters) - The U.S. livestock and meat industry could face more than $1 billion in annual losses, and a drop in production if proposed rules for the industry are implemented, according to a study funded by big livestock producers released on Wednesday.

Earlier this year, the Agriculture Department’s Grain Inspection, Packers and Stockyards Administration proposed rules designed to help all livestock and poultry producers compete and to assist the agency in prosecuting violators.

The proposals have divided the livestock industry, with larger producers and meat companies opposed to them claiming they will drive up costs and reduce marketing options.

Smaller producers favor the rule claiming they will help them command the premium prices paid to larger rivals.

A study by Informa Economics and commissioned by opponents of the rules, estimated that the U.S. meat industry’s indirect losses from the proposed rules could total $1.34 billion annually, including one-time costs of $136 million, and annual costs of $169 million.

It also claimed the rules would over time decrease beef production by 0.6 percent, pork by 1.9 percent, and poultry by 0.6 percent, and could lead to 22,800 job losses.

Many of these costs and changes would occur over two to three years, with lingering economic impacts lasting 10 years or more, it said.

In a separate response, USDA on Wednesday called the rules a starting point and that comments received through Nov. 22 will assist it with regard to if and how changes should be made and aid in a “more rigorous cost-benefit” analyses in the rule making.

“We want a workable, feasible, and common sense rule,” a USDA spokesman said.

There was talk from both producer camps on Wednesday that the new Republican majority in the House of Representatives could prompt changes in the rules.

“I’m hopeful that there will be a positive out come from the election that will spillover onto the rules and hopefully we can have some serious debate about them,” said Bill Donald, president-elect of the National Cattlemen’s Beef Association.

FEAR OF LITIGATION

Trade groups such as the National’s Cattlemen’s Beef Association, National Pork Producers Council and National Turkey Federation paid for the study.

The study supported many of the sponsors’ arguments including that current marketing contracts between producers and meat companies would leave the meat companies vulnerable to lawsuits.

The rules would, among other things, require meat plants and commercial buyers to maintain written records to justify variations in pricing and would prohibit offering higher prices to producers who can provide larger volumes.

“The natural response is to reduce the amount of contracting. It is largely in response to the competitive industry clause and the fear of litigation,” said Rob Murphy, vice president at Informa.

PROPONENTS SAYS THE RULES ARE NEEDED

Grass-roots groups, such as R-CALF USA and the National Farmers Union, said at a separate press conference that the rules are needed to give smaller producers access to top prices and to lessen the influence meat packers have in setting prices.

They also said that marketing agreements can continue and while there may be some initial law suits there should not be an increase in litigation.

“The rule does not in any way limit, restrict, or prohibit any of the various marketing procurement contracts that currently are practiced in the industry,” said Bill Bullard, chief executive of R-CALF. (Reporting by Bob Burgdorfer; Additional reporting by Charles Abbott in Washington; Editing by Marguerita Choy)

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