House approves prompt payment for pou
HARRISBURG - “I am en
couraged by this effort on the part
of the State House to help the
state’s poultry farmers,” State
Grange Master Charles Wismer
said following the House’s passage
of a bill requiring prompt payment
to poultry farmers. The House
approved the measure by an
overwhelming 180-15 vote.
H.B. 2035, initiated by the
Grange and introduced by Rep.
John Broujos (D-Adams), requires
poultry processors to pay poultry
farmers for live birds or eggs
within 14 days of delivery to the
plant.
“This would prevent situations
such as the Mandate Poultry
Processing Plant’s (Nor
thumberland County) failure to
pay its growers for 16 weeks last
year,” Wismer said. “When the
company finally declared
bankruptcy, farmers were really
left holding the bag.”
Wismer said that when
processors are late in payment,
farmers find themselves without
cash to pay utility bills, feed costs
and labor for raising the birds.
“H.B. 2035 will simply ensure fair
business practices,” Wismer said.
The legislation holds a merchant
or processor liable for payment
plus interest on the 15th day after
delivery is made by the farmer. If
a farmer is not paid on time, he can
declare any contract with the
merchant void by written notice
and sell the birds on the market,
keeping the money owed him and
returning any excess profit to the
merchant. Farmers also can
respond with civil action.
“Poultry farmers have been the
victims of late payments or no
payments at a time of severe
economic crisis,” said Rep.
Broujos. The poultry industry has
been faced with drought, avian flu.
a large influx of foreign capital,
high interest rates and a recession.
“Even without the adverse
economic impact of these con
ditions, the structure of the
marketing of poultry and eggs
deprives the farmer of leverage or
bargaining power,” Broujos
continued. “Lacking organization
and failing to insist on adequate
security and contract terms, the
farmer sells his services and
product on terms providing
inadequate protection.
“Hie majority of distributors
and processors on fair and
honorable. However, there are
market- and supply and demand
conditions that seem to be beyond
the control of anyone.”
According to the bill’s principle
sponsor, H.B. 2035 contains the
following provisions:
• Moneys due to a grower by a
merchant (processor or
distributor) shall be paid to the
grower within 14 days of delivery
of poultry by grower to merchant,
unless the parties otherwise agree.
(This latter condition is important.
The bill does not require money to
be paid within 14 days for all
contracts; only those in which the
two parties do not agree otherwise.
Grower and merchant can agree in
writing to 30 or more days, if they
desire.
• Interest is due on the unpaid
amount at rate set under the Fiscal
Code of the Commonwealth, unless
otherwise agreed to by the parties.
• If timely payment is not made,
the grower can declare the mer
chant to be in default and impose a
lien on the poultry in the possession
of the grower.
• The lien so imposed shall take
priority over any previous lien or
security interest created in the
poultry, such as a bank security
agreement.
• Sale of the poultry held for the
unpaid claim shall be in ac
cordance with the sale provisions
of the Uniform Commercial Code,
section 9504, relating to the right of
a secured party to dispose of
collateral after default.
• To prevent retroactive effect,
which is illegal, the act would not
apply to contracts in effect prior to
the effective date.
In response to a number of
commonly asked questions,
Representative Broujos provides
the following information:
Q. Will this law interfere with
normal market conditions and
methods of financing?
A. The market condition is not
normal when the farmer is the
victim of a product marketing
practice that leaves him unpaid for
services and goods provided. From
a broad base of many unorganized
growers, to a narrowing of control
within a few persons, the market
place does not operate in a normal
supply and demand way. Nor can
we say that this bill interferes
significantly with normal finan
cing practices of banks.
Q. Is this not special legislation
affecting only one group?
A. The Legislature can and does
respond to one group’s problems.
The farmer is a special person.
One of the objective commonly
held by legislators is the preser
vation of the small family farm. On
other occasions, special groups
have been accomodated by law;
there is a mechanics lien for
contractors; a lien for auto
repairs; and a documents
retaining lien for attorneys.
Q. Will lending institutions lose
their security by being subordinate
to the lien created for the grower
for unpaid bills?
A. Although the bill specifically
states that the grower shall have a
Lancaster Farming, Saturday, June 16,1984—D5
right to a lien upon default of the
merchant, and that the lien takes
priority over any prior security
interest, the actual mechanics of
default-lien-sale must be examined
to see that there is no serious
threat to security holders.
If a grower has $60,000 worth of
chickens of a processor, he may
sell about $l5OO to $3OOO worth of
eggs per week. If default occurs
after two weeks and the grower
claims a lien, he would only
threaten to sell 5 to 10% of the total
value of the chickens to recoup his
unpaid bill. If a bank had a
security interest in the chickens,
its interest would be protected in
the remaining collateral.
In the case of the broilers, if a
processor delivered 10,000
chickens and later took all of them
out, there would be none left on
which to assert a lien by the
grower if he were unpaid. If the
grower still had possession of other
flocks of chickens delivered, then
he could claim a lien for the unpaid
bill against those remaining in his
possession.
Q. Why should farmers have a
lien priority over the lender
financing the chickens owned by
the processor?
A. One answer is: Why should
the lender have priority of claim
for his lending service over the
feeding and growing service of
farmer? Just because the bank is
first in line to finance the chickens,
the farmer should not be com
pletely stripped of any security
interest in the same property.
There is probably enough
collateral for both bank and far
mer. If not, then they should share.
Resolving the problem of
sharing security for money or
services advanced should be
through reconciliation, not legal
confrontation.
Itrymen
Statutory priority of liens is not
new to the law. The law recognizes
certain priorities in the standing of
creditors, based on public policy.
Wage earners, landlords, and
taxing authorities have priorities
over general creditors in some
property dispositions.
A major advantage of this bill is
to set some standards in the in
dustry which will act as incentives
to the essential parties to correct
the imbalance in negotiation and in
contracts.
The bill will now be sent to the
senate agriculture committee for
consideration.
Those interested in commenting
on H.B. 2035 are invited to cot tact
Rep. John Broujos, Room 628,
Main Capitol Bldg, Harrisburg,
Pa. 17120.
Corn contest
sign-up deadline
FLEMINGTON, N.J. - The
deadline for sign-up for the Hun
terdon County Corn Contest has
been extended to Tuesday, June 19,
according to Jack Rinehart,
Franklin Township, chairman of
the board’s field crop committee.
“The season has been late, so it
does seem logical to extend the
registration period,” he said.
The rules of the contest require
that the field be at least 5-acres in
size, must be located in Hunterdon
County, and the farmer must be a
Hunterdon resident. The contest is
limited to one field per entrant.
There will be two awards;
“highest yield” and “highest net
return.”
Details and entry forms are
available in the Cooperative Ex
tension office, Extension Center.
Phone number is 788-1339 (201 area
code).