BOISE — Legislation pending in Idaho’s House of Representatives would force french fry processors to try negotiating with a growers’ cooperative rather than taking contracts straight to potato farmers’ fields.
Leaders with Southern Idaho Potato Cooperative said they drafted HB 121 based on a longstanding law in Washington. SIPCO Executive Director Chuck Stadick argued the bill is needed because the Canada-based processor McCain Frozen Foods circumvented the usual negotiations prior to implementing contracts for 2018 and 2019.
Stadick said the contract McCain forced upon growers hurt them financially, to the point that many SIPCO members who raise spuds for the company recently had to put up land as equity to secure operating loans.
A Rupert grower with a large farm, Duane Grant, has opposed the bill, believing it includes significant flaws that aren’t found in Washington’s Agricultural Fair Practices Act. Specifically, Grant worries the Idaho bill singles out fry processors and that its open-ended language could force processors to negotiate with entities that don’t have a real stake in contracting.
The bill, which is also supported by the potato growers’ legislative lobbying group Potato Growers of Idaho, passed out of the House Agricultural Affairs Committee by an 11-1 vote on Feb. 27. It should be up for a full House vote later this week.
It would set a negotiation period from Oct. 31 through March 15 for fry processors to meet with any bargaining association with at least 40 members who either do or could produce potatoes. Absent an agreement, growers would be released after March 15 to work out a contract with processors on their own.
An existing state statute would allow growers and their cooperative to take processors to court should they fail to exercise “good faith” in their negotiations, Stadick said. Stadick said SIPCO represents roughly half of the state’s potato acres for making fries, and its negotiations have helped set a benchmark price for the dehydrated, fresh and seed markets, as well as other growers with fry contracts.
Stadick said McCain required Idaho growers to sign a two-year contract for 2018 and 2019, keeping prices flat with 2017. However, he said fertilizer and chemical costs have both risen significantly, and McCain gave increases to its growers in other areas, such as Washington and Oregon.
Stadick said McCain officials indicated the change in approach to contracting was necessary to ensure an adequate potato supply for a major expansion of their Burley plant.
“They’re putting a lot of the costs of expanding that plant on the grower’s backs right now,” Stadick said. “Up until this time, this company has been really fair to work with.”
Grant, who has contracts with fry processors including McCain, worries the legislation lacks stated penalties for noncompliance, as are found in the Washington law, and would thrust negotiations into a “sue and settle” process.
Grant also believes it’s likely that growers who raise spuds for other processors may come together and demand the right to negotiate with McCain simply to set an unrealistic standard of good faith and fairness, planning to bring suit.
“If you look at the message this bill sends to the potato processing industry ... it says if you are one of the good guys bringing high value, we’re going to punitively punish you by requiring you to bargain with associations of 40 or more members who could grow potatoes,” Grant said.
Stadick said it’s unrealistic that 40 or more growers without a direct interest in a given contract could come together to pursue negotiations.
Had potato prices dropped in the contract’s second year, Grant argued the two-year contract would have benefited growers and made “heroes” of McCain.
“I’m personally delighted that McCain invested $250 million in the Burley facility,” Grant said. “It assures there will be demand for processed potatoes from the Magic Valley well into the future.”
Grant said he would support a bargaining bill with the exact language included in Washington’s law.
Stadick said SIPCO would back an identical bill in Idaho, as well. However, Stadick explained SIPCO has already attempted to introduce an exact version of the Washington law, but it gained no traction with lawmakers. The Washington law includes a provision that the state provide oversight of negotiations, which would cost the state money. Furthermore, Stadick said lawmakers balked at the idea of “government telling ag folks what to do.”
Stadick said McCain has hired a lobbyist to challenge the proposed legislation, and he believes SIPCO will face a far greater challenge in the Senate. McCain officials did not respond to a request for comment.
Shortly after growers signed the controversial two-year contract, however, a company spokeswoman issued a prepared statement: “McCain values our partnerships with our Idaho growers. Many of these relationships have been in place for decades. We are pleased that the McCain Idaho growers are supportive of our expansion in Burley, and of the Idaho potato industry.”