2025-00508. Poultry Grower Payment Systems and Capital Improvement Systems

Table 1—Estimated Costs of Final §§ 201.106, 110, and 112—Preferred Alternative

Preferred alternative	Expected costs *
	Live poultry dealers	Poultry growers	Industry total
§ 201.106:
First-Year	$16,968,000	$4,974,000	$21,941,000
Ten-Year Total	26,401,000	4,974,000	31,375,000
PV of Ten-Year Discounted at 2%	25,148,000	4,876,000	30,025,000
Ten-Year Annualized at 2%	2,800,000	543,000	3,343,000
§ 201.110:
First-Year	3,749,000	0	3,749,000
Ten-Year Total	31,736,000	0	31,736,000
PV of Ten-Year Discounted at 2%	28,559,000	0	28,559,000
Ten-Year Annualized at 2%	3,179,000	0	3,179,000
§ 201.112:
First-Year	58,000	249,000	307,000
Ten-Year Total	582,000	2,487,000	3,069,000
PV of Ten-Year Discounted at 2%	523,000	2,234,000	2,757,000
Ten-Year Annualized at 2%	58,000	249,000	307,000
§§ 201.106, 110, and 112:
First-Year	20,775,000	5,223,000	25,997,000
Ten-Year Total	58,719,000	7,461,000	66,179,000
PV of Ten-Year Discounted at 2%	54,230,000	7,110,000	61,341,000
Ten-Year Annualized at 2%	6,037,000	792,000	6,829,000
* Rows may not sum to Total Costs due to rounding.

Estimated Costs-and Expected Benefits of Final §§ 201.106, 110, and 112—Preferred Alternative

The value of broiler production in the U.S. for 2023 was approximately $50.6 billion.^[109] Total direct costs of final §§ 201.106, 110, and 112 are estimated to be greatest in the first year at $26.0 million, or 0.051 percent of revenues. A relatively small improvement in efficiency from improved allocation of capital and labor resources in the industry would more than outweigh the direct costs of this final rule. A reduction in information asymmetry (resulting in more useful information provided to growers), grower uncertainty and risk of potential adverse outcomes, and retaliatory and deceptive practices by LPDs will lead to benefits resulting from the final rule. The size of benefits will be directly related to the extent of these reductions. AMS expects that the final rule will provide substantial benefits the industry and address issues of extreme importance to broiler growers. However, these benefits are not quantifiable. Benefits and costs are summarized below for each provision of the rule.

Final § 201.106(a) benefits broiler growers by requiring LPDs to implement payment structures that increase clarity and certainty about the lowest possible revenue outcomes under a growing arrangement. LPDs are expected to incur one-time direct costs of developing, documenting, and communicating new contracts and a new system of grower payments and no additional ongoing costs. Since most LPDs currently employ payment structures that allow for both bonuses and discounts, AMS expects these costs to be realized by LPDs at most complexes and the corresponding benefits to be realized by the vast majority of broiler growers.

Final § 201.106(b) establishes a presumption of unfairness when the amount of total grower compensation based on relative performance exceeds 25 percent and thereby protects growers from excess income variability. Some growers at complexes where LPDs modify compensation structures to reduce the percentage of grower pay based on relative performance may benefit from reductions in the variability of their income. The distribution of benefits is likely to be unequal, such that increases in compensation for some growers may correspond with decreases in performance-based compensation for other growers. ( print page 5202)

In addition to direct costs to LPDs of implementing the rule, § 201.106(b) could result in additional indirect costs to broiler industry stakeholders (including LPDs, consumers, and growers) if LPDs modify existing compensation structures in ways that adversely affect grower incentives and lead to increased production costs. The magnitude of benefits and costs resulting from § 201.106(b) will depend on two important factors that cannot be measured or predicted with a reasonable degree of certainty: the number of broiler complexes that will modify existing compensation structures as a result of final § 201.106(b) and the manner in which those change will be implemented by LPDs. If few or no complexes make substantial modifications to existing compensation structures as a result of § 201.106(b), the resulting benefits to growers of reduced income variability and the indirect costs to the broiler industry will be small. All broiler growers will nonetheless benefit from ongoing protection against future increases in performance-based pay variability and reductions in base pay amounts.

Growers will benefit from additional protections under § 201.106(c) that require LPDs to submit prior and modified contracts if contract modifications result in reduced average grower compensation during a three-year transition period. This requirement will facilitate AMS monitoring and intervention, when necessary, to protect growers from unfair treatment. AMS does not expect indirect costs to broiler industry stakeholders. AMS expects the benefits of § 201.106(c) will accrue to all broiler growers and the direct costs of implementation over the three-year transition period will apply to all LPDs.

By requiring that LPDs design and operate poultry grower ranking systems to provide a fair comparison among growers, final § 201.110 will benefit broiler growers through increased fairness and reduced deception. All broiler growers will benefit to the degree that this provision improves fairness and reduces deception within poultry grower ranking systems. The direct costs of implementing and maintaining compliance with § 201.110 will be incurred by all LPDs, and AMS does not expect any other indirect costs of this provision.

Disclosures concerning additional capital investments required by final § 201.112 will provide broiler growers with better information to make financial decisions and reduce the likelihood the LPDs can deceive or mislead growers. Growers will also benefit to the extent that this requirement provides information that facilitates improved identification and enforcement of violations under § 201.116. LPDs will incur direct costs of preparing and distributing disclosures when additional capital investments are requested by the LPD. The provision could also cause some transfer of benefits from LPDs to growers if the provision causes growers to avoid making unprofitable investments that would have benefited the LPD more than the grower.

Net total costs and benefits to the industry from final §§ 201.106, 110, and 112 cannot be quantified. Thus, AMS cannot measure any impact or shift in total industry supply or any corresponding indirect effects on industry supply and demand, including price and quantity effects.

Estimated Costs and Expected Benefits of the Small Business Exemption Alternative

AMS estimated costs for an alternative to the preferred option for the final rule. It would be the same as final §§ 201.106, 110, and 112, with the exception that the alternative would exempt LPDs that fall under the SBA definition of small businesses from all provisions of the two final rules. In the preferred alternative, the requirements in final §§ 201.106, 110, and 112 would apply to all LPDs, including those classified as small businesses.

The costs associated with this alternative are similar, but smaller than the preferred option. According to PSD records, small LPDs make up 50.0 percent of all LPDs, but have only 6.0 percent of poultry growing contracts. The estimation of the costs of the small business exemption alternative will follow the same format as the preferred alternative.

Costs of Final § 201.106—Small Business Exemption Alternative

AMS estimates that the aggregate one-time costs to LPDs of updating grower contracts and developing new grower payment systems, including modifying information systems to include new calculations as well as filing, and reporting to comply with final § 201.106(a), will require 15,936 legal hours, 54,780 management hours, 6,640 administrative hours, and 6,640 information technology hours, costing a total of $8,474,000 in the first year under the small business exemption alternative. Once LPDs have incurred a one-time cost of developing, documenting, and communicating new contracts and a new system of grower payments, AMS does not expect additional ongoing costs of implementing final § 201.106(a) under the small business exemption alternative.

AMS estimates that the aggregate one-time costs to LPDs of examining and evaluating existing grower compensation structures and making modifications as required to ensure ongoing compliance with final § 201.106(b), will require 6,640 legal hours, 49,800 management hours, 6,640 administrative hours, and 13,280 information technology hours, costing a total of $7,327,000 in the first year under the small business exemption alternative.

LPDs will monitor, maintain and comply with the processes for examining excessive variability. AMS expects these annual ongoing costs to require in aggregate 664 legal hours, 4,980 management hours, 664 administrative hours, and 1,328 information technology hours for an aggregate annual cost of $733,000 under the small business exemption alternative.

AMS does not expect any cost in the first year to set up and implement a plan in response to § 201.106(c). For each of the three calendar years following the effective date for § 201.106, AMS expects these annual ongoing costs to require in aggregate 664 legal hours, 4,980 management hours, 664 administrative hours, and 1,328 information technology hours for an aggregate annual cost of $733,000 under the small business exemption alternative.

For final § 201.106(a), AMS expects that growers will take about 4 hours to review new contract terms and provisions when they are provided in the first year. At $62.13 per hour, the total one-time cost for all broiler growers to review the new contract under the small business exemption alternative is $4,674,000.^[110] AMS expects that the updated contract provisions and payment systems developed by LPDs pursuant to final § 201.106 (a) would not contribute to additional ongoing contract review time by growers beyond an initial one-time review. Therefore, no ongoing future costs of grower contract review are included.

The ten-year aggregate total costs to LPDs of final § 201.106 under the small business exemption alternative are estimated to be $24,593,000, the ten-year aggregate total costs to broiler growers of final § 201.106 for the small business exemption alternative are estimated to be $4,674,000, and the first- ( print page 5203) year and ten-year aggregate total costs to LPDs and poultry growers of final § 201.106 for the small business exemption alternative are estimated to be $29,267,000.

Unquantified Indirect Costs of § 201.106—Small Business Exemption Alternative

AMS expects that indirect costs resulting from § 201.106(b) and (c) for the small business exemption alternative will be nearly identical to those discussed for the preferred alternative, with the only difference being the number of complexes potentially affected. In particular, small LPDs would be exempt from the presumption of unfairness under § 201.106(b) and will not incur indirect costs from modifying grower compensation structures to reduce the percentage of performance-based compensation for a complex below the presumptively unfair 25 percent of total compensation. The 10 percent of complexes that would be exempted from the regulation under this alternative are small by definition. AMS does not have access to data that would suggest whether these small LPD complexes are any more or less likely to require modifications to existing grower compensation structures that result in indirect costs than other complexes. Indirect costs for the small business exemption alternative could only be equal to or less than the preferred alternative but cannot be quantified for the same reasons.

Direct Costs of Final § 201.110—Small Business Exemption Alternative

AMS estimates that the one-time aggregate cost of developing new policies and procedures in response to final § 201.110(a) and (b)(1)(i) through (v) for LPDs will require 3,984 legal hours, 24,900 management hours, 1,328 administrative hours, and 1,328 information technology hours, costing a total of $3,150,000 in the first year for the small business exemption alternative.

After new written processes have been developed, LPDs would be required to implement, monitor, and comply and to maintain and update them. AMS expects these annual ongoing costs for the small business exemption alternative to require in aggregate 1,328 legal hours, 25,564 management hours which include renewal and updating of written processes at the corporate level as well as monitoring activities conducted by managers at each complex to ensure ongoing compliance, 664 administrative hours, and 664 information technology hours for an aggregate annual cost of $2,746,000.^[111]

Final § 201.110(b)(1)(vi) requires that the written processes developed must include a description for how the LPD would resolve a grower's concerns with the LPD's design or operation of a poultry grower ranking system that is consistent with the duty of fair comparison that is required by this section, including the timeliness of the resolution. AMS expects that the aggregate one-time cost to LPDs of setting up communications and complaint resolution processes as described in § 201.110(b)(1)(vi) for the small business exemption alternative will require 504 legal hours, 252 management hours, 84 administrative hours, and 210 information technology hours for an aggregate one-time cost of $119,000.^[112]

Costs associated with final § 201.110(b)(2), “Record retention,” are included in cost estimates for final § 201.110(b)(1). AMS expects that this section does not incur any additional costs.

AMS expects the ongoing annual costs of implementing communications and complaint resolution processes as described in § 201.110(b)(1)(vi) to require, for the small business exemption alternative, in aggregate, 168 legal hours, 84 management hours, 42 administrative hours, and 42 information technology hours for an aggregate annual cost of $38,000.^[113] Because final § 201.110 does not require LPDs to provide additional disclosures to contract growers, final § 201.110 would not impose any additional one-time or ongoing costs on growers to review additional disclosures, and total grower costs of final § 201.110 are also zero under the small business exemption alternative.

The ten-year total costs of final § 201.110 to the 50.0 percent of live broiler poultry dealers impacted under the small business exemption alternative are estimated to be $28,327,000. Since expected grower costs for this section are zero, these also represent the total aggregate costs of final § 201.110.

Direct Costs of Final § 201.112—Small Business Exemption Alternative

Final § 201.112 would require LPDs to create a Capital Improvement Disclosure Document when new capital investments are requested of growers. Based on information provided by subject matter experts, AMS estimates a five percent annual average probability that capital improvement upgrades will be required for growers at a complex, which would trigger creation of a new Disclosure Document. Therefore, AMS estimates the annual ongoing cost of creating Capital Improvement Disclosure Documents for the small business exemption alternative will require 66 legal hours, 332 management hours, 66 administrative hours, and 83 information technology hours to create and provide Capital Improvement Disclosure Documents for all growers requiring additional capital improvement upgrades, for an aggregate annual cost of $53,000 for the small business exemption alternative.^[114]

For final § 201.112, AMS expects that growers would take about four hours to review these documents when they are disclosed as part of a capital improvement request or requirement by the LPD. For the small business exemption alternative, LPDs would be required to provide disclosures to growers for any of the 18,806 contracts for which additional capital investment requests are made.^[115] AMS expects that LPDs will make additional capital investment requests for an average of five percent of grower contracts annually. Given that growers require an estimated 4 hours at $62.13 per hour, growers' aggregate annual costs would be $234,000 for reviewing documents required by final § 201.112 in the first year and in each successive year for the small business exemption alternative.^[116]

The ten-year aggregate total costs of final § 201.112 under the small business exemption alternative for LPDs are estimated to be $525,000, and the ten-year aggregated total costs to poultry growers of final § 201.112 under the small business exemption alternative are estimated to be $2,337,000. The combined first-year aggregate total costs to LPDs and poultry growers of final ( print page 5204) § 201.112 under the small business exemption alternative are estimated to be $286,000, and the ten-year aggregate total costs are estimated to be $2,862,000.

Combined Costs of Final §§ 201.106, 110, and 112—Small Business Exemption Alternative

Aggregate combined costs to LPDs for final §§ 201.106, 110, and 112 for the small business exemption alternative are expected to be $19,123,000 in the first year, and $4,302,000 in subsequent years. The combined costs for poultry growers are expected to be $4,907,000 in the first year, $234,000 in subsequent years.

The aggregate ten-year combined quantified costs to LPDs of final §§ 201.106, 110, and 112 for the small business exemption alternative are estimated to be $53,445,000 and the present value of the ten-year combined costs $49,382,000 discounted at a two percent rate. The aggregate annualized costs of the PV of ten-year costs to LPDs discounted at a two percent rate are expected to be $5,498,000.

The aggregate ten-year combined costs to poultry growers of final §§ 201.106, 110, and 112 for the small business exemption alternative are estimated to be $7,011,000 and the present value of the ten-year combined costs are estimated to be $6,681,000 discounted at a two percent rate. The aggregate annualized costs of the PV of ten-year costs to poultry growers discounted at a two percent rate are expected to be $744,000.

The aggregate combined costs of final §§ 201.106, 110, and 112 under the small business exemption alternative for LPDs and poultry growers are estimated to be $24,030,000 in the first year and $4,536,000 in subsequent years. The aggregate ten-year combined costs to LPDs and poultry growers of final §§ 201.106, 110, and 112 for the small business exemption alternative are estimated to be $60,456,000 and the present value of the ten-year combined costs are estimated to be $56,063,000 discounted at a two percent rate. The aggregate annualized costs of the PV of ten-year costs to LPDs and poultry growers discounted at a two percent rate are expected to be $6,241,000. The aggregate cost estimates of final §§ 201.106, 110, and 112 under the small business exemption alternative presented above appear in the following table. The quantified costs to the industry in the first year under the small business exemption alternative are $24.030 million.

Table 2—Estimated Costs of Final §§ 201.106, 110, and 112—Small Business Exemption Alternative

SBE alternative	Expected cost *
	Live poultry dealers	Poultry growers	Industry total
§ 201.106:
First-Year	$15,801,000	$4,674,000	$20,474,000
Ten-Year Total	24,593,000	4,674,000	29,267,000
PV of Ten-Year Discounted at 2%	23,426,000	4,582,000	28,008,000
Ten-Year Annualized at 2%	2,608,000	510,000	3,118,000
§ 201.110:
First-Year	3,269,000	0	3,269,000
Ten-Year Total	28,327,000	0	28,327,000
PV of Ten-Year Discounted at 2%	25,485,000	0	25,485,000
Ten-Year Annualized at 2%	2,837,000	0	2,837,000
§ 201.112:
First-Year	53,000	234,000	286,000
Ten-Year Total	525,000	2,337,000	2,862,000
PV of Ten-Year Discounted at 2%	472,000	2,099,000	2,571,000
Ten-Year Annualized at 2%	53,000	234,000	286,000
§§ 201.106, 110, and 112:
First-Year	19,123,000	4,907,000	24,030,000
Ten-Year Total	53,445,000	7,011,000	60,456,000
PV of Ten-Year Discounted at 2%	49,382,000	6,681,000	56,063,000
Ten-Year Annualized at 2%	5,498,000	744,000	6,241,000
* Rows may not sum to Total Costs due to rounding.

Estimated Costs and Expected-Benefits of Final §§ 201.106, 110, and 112—Small Business Exemption Alternative

According to PSD records, only 6.0 percent of poultry growing contracts are between small LPDs and poultry growers. Thus, 94 percent of all poultry growers will receive the benefits of final §§ 201.106, 110, and 112 under the small business exemption alternative.

As with the preferred option, net total costs and benefits to the industry from §§ 201.106, 110, and 112 under the small business exemption alternative cannot be quantified. Thus, AMS cannot measure any impact or shift in total industry supply or any corresponding indirect effects on industry supply and demand, including price and quantity effects.

The tables above indicate that the small business exemption alternative would cost the industry less than the preferred option. Although most growers contract with large poultry growers, AMS chose not to accept the alternative because exempting small business from complying with the regulations would also result in less benefits to growers.

Estimated Costs and Expected Benefits of Proposed Rule Alternative

AMS estimated costs for a third alternative to the “do nothing” option and the last of four total alternatives presented. This alternative considers adopting §§ 201.106, 110, and 112 for all small and large LPDs as originally proposed without including the changes in the final rule. These changes have already been described in extensively earlier in the document. The estimation of costs for the proposed rule alternative will proceed by describing differences in costs by major rule section and combined. ( print page 5205)

Costs of § 201.106—Proposed Rule Alternative

Final § 201.106(a) is unchanged from § 201.106 as it was proposed and as it is analyzed in this alternative. Final § 201.106(b), “Excessive variability,” and (c), “Transition,” were not included in proposed § 201.106. Neither estimates of direct time costs nor other potential indirect costs or associated benefits for these provisions are included for the proposed rule alternative. Estimated costs for § 201.106 under the proposed rule alternative are equal to one-time direct costs of final § 201.106(a).

Costs of § 201.110—Proposed Rule Alternative

Final § 201.110 requires LPDs to develop, maintain, and comply with a set of policies and procedures that are reasonably designed for the design and operation of a poultry grower ranking system that is consistent with the duty of fair comparison. As described in previous discussion of changes from the proposed to final rule, final § 201.110(a) is substantively unchanged from the proposed rule, text of final § 201.110(b)(1) has been simplified from the proposed rule to improve clarity of documentation requirements, and proposed § 201.110(b)(2), “Compliance review,” has been removed. Two other provisions of proposed § 201.110 relating to “Communication and cooperation” and “Record retention” have received paragraph number redesignations but are otherwise unchanged. Changes to § 201.110(b)(1) did not affect the estimation of hours or of costs and benefits to the rule. Estimated costs of § 201.110 under the proposed rule alternative are therefore equal to estimated direct costs for the final § 201.110 under the preferred alternative with costs for proposed § 201.110(b)(2) added.

Proposed § 201.110(b)(2), would require LPDs to conduct a compliance review of each complex no less than once every two years to ensure compliance with policies and procedures established under proposed § 201.110(a) and (b)(1). LPDs would need to first design a compliance review system to be used for conducting written review of compliance by complex managers, production supervisors, and field agents. Compliance reviews would then need to be conducted every two years at each complex.

AMS estimates that the aggregate one-time costs of designing and initiating the compliance review process would require 2,208 legal hours, 14,720 management hours, 736 administrative hours, and 2,392 information technology hours costing $1,993,000 ^[117] in the first year for LPDs to initially set up their review and compliance policies and procedures and initiate their ongoing compliance review processes.

The ongoing cost for LPDs to conduct compliance reviews for each complex every two years has been converted to an annual cost by dividing the total cost of conducting reviews on all complexes in half. This could be consistent with, for example, a system where each LPD reviews half of their complexes each year on a rolling basis or, alternatively, where a sinking fund deposit is made each year and used every other year. AMS estimates that total ongoing annual costs on the part of LPDs will require 736 legal hours, 7,360 management hours, 368 administrative hours, and 920 information technology hours to conduct and document written reviews of compliance of each complex no less than once every two years, for an aggregate annual cost of $919,000.^[118]

Costs of § 201.112—Proposed Rule Alternative

Text of § 201.112(a) and (b) was changed from the proposed to final rule primarily for the purpose of clarification or to add paragraph titles; these changes did not affect the estimation of hours or of costs and benefits to the rule. The addition of final § 201.112(c), “Translation,” from the proposed to final rule is also not expected to change hours or costs because LPDs already have all necessary information to make reasonable efforts to assist growers in translating disclosure documents and have made it available to growers who request the information. Accordingly, AMS did not add any time to its cost estimates for LPDs to comply with this new requirement. AMS cost estimates to LPDs and growers of § 201.112 under the proposed rule alternative are identical to those described under the preferred alternative.

Combined Costs of §§ 201.106, 110, and 112—Proposed Rule Alternative

Aggregate combined costs to LPDs for §§ 201.106, 110, and 112 for the proposed rule alternative are expected to be $14,906,000 in the first year, and $4,086,000 in subsequent years. The combined costs for poultry growers are expected to be $5,223,000 in the first year, $249,000 in subsequent years.

The aggregate ten-year combined quantified costs to LPDs of §§ 201.106, 110, and 112 for the proposed rule alternative are estimated to be $51,684,000 and the present value of the ten-year combined costs is $47,314,000 discounted at a two percent rate. The aggregate annualized costs of the PV of ten-year costs to LPDs discounted at a two percent rate are expected to be $5,267,000.

The aggregate ten-year combined costs to poultry growers of §§ 201.106, 110, and 112 for the proposed rule alternative are estimated to be $7,461,000 and the present value of the ten-year combined costs are estimated to be $7,110,000 discounted at a two percent rate. The aggregate annualized costs of the PV of ten-year costs to poultry growers discounted at a two percent rate are expected to be $792,000.

The aggregate combined costs of final §§ 201.106, 110, and 112 under the proposed rule alternative for LPDs and poultry growers are estimated to be $20,129,000 in the first year and $4,335,000 in subsequent years. The aggregate ten-year combined costs to LPDs and poultry growers of §§ 201.106, 110, and 112 for the proposed rule alternative are estimated to be $59,145,000 and the present value of the ten-year combined costs are estimated to be $54,425,000 discounted at a two percent rate. The aggregate annualized costs of the PV of ten-year costs to LPDs and poultry growers discounted at a two percent rate are expected to be $6,059,000. The aggregate cost estimates of final §§ 201.106, 110, and 112 under the proposed rule alternative presented above appear in the following table. The quantified costs to the industry in the first year under the proposed rule alternative are $20.13 million. ( print page 5206)

Table 3—Estimated Costs of §§ 201.106, 110, and 112—Proposed Rule Alternative

Preferred alternative	Expected cost *
	Live poultry dealers	Poultry growers	Industry total
§ 201.106:
First-Year	$9,106,000	$4,974,000	$14,080,000
Ten-Year Total	9,106,000	4,974,000	14,080,000
PV of Ten-Year Discounted at 2%	8,928,000	4,876,000	13,804,000
Ten-Year Annualized at 2%	994,000	543,000	1,537,000
§ 201.110:
First-Year	5,742,000	0	5,742,000
Ten-Year Total	41,996,000	0	41,996,000
PV of Ten-Year Discounted at 2%	37,864,000	0	37,864,000
Ten-Year Annualized at 2%	4,215,000	0	4,215,000
§ 201.112:
First-Year	58,000	249,000	307,000
Ten-Year Total	582,000	2,487,000	3,069,000
PV of Ten-Year Discounted at 2%	523,000	2,234,000	2,757,000
Ten-Year Annualized at 2%	58,000	249,000	307,000
§§ 201.106, 110, and 112:
First-Year	14,906,000	5,223,000	20,129,000
Ten-Year Total	51,684,000	7,461,000	59,145,000
PV of Ten-Year Discounted at 2%	47,314,000	7,110,000	54,425,000
Ten-Year Annualized at 2%	5,267,000	792,000	6,059,000
* Rows may not sum to Total Costs due to rounding.

Estimated Costs and Expected Benefits of §§ 201.106, 110, and 112—Proposed Rule Alternative

The expected benefits of proposed §§ 201.106, 110, and 112 as analyzed in the proposed rule alternative have been described in the discussion of benefits for the preferred option, final §§ 201.106, 110, and 112, with the exception of § 201.110(b)(2), “Compliance review,” which was removed from the proposed to final rule. Proposed § 201.110(b)(2) would require a written review of each broiler complex at least every other year to ensure compliance with the policies and procedures developed under this section. While the proposed rule would not require that LPD documentation be distributed to growers, it would be subject to USDA review to ensure ongoing maintenance and compliance. This compliance review requirement would not provide benefits separate from those generated by establishing the duty in § 201.110(a); however, documentation of regular review of LPD procedures could assist in ongoing enforcement of the proposed rule, thereby increasing the likelihood of compliance so that benefits of the proposed rule are realized by growers.

All potential non-quantifiable benefits and indirect costs of final § 201.106(b) and (c) are excluded from the proposed rule alternative. Net total costs and benefits to the industry from §§ 201.106, 110, and 112 in the proposed rule alternative cannot be quantified in relation to the total value of industry production. Thus, AMS cannot measure any impact or shift in total industry supply or any corresponding indirect effects on industry supply and demand, including price and quantity effects.

Comments from the proposed rule have been discussed and changes to the final rule have been explained previously in this regulatory analysis. Expected benefits and costs of adopting the proposed rule are presented in this section as a third regulatory alternative to final §§ 201.106, 110, and 112. Estimated direct costs for the final rule preferred alternative are decreased by removal of proposed § 201.110(b)(2), “Compliance review” and increased by the addition of § 201.106(b) and (c). As a net result of all changes, estimated direct costs are lower for the proposed rule alternative in comparison to the final §§ 201.106, 110, and 112. The proposed rule alternative also excludes expected benefits and indirect costs of § 201.106(b) and (c). As discussed previously, commenters on the proposed rule expressed strong support for including these provisions. Under the proposed rule alternative, growers would be denied protection against excessive variation in compensation by establishing 25 percent as a presumptively unfair percentage of performance-based pay. Without protection during the transition period for implementation of these rule provisions, growers would be vulnerable to reductions in compensation by LPDs.

After considering all four regulatory alternatives, AMS determined that the preferred alternative is the best alternative.

C. Regulatory Flexibility Act

As part of the regulatory process, a Regulatory Flexibility Analysis (RFA) is conducted in order to evaluate the effects of this final rule on small businesses.

AMS is adding final §§ 201.106, 110, and 112 to the regulations under the Packers and Stockyards Act. The regulations will establish requirements for LPDs that produce broilers with grower ranking contracts. LPDs that only produce turkeys, ducks, geese, or other fowl will not be affected. Final § 201.106 will require LPDs to develop and implement new broiler grower contracts and grower payment systems. Final § 201.110 will impose a duty on LPDs that produce broilers to establish and maintain compliance with written processes for the design and operation of poultry growing ranking systems consistent with a duty of fair comparison. Final § 201.112 would require LPDs to produce and distribute disclosures when they request growers to make additional capital investments.

Summary of the Final Rule

Final § 201.106 will prevent LPDs reducing compensation rates based on a grower's grouping, ranking, or comparison to others. All payment adjustments related to grower performance will need to be positive adjustments. LPDs are prevented from taking deductions based on relative performance rankings. ( print page 5207)

Final § 201.106 will also establish a presumptive unfairness limitation on the share of grower payments that an LPD may determine by a grower's grouping, ranking, or comparison to others. The Secretary will presume that an LPD is in violation of the Act if a payment associated with a grower's grouping, ranking, or comparison to others is more than 25 percent of the total payments to growers in a calendar year.

Final § 201.106 also creates a transition period lasting three years after the regulation becomes effective. During the transition period, if an LPD reduces the price per pound, the LPD will be required to forward to the AMS Administrator a copy of the prior and the modified contract and any LPD Disclosure Document.

Final § 201.110 will require LPDs to provide for fair comparison among growers when basing compensation on a upon a grouping or ranking of growers delivering during a specified period. Final § 201.110 also lists factors that the Secretary will consider in determining whether the system was designed to deliver a fair comparison, which include: whether growers will be compared to growers supplied with inputs or assigned production practices that result in material differences in performance metrics used in payment calculations, whether growers will be compared over appropriate time periods, whether any non-comparison payment methods applied are appropriate, whether the LPD has made reasonable efforts to timely resolve concerns a grower raises regarding the LPD's design and operation of its poultry grower ranking system, and any other factor relevant to a fair comparison.

Final § 201.110 will further require that when an LPD uses a poultry grower ranking system and cannot conduct a fair comparison for one or more growers, the LPD must compensate those growers through an appropriate non-comparison method specified in the contract that reflects reasonable compensation to the grower for its services.

Final § 201.110 will also require LPDs to establish and maintain written documentation of poultry grower ranking system policies and procedures for the design and operation of a poultry grower ranking system that is consistent with the duty of fair comparison. The written documentation must include policies and procedures regarding the manner in which LPDs will work to ensure a fair comparison among contract growers taking into account the distribution of inputs and assignment of production variables that are controlled by the LPD, any flexibility the LPD has in performing these comparisons, and how the LPD resolves concerns regarding the design and operation of the poultry grower ranking system by the LPD.

Final § 201.112 will require LPDs to provide a Capital Improvement Disclosure Document any time the LPD requests or requires existing broiler chicken growers to make an additional capital investment that is $12,500 or more per structure excluding maintenance or repair. The Capital Improvement Disclosure Document must include information about the goal or purpose of the investment, all schedules and deadlines for the investment, a description of changes to housing specifications, and analysis of projected returns.

Comments on the Proposed Rule and Associated Changes to the Final Rule

AMS did not receive comments from small LPDs. AMS received comments from trade associations that likely represent small LPDs, but none of their comments specifically addressed issues concerning small LPDs. After consideration of all the public comments, AMS chose to adopt the proposed rule as a final rule with several modifications. Large LPDs and trade associations commented that the regulation would be particularly challenging if the period of time allowed for regulated entities to comply with the provisions is too short.

To allow sufficient time for regulated entities to comply with the final rule and avoid excess implementation costs, AMS is setting the effective date for this rule at July 1, 2026, which is approximately 18 months following publication in the Federal Register . This extended time frame will not impact the amount or timing for estimated costs of the final rule because regulated entities are expected to incur costs during the year preceding the effective date.

Industry trade organizations and large LPDs commented that the full cost of implementing the proposed rule would be far greater than estimated by AMS. The commenters asserted that AMS greatly underestimated the costs that will be required for employing teams with highly specialized legal and technical expertise to implement the proposed rule by modifying or replacing grower contracts and communicating changes to growers. Commenters suggested that AMS did not adequately consider the total number of hours needed, but none provided quantified estimates. Large LPDs also commented that hourly rates paid to specialized industry professionals such as attorneys should be much higher. Commenters also suggested that implementation of the rule would require LPDs to hire and train additional staff and pull resources away from other important activities.

For the time that small LPDs would require to comply with the rule, AMS consulted auditors and supervisors as subject matter experts who are familiar with LPDs and broiler complex operations from many years of experience employed with AMS in auditing LPDs for compliance with the Act. Small LPDs may need to hire new staff to implement the changes required by final §§ 201.106, 110, and 112, particularly in the first year. Hourly rates used in cost analysis for the proposed rule were based on averages within the agricultural sector as published and annually updated by the U.S. Bureau of Labor Statistics.^[119] AMS expects that average hourly rates provide an appropriate benchmark for estimating industry average costs. While some LPDs commented that AMS's estimates were too low, none of them recommended a different method of estimating costs.

In preparation for the final rule AMS reviewed direct costs with the subject matter experts. After doing so, AMS added modest amount of time to account for the cost of IT work in preparing disclosures in § 201.112.

AMS received comments from growers, grower groups, government agencies, and advocates in support of additional limitations on grower risk from excessive variability in compensation. Based on these comments, AMS has added provision § 201.106(b), which establishes a presumption that a regulated entity is in violation of the Act when aggregate gross annual payments based upon a grouping, ranking, or comparison of growers (performance pay) exceed of 25 percent of total gross payments (including performance and all other types of grower pay).

AMS added costs for LPDs to implement and monitor this new provision, which are discussed and quantified as direct administrative costs. Other expected additional benefits and indirect costs resulting from this new provision cannot be quantified and are discussed separately.

AMS also solicited comment in the proposed rule on whether there was a need to protect growers against the risk ( print page 5208) that LPDs might unfairly reduce broiler grower total compensation during a transition period after implementation of the final rule. Based on comments, AMS added § 201.106(c), which will require LPDs to submit copies of the prior and modified contracts and disclosures to AMS if average gross grower payments at a complex show year-over-year decline following a contract modification during the three calendar years commencing with and including the effective date of the rule. AMS will review the information provided by LPDs to identify any potentially unfair practices related to broiler grower compensation.

AMS expects that requirements in final § 201.106(c) will increase direct administrative costs for LPDs relative to the proposed rule. Final § 201.106(c) may increase indirect costs as well, but AMS does not have sufficient data to quantify the potential indirect costs or benefits associated with final § 201.106(c).

AMS received comments suggesting that some of the detailed documentation requirements under proposed § 201.110(b) were similar to existing documentation requirements and might create unnecessarily burdensome and complex paperwork. In response to these comments, AMS made several changes to § 201.110(b) in the final rule that included consolidating and streamlining the documentation requirements and removing some detailed requirements that were included in the proposed rule. AMS expects these changes to modestly reduce the total recordkeeping requirements or time cost of the information collection for LPDs, but AMS is unable to estimate these effects with certainty. To limit the potential for underestimating costs, AMS did not reduce hours and accordingly these changes did not affect the estimation of costs or benefits in the final rule relative to the proposed rule.

The proposed rule included § 201.110(b)(2), “Compliance review,” which required LPDs to conduct a required bi-annual review process. AMS removed this requirement in response to comments that self-audits would be burdensome for LPDs, and that elimination of this requirement would not substantially diminish compliance with § 201.110. Compliance will be enforced through regular AMS review of the policies and procedures poultry dealers are required to establish and maintain under § 201.110(b). Removing the compliance reviews reduced costs in the final rule relative to the proposed rule.

Based on comments received, AMS added a provision at § 201.112(c) to require that the LPD make reasonable efforts to ensure that growers are aware of their right to request translation assistance and to assist the grower in translating the Capital Improvement Disclosure Document. Reasonable efforts include, but are not limited to, providing current contact information for professional translation service providers, trade associations with translator resources, relevant community groups, or any other person or organization that provides translation services in the poultry grower's geographic area. Reasonable efforts, depending on the facts and circumstances (such as convenience, expense, and timeliness of the translation), may also include allowing the grower access to a computer-generated translation of the Disclosure Document and additional time to review any translated Disclosure Document.

A similar requirement was established for LPDs in § 201.102 of the “Transparency in Poultry Grower Contracting and Tournaments” final rule.^[120] As LPDs already have all necessary information to make reasonable efforts to assist growers in translating disclosure documents and have made it available to growers who request the information. Similarly, AMS did not increase grower review time for the addition of § 201.112 as growers who require translation assistance already should be connected with the resources from § 201.102.

Small Businesses Affected

The Small Business Administration (SBA) defines small businesses by their North American Industry Classification System Codes (NAICS).^[121] SBA considers broiler producers small if sales are less than $3.5 million per year. LPDs, classified under NAICS 311615, are considered small businesses if they have fewer than 1,250 employees.

AMS maintains data on LPDs from the Annual Reports these firms file with PSD.^[122] Currently, 42 LPDs would be subject to the regulation. Of these, 21 LPDs would be small businesses according to the SBA standard. In their fiscal year 2023, LPDs reported that they had 18,806 production contracts with broiler growers. Small LPDs accounted for 1,208 contracts (6.0 percent).

Annual Reports from LPDs indicate they had 20,014 contracts, but a poultry grower can have more than one contract. The 2022 Census of Agriculture indicated that there were 14,144 contract broiler growers in the United States.^[123] AMS does not regulate poultry growers and has no record of the number of poultry growers that qualify as small businesses but expects that nearly all of them are small businesses.

The typical size of broiler grow-out operations has trended larger from the early 2000s—when a typical broiler farm consisted of a 80,000-100,000 square foot operation—to a typical new farm today which “may have eight or more barns of over 30,000 square feet each on one site.” ^[124] Projected gross revenue for a newer farm receiving relatively high performance-based pay rates is $224,000 for two 36,000 square foot barns.^[125] Extrapolating these projections on a per house basis, gross revenue for an eight barn 288,000 square foot operation would total just under $900,000 and an operation with 30 barns could still remain within the $3.5 million threshold for small business classification. However, this same study notes that, “still, 80,000 to 120,000 square feet of housing for most family farms is all a single farmer can successfully operate while limiting hired labor.”

Direct Costs of Final §§ 201.106, 110, and 112

Direct costs of final §§ 201.106, 110, and 112 to LPDs would primarily consist of the time required to modify existing contracts, develop and comply with new policies, and collect and distribute it among the growers. Final §§ 201.106, 110, and 112 would also cost poultry growers the value of the time they put into reviewing and acknowledging receipt of new contracts and disclosures.

Expected direct costs are estimated as the total value of the time required by LPDs to modify existing contracts, develop and comply with new policies, ( print page 5209) and collect and distribute required disclosures that would be required by final §§ 201.106, 110, and 112 as well as the time to create and maintain any necessary additional records. Estimates of the amount of time required to create and distribute the disclosure documents were provided by AMS subject matter experts. These experts were auditors and supervisors with many years of experience in auditing LPDs for compliance with the Packers and Stockyards Act. Estimates for the value of the time are U.S. Bureau of Labor Statistics Occupational Employment and Wage Statistics estimate released May 2023.^[126] AMS marked up the wages 41.79 percent to account for benefits.

AMS estimated one-time first-year investment to LPDs of updating grower contracts and developing new grower payment systems, including modifying information systems to include new calculations as well as filing, and reporting to comply with § 201.106 would require 2,448 legal hours at $139.96 per hour costing $342,000, 5,670 hours of management time at $96.40 per hour costing $547,000, 1,440 hours of administrative time at $49.36 per hour costing $71,000, and 2,160 hours of information technology staff time at $95.58 per hour costing $206,000. Aggregate total first-year setup costs are expected to be $1,167,000 ^[127] for final § 201.106.^[128]

AMS expects that ongoing aggregate costs of implementation, maintenance, monitoring, and compliance with final § 201.106 would annually require an additional 144 legal hours at $139.96 per hour costing $20,000, 540 hours of management time at $96.40 per hour costing $52,000, 144 hours of administrative time at $49.36 per hour costing $7,000, and 288 hours of information technology staff time at $95.58 per hour costing $28,000. Total aggregate ongoing costs to small LPDs for final § 201.110 are expected to be $107,000 annually.^[129]

AMS estimated the total costs of developing new policies and procedures, communications plans, and compliance review systems to comply with final § 201.110 would require a one-time first-year aggregate investment of 480 legal hours at $139.96 per hour costing $67,000, 3,894 hours of management time at $96.40 per hour costing $375,000, 228 hours of administrative time at $49.36 per hour costing $11,000, and 270 hours of information technology staff time at $95.58 per hour costing $26,000. Total aggregate first-year setup costs are expected to be $480,000 ^[130] for final § 201.110.

AMS expects that ongoing aggregate costs of implementation, maintenance, monitoring, and compliance with final § 201.110 would annually require an additional 240 legal hours at $139.96 per hour costing $214,000, 2,856 hours of management time at $96.40 per hour costing $95,000, 114 hours of administrative time at $49.36 per hour costing $6,000, and 114 hours of information technology staff time at $95.58 per hour costing $11,000. Total aggregate ongoing costs to small LPDs for final § 201.110 are expected to be $325,000 annually.^[131]

Proposed § 201.112 would require LPDs to provide a Capital Improvement Disclosure Document any time the LPD requests existing broiler chicken growers to make an additional capital investment.^[132] AMS estimated ongoing annual costs of final § 201.112 to small LPDs would require on average an additional 7 legal hours at $139.96 per hour costing $1,000, 36 hours of management time at $96.40 per hour costing $3,000, 7 hours of administrative time at $49.36 per hour costing $400, and 9 hours of information technology staff time at $95.58 per hour costing $900. Total aggregate ongoing costs to small LPDs for final § 201.110 are expected to be $6,000 annually.^[133]

Expected costs of final §§ 201.106, 110, and 112 are associated with developing, maintaining, updating, and complying with policies and procedures that will be implemented at poultry growing complexes and communicating changes, and producing and distributing disclosure documents among contract growers. AMS expects that firms with fewer contract types and those that contract with few growers will have lower costs. Larger LPDs will tend to have larger numbers and types of contracts and will likely have more costs. Final §§ 201.106 and 201.110 only concern poultry grower ranking systems. Smaller LPDs that do not have grower ranking or tournament contracts will not have any of the costs associated with final §§ 201.106 and 201.110. Some LPDs have few contracts with poultry growers and raise poultry in their own facilities. Those dealers will have relatively lower costs.

AMS does not regulate poultry growers, and, with the exception of reviewing and signing contracts that have been updated by LPDs to meet requirements of § 201.106 and acknowledging receipt of Capital Improvement Disclosure Documents at the time of capital investment requests, the final rule imposes no requirements on poultry growers. To benefit from the disclosures and to understand the updated contracts, growers would need to review the new contracts and disclosure information provided. Growers that do not expect a benefit from reviewing the disclosure information likely would not review it.

AMS estimates aggregate growers' costs for reviewing updated contracts and disclosures associated with final §§ 201.106 and 201.112 combined to be $315,000 in the initial year. After an updated contract has been reviewed and signed in the first year, AMS expects the annual aggregate cost for reviewing disclosures by growers making additional capital investments would be $15,000 each year. This amounts to $400 per grower in the first year. The table below summarizes costs of final §§ 201.106, 110, and 112 to small LPDs and small poultry growers.

Indirect Costs Associated With Final §§ 201.106, 110, and 112

Final § 201.106 will require all LPDs involved in broiler production with tournament or grower ranking contracts to redesign the way they pay broiler growers. It is likely that all LPDs will be required to change their contracts to make all performance base adjustments positive adjustments to the base prices. AMS does not have sufficient data to determine how many LPDs will need to change contracts to comply with the provision capping performance payments at 25 percent of total payments at a complex. AMS is aware ( print page 5210) that some firms would currently be in compliance with a 25 percent cap, and at least some firms will not.

Any firms that modify existing grower compensation structures at a complex in response to this rule could experience increased production costs if reductions in performance-based payments relative to total payments adversely affect grower performance incentives and cause growers to produce broilers less efficiently. In general, the “tournament” system of broiler grower compensation bases payments to individual growers on their performance relative to other growers. Performance payments provide an incentive for growers to optimize factors under their control, such as effort and management, and to some extent investment (subject to the concerns highlighted by this rule), to improve their own relative performance efficiency and increase income. Tournament systems have been described in economic literature as “particularly economical means to provide incentive.” The strength of individual performance incentives is directly related to the size of expected grower performance payments, which will be limited by the total amount of performance-based pay distributed among all growers. Any firms that modify existing grower compensation structures at a complex in response to this rule by decreasing the relative size of performance payments available to growers at a complex might therefore weaken performance incentives and could result in reduced grower efficiency in broiler production.

Given the range of possible outcomes, AMS is unable to predict effects with any degree of certainty. For example, if production efficiency is reduced, economic principles suggest that cost of production would increase at the impacted broiler complex, causing an inward shift of a firm's marginal cost curve and an associated decrease in broiler production at the impacted complex. A decrease in production for a broiler complex would also be likely to reduce demand for broiler growing services in the area and could result in LPDs lowering overall rates of grower compensation and possibly terminating some marginal growers.

AMS is not able quantify indirect costs related to capping performance payments. However, if the cap has any significant effect on grower productivity, it is likely that indirect costs of capping performance payments will be considerably larger than the direct costs that AMS has been able to estimate.

Table 4—Estimated Direct Costs to Small Businesses of Final §§ 201.106, 110, and 112

Type of cost	Regulated live poultry dealers	Unregulated growers	Total *
Final § 201.106:
First-year Cost	$1,167,000	$300,000	$1,467,000
First-year Cost per Firm	56,000	351	NA
PV of Ten-year Cost Discounted at 2%	1,722,000	294,000	2,017,000
Ten-year Cost Annualized at 2%	192,000	33,000	225,000
Average Ten-Year Cost per Firm Annualized at 2%	9,000	38	N/A
Final § 201.110:
First-year Cost	480,000	0	480,000
First-year Cost per Firm	23,000	0	NA
PV of Ten-year Cost Discounted at 2%	3,074,000	0	3,074,000
Ten-year Cost Annualized at 2%	342,000	0	342,000
Average Ten-Year Cost per Firm Annualized at 2%	16,000	0	NA
Final § 201.112:
First-year Cost	6,000	15,000	21,000
First-year Cost per Firm	271	18	NA
PV of Ten-year Cost Discounted at 2%	51,000	135,000	186,000
Ten-year Cost Annualized at 2%	6,000	15,000	21,000
Average Ten-Year Cost per Firm Annualized at 2%	286	18	NA
Proposed §§ 201.106, 110, and 112:
First-year Cost	1,652,000	315,000	1,967,000
First-year Cost per Firm	79,000	369	NA
PV of Ten-year Cost Discounted at 2%	4,848,000	429,000	5,277,000
Ten-year Cost Annualized at 2%	540,000	48,000	587,000
Average Ten-Year Cost per Firm Annualized at 2%	26,000	56	NA
* Rows may not sum to Total Costs due to rounding.
** Totals do not include indirect costs to associated with possible changes in supply or demand. AMS was not able to estimate indirect costs, but it is possible that they are larger than the direct costs in the table.

LPDs report net sales in Annual Reports to AMS. Table 5 below groups small LPDs' net sales into quartiles, reports the average net sales in each quartile, and compares average net sales to average expected first-year direct costs per firm for each of final §§ 201.106, 110, and 112 and total first-year direct costs.^[134] Estimated first-year direct costs are higher than 10-year annualized costs, and for the threshold analysis, first-year costs will be higher than annualized costs as a percentage of net sales. Correspondingly, the ratio of ten-year annualized direct costs to net sales is lower than their corresponding first-year cost ratios listed in Table 5. If estimated costs meet the threshold in the first year, they will in the following years as well. AMS is able to perform a threshold analysis on based on direct costs. However, AMS was unable to estimate indirect costs associated with the final rule include indirect costs.

Estimated first-year direct costs per firm are less than 1 percent of average net sales in the three largest quartiles. Total first-year direct costs as a percent of net sales are estimated to be about 0.8 percent for the smallest quartile. However, average first-year cost per entity in Table 5 is the average cost of ( print page 5211) all of the small businesses. Costs for the LPDs in smallest quartile will likely be less than the average for small businesses.

LPDs do not report to AMS whether any of their contracts are tournament-style contracts but evaluating the number contracts that LPDs listed in their Annual Reports to AMS, few of the LPDs in smallest quartile contracted with a sufficient number of growers to implement tournament contracts. It is unlikely that any of the LPDs in the smallest quartiles had any tournament contracts. It is unlikely that several of the smaller LPDs in the second quartile had any tournament contracts either.

Since final §§ 201.106 and 201.110 only apply to tournament contracts, none of the LPDs in the smallest quartile are likely to incur any costs from final §§ 201.106 and 201.110. Their costs are likely only costs associated with final § 201.112, which, as percentage of net sales would be 0.003 percent. Because the smallest LPDs have fewer contracts than the other small LPDs, their costs associated with final § 201.112 are also likely less than average.

Costs in the threshold analysis do not include indirect costs, which AMS was not able to quantify. The size of the indirect costs is not known, and AMS cannot state with any confidence that the total costs associated with final §§ 201.106, 110, and 112 will be insignificant for any LPD.

Table 5—Comparison of Small Live Poultry Dealers' Net Sales to Expected Annualized Direct Costs of Final §§ 201.106, 110, and 112 *

Quartile (%)	Average net sales	First-year costs related to § 201.106 as a percent of net sales (%)	First-year costs related to § 201.110 as a percent of net sales (%)	First-year costs related to § 201.112 as a percent of net sales (%)	Total first-year costs as a percent of net sales (%)
0 to 25%	$10,017,311	0.559	0.230	0.003	0.789
25 to 50%	34,567,539	0.162	0.067	0.001	0.229
50 to 75%	92,380,634	0.061	0.025	0.000	0.086
75 to 100%	226,958,521	0.025	0.010	0.000	0.035
* Numbers in the table may not sum to one due to rounding.
** Costs do not include indirect costs to associated with possible changes in supply or demand. AMS was not able to estimate indirect costs, but it is possible that they are larger than the direct costs in the table.

Direct Cost Associated With an Alternative §§ 201.106, 110, and 112

AMS also estimated costs of the original proposed rule as an alternative. Section 201.106(b) and (c) in the final rule were not include in the proposed rule. AMS estimated that alternative § 201.106 would require a one-time first-year investment of 1,728 legal hours at $139.96 per hour costing $242,000, 2,970 hours of management time at $96.40 per hour costing $286,000, 720 hours of administrative time at $49.36 per hour costing $36,000, and 720 hours of information technology staff time at $95.58 per hour costing $69,000. Aggregate total first-year setup costs are expected to be $633,000. AMS does not expect additional ongoing costs of implementing final § 201.106 under the proposed rule alternative.

Under the proposed rule alternative, § 201.110(b) includes a section dealing with compliance reviews. AMS estimated that alternative § 201.110 would require a one-time first-year aggregate investment of 696 legal hours at $139.96 per hour costing $97,000, 5,334 hours of management time at $96.40 per hour costing $514,000, 300 hours of administrative time at $49.36 per hour costing $15,000, and 504 hours of information technology staff time at $95.58 per hour costing $48,000. Total aggregate first-year setup costs for small LPDs under the alternative are expected to be $675,000.

AMS expects alternative § 201.110 would annually require an additional 312 legal hours at $139.96 per hour costing $44,000, 3,576 hours of management time at $96.40 per hour costing $345,000, 150 hours of administrative time at $49.36 per hour costing $7,000, and 204 hours of information technology staff time at $95.58 per hour costing $19,000. Total aggregate ongoing costs to small LPDs for final § 201.110 are expected to be $415,000 annually.

All sections of § 201.112 were included under the proposed rule alternative. AMS estimated that first-year and ongoing annual costs of final § 201.112 to small LPDs would require on average an additional 7 legal hours at $139.96 per hour costing $1,000, 36 hours of management time at $96.40 per hour costing $3,000, 7 hours of administrative time at $49.36 per hour costing $400, and 9 hours of information technology staff time at $95.58 per hour costing $900. Total aggregate ongoing costs to small LPDs for final § 201.110 are expected to be $6,000 annually.

The alternative would have a relatively small effect on costs to poultry growers on a per grower basis, and growers will only review the disclosures if they perceive that they are beneficial. AMS estimates growers' aggregate costs for reviewing updated contracts and disclosures associated with final §§ 201.106 and 201.112 combined to be $315,000 in the initial year. AMS expects the annual aggregate cost to growers making additional capital investments to be $15,000 each year. Table 6 below summarizes costs of alternative §§ 201.106, 110, and 112 to small LPDs and small poultry growers.

Table 6—Estimated Costs to Small Businesses of Alternative §§ 201.106, 110, and 112

Type of cost	Regulated live poultry dealers	Unregulated growers	Total *
Final § 201.106:
First-year Cost	$633,000	$300,000	$933,000
First-year Cost per Firm	30,000	351	NA
PV of Ten-year Cost Discounted at 2%	620,000	294,000	914,000
Ten-year Cost Annualized at 2%	69,000	33,000	102,000
Average Ten-Year Cost per Firm Annualized at 2%	3,000	38	N/A
( print page 5212)
Final § 201.110:
First-year Cost	675,000	0	675,000
First-year Cost per Firm	32,000	0	NA
PV of Ten-year Cost Discounted at 2%	3,266,000	0	3,266,000
Ten-year Cost Annualized at 2%	364,000	0	364,000
Average Ten-Year Cost per Firm Annualized at 2%	17,000	0	NA
Final § 201.112:
First-year Cost	6,000	15,000	21,000
First-year Cost per Firm	271	18	NA
PV of Ten-year Cost Discounted at 2%	51,000	135,000	186,000
Ten-year Cost Annualized at 2%	6,000	15,000	21,000
Average Ten-Year Cost per Firm Annualized at 2%	286	18	NA
Final §§ 201.106, 110, and 112:
First-year Cost	1,313,000	315,000	1,628,000
First-year Cost per Firm	63,000	369	NA
PV of Ten-year Cost Discounted at 2%	3,937,000	429,000	4,366,000
Ten-year Cost Annualized at 2%	438,000	48,000	486,000
Average Ten-Year Cost per Firm Annualized at 2%	21,000	56	NA
* Rows may not sum to Total Costs due to rounding.

Net sales for small LPDs that would be required to make disclosure under alternative §§ 201.106, 110, and 112 averaged $91 million for their fiscal year 2023. Expected first-year cost per LPD would be well below 0.1 percent.^[135]

Table 7—Comparison of Small Live Poultry Dealers' Net Sales to Expected Annualized Costs of Alternative §§ 201.106, 110, and 112

Quartile	Average net sales	First-year costs related to § 201.106 as a percent of net sales (%)	First-year costs related to § 201.110 as a percent of net sales (%)	First-year costs related to § 201.112 as a percent of net sales (%)	Total first-year costs as a percent of net sales (%)
0 to 25%	$10,017,311	0.299	0.319	0.003	0.629
25 to 50%	34,567,539	0.087	0.093	0.001	0.182
50 to 75%	92,380,634	0.032	0.035	0.000	0.068
75 to 100%	226,958,521	0.013	0.014	0.000	0.028