June 3 (Reuters) - Poultry companies in the U.S. could

be required to adjust how they pay their contract chicken

farmers under a rule proposed by the U.S. Department of

Agriculture on Monday.

The rule is the third proposed by the administration of

President Joe Biden to enhance competition in the meatpacking

sector, where four companies control between 55% and 85% of the

cattle, hog and chicken markets.

Under the rule, chicken farmers could no longer have their

base compensation docked for how their flocks compare to their

peers, and would receive more information to assess risks

associated with capital improvements requested by poultry

companies.

Often, contract poultry farmers for companies, such as Tyson

Foods ( TSN ) and Pilgrim's Pride are paid in a

"tournament system" that ties their compensation to performance

- like how much their chickens weigh, or mortality rate -

against other farmers. The farmers are also typically

responsible for paying for updates to their chicken barns.

"Producers came to me and indicated deep concerns about the

ways they were being handled and dealt with in this tournament

system," Agriculture Secretary Tom Vilsack said on a call with

reporters.

The agency previously finalized a rule to enhance

transparency between chicken farmers and processors, and another

to prohibit retaliation against chicken farmers for

whistle-blowing or participating in associations.

The USDA expects to release more rules on competition in the

livestock sector in the coming months, Vilsack said.

The proposed rule announced on Monday will be open to public

comment for 60 days.