RS20079: Livestock Price Reporting Issues
Geoffrey S. Becker
Specialist in Agricultural Policy
Resources, Science, and Industry Division
Updated December 8, 1999
Meat packers and processors have not been required to report the
prices they pay for animals, although the U.S. Department of Agriculture (USDA) has long
collected and reported this data under an extensive voluntary system. A new mandatory
price reporting bill, reported in July 1999 by the Senate Agriculture Committee, was
incorporated into the conference version of the USDA FY2000 appropriation (H.R. 1906), and signed
into law (P.L.
106-78) on October 22, 1999. Some farm organizations backed mandatory price reporting
for packers on the grounds that meat industry consolidation, and the less public marketing
arrangements that have resulted, have made it difficult for producers to determine a
"fair" market price. Others argued that such proposals will prove costly for
government and industry, raise privacy concerns, and not cure the low livestock prices
that helped fuel interest in the idea.
Packers and processors in the past were not required to report the
prices they pay for the animals they buy from producers, or the terms of sale. Rather,
daily sales information has been collected by USDA's Agricultural Marketing Service (AMS)
from companies on a voluntary basis. However, more and more animals are now being
sold under private marketing arrangements where prices are not publicly disclosed.
Some agricultural producers, believing that such arrangements make
it difficult or impossible for them to determine a "fair" market price for their
livestock, called for mandatory price reporting requirements for packers and perhaps
others who process and market meat. Opponents, including some meat packers, and other
farmers and ranchers, argued that mandatory reporting would impose costly new burdens on
the industry and could cause the release of confidential company information.
Mandatory price reporting attracted interest in Congress in 1999, as
Members sought ways to help producers coping with low cattle, hog, and sheep prices. Also
fueling interest were concerns about the increasing concentration of the livestock
industry into larger and fewer entities, and the impact of these changes on "price
transparency"--that is, the ability to obtain accurate, timely price information.
Voluntary Price Reporting Activities
Under the broad authority of the Agricultural Marketing Act of 1946
(7 U.S.C. 1621-1627), AMS's Livestock and Grain Market News Branch collects and
immediately reports livestock and meat prices and related market information. The agency's
trained market reporters attend public livestock auctions, visit feedlots and packing
plants, personally contact many individual buyers and sellers, and consult with trade
associations to develop their data so that buyers and sellers all have access to accurate
and objective information from major markets throughout the country. The information is
disseminated through daily, weekly, monthly, and annual written and electronic reports
covering sales of live cattle, hogs, and sheep, and of the wholesale meat products from
these animals. Appropriations fund this service, except user fees are charged for written
A USDA-chartered Advisory Committee on Agricultural Concentration in
1996 concluded that improved transparency in price and other sales information "is
critical to both buyer and seller for efficient functioning of market systems" and
for evaluating whether markets are competitive. "In today's global market, no country
can afford a climate of distrust and hostility when successful global competition often
depends on productive, industrial partnerships between government and business...a
disclosure policy can provide a basis for harmonious and productive interactions between
the food industry and farmers, as well as consumers."(2) At issue has been whether such a policy should remain
entirely voluntary or contain at least some mandatory elements.
The Advisory Committee recommended a variety of specific incremental
improvements in voluntary information reporting and access, a number of which USDA has
undertaken. Examples are expanded coverage of boxed (wholesale) beef sale commitments; new
reports on numbers of hogs and on cattle being produced under contract; and new daily
reports on cattle, hog, and sheep imports from Canada and Mexico. In another initiative to
improve market information, USDA's Grain Inspection, Packers, and Stockyards
Administration (GIPSA) published, in the September 10, 1998, Federal Register, an
advance notice of proposed rulemaking asking whether GIPSA should prohibit private
livestock transactions that are based on the condition that the price must remain secret.(3)
Department analysts have determined that AMS, under the 1946 Act,
cannot require buyers and sellers to report price and other market information. However,
GIPSA, under the Packers and Stockyards Act of 1921 (7 U.S.C. 181-229), has
broad authority to collect price and other marketing information from firms in fulfilling
its mandate to ensure fair competition and fair trade practices in the industry. Although
packers and others must provide this information when GIPSA requests it, the data almost
always are from past rather than current transactions. Consequently, it is not especially
useful to producers seeking immediate price information.
In the 106th Congress, the House and Senate Agriculture Committees
held hearings on April 29 and May 26, 1999, respectively, on mandatory price reporting.(4) The Senate committee then marked up
and approved an original bill (S. 1672; S.Rept. 106-168)
on July 29, 1999. This culminated a long period of intensive negotiations involving meat
packing companies and livestock producers to design a comprehensive price reporting law
acceptable to both segments of the industry. Although the full Senate did not vote on the
plan, it was added to the conference version of USDA's FY2000 appropriation (H.R. 1906; H.Rept. 106-354).
Congress cleared the conference measure in early October, and the President signed it into
law (P.L. 106-78)
on October 22, 1999.
Producer groups that endorsed some form of mandatory price reporting
have included the National Pork Producers Council (NPPC), National Farmers Union (NFU),
the National Cattlemen's Beef Association (NCBA), the American Sheep Industry Association
(ASI), and the American Farm Bureau Federation (AFBF).
Several major packers participated in the negotiations on
legislation largely because they wanted a federal law to preempt what they view as the
"patchwork" of divergent and burdensome price reporting laws within individual
states. For example, after a new price reporting law took effect in South Dakota on July
1, 1999, meat packers filed a federal lawsuit charging that it is unconstitutional and
discriminates against specific businesses. In late July, the U.S. judge refused to block
the law, except for a "price discrimination" provision that bans packers from
paying different prices for animals of the same quality. Iowa, Minnesota, Missouri, and
Nebraska also have passed price reporting laws. The reporting plan in P.L. 106-78
prohibits states from imposing mandatory reporting requirements that are in addition to,
or inconsistent with, the federal law.
Provisions of the Plan
The plan in P.L. 106-78 is
effective for 5 years. Besides preempting state laws, the measure: subjects packers to
civil penalties of up to $10,000 for each violation of the requirements; requires USDA to
collect and publish at least monthly information on retail prices for meat and poultry
products; and requires the General Accounting Office to study the Secretary's powers and
current legislative authorities to regulate the livestock sector. The law contains the
following species-specific provisions, which, sponsors estimate, imposes reporting
requirements on only 10% of all cattle and hog plants (the largest) but still captures 94%
of market transactions.
Cattle Provisions. Cattle plants that slaughter at
least 125,000 head annually must report to USDA twice a day on all cattle purchased on a
live or dressed weight basis. Packers must report weekly to USDA on all cattle not
purchased on cash (spot) markets, such as through forward contracts or formula marketing
agreements. They also are required to report to USDA on their sales of boxed beef, by
price, volume, and grade. USDA, in turn, is required to compile and publish the data in
detailed form at regular, statutorily-prescribed intervals--some of it several times per
Pork Provisions. Federally-inspected pork plants
that slaughter at least 100,000 head annually must report to USDA by 8 a.m. each day all
prices (also to reflect any premiums, discounts, and merit adjustments), plus volumes and
terms of sale, for domestic hog purchases from the previous business day. USDA in turn is
required to publish detailed reports on hog purchases and slaughter twice daily, plus
separate weekly reports distinguishing between barrow and gilt slaughter, and a monthly
rather than quarterly hogs and pigs inventory report. USDA also must maintain an
electronic library on open hog marketing contracts offered by packers.
Lamb Provisions. The Secretary of Agriculture is
given the authority to mandate, through public rulemaking, price reporting for lamb if he
determines one is needed.
Administrative Cost Considerations
Additional funding is needed for USDA's administration of the
mandatory system, including such expenses as new market reporters, clerical staff, and
auditors to collect data, review records, and assess compliance. The FY2000 appropriations
bill both provided no money for mandatory reporting and explicitly prohibited user fees to
fund it. However, a subsequent law, the Consolidated Appropriations Act (P.L. 106-113),
authorized USDA to expend for the program up to $4.7 million in Commodity Credit
Corporation funding not otherwise needed for emergency farm assistance payments.
Arguments for Mandatory Price Reporting
The livestock industry, particularly the meat packing segment, has
undergone fundamental changes in recent years, both structurally and in its marketing
practices. Today, just four firms slaughter about 80% of all fed cattle, and four firms
slaughter about 55% of all hogs, for example. Rather than buy in open cash markets, these
and other top firms increasingly feed their own animals or use private marketing
arrangements--such as forward contracts, formula pricing, and exclusive purchase
agreements--for which prices and terms of sale are not publicly disclosed. This makes it
difficult for producers, particularly smaller-sized ones and those that want to utilize
open cash markets, to determine a "fair" market price, it is argued.
Many producers contend that they cannot obtain the data needed to
quickly and easily compare bids from different packers and to negotiate the best possible
price for their livestock. As the number of spot cash market transactions diminishes, the
reported prices from these transactions--which tend to be lower than privately-negotiated
sales--are questionable as indicators of market prices, they argue. Government and
producer efforts to coax more information from firms on a voluntary basis have largely
failed, add proponents of mandatory price reporting.
These proponents contend that the lack of transparency in prices
also creates the potential for large firms--whether buyers or sellers--to unfairly wield
market power. They argue that when prices, and the terms under which those prices are
negotiated, are readily apparent to all parties, there is less likelihood that firms will
break anti-trust laws--and less need for the government to expend resources searching for
evidence of, and prosecuting, anti-competitive behavior. This was one of the arguments the
Advisory Committee on Agricultural Concentration used in recommending that mandatory price
reporting legislation be considered.
Arguments Against Mandatory Price Reporting
Opponents of mandatory reporting contend that the voluntary system
already presents an accurate and timely picture of market prices and conditions. For
example, the American Meat Institute (AMI), an association representing a number of large
packers, cited USDA estimates that at least 75% of all boxed beef sales are covered by
voluntary reporting, and that more than two-thirds of all negotiated live cattle sales are
covered. Meat packer Cargill, in testimony before the House Agriculture Committee, also
noted that GIPSA several years ago undertook two of the most comprehensive studies of
cattle pricing in history--reviewing every cattle transaction over a one-year period in
two states (Kansas in 1995 and Texas in 1996). These studies found a high degree of
participation in the current voluntary system, and that the prices reported were
representative of overall market conditions, Cargill added. Although voluntary reporting
for hogs and pork was found to be not as effective, improvements could be achieved simply
by encouraging more packer participation, Cargill testified. Others suggested that with
additional resources from Congress, AMS could easily have expanded its voluntary market
Packers also have expressed concerns about the forced disclosure of
companies' proprietary information. "Disclosure of specific sales and volumes may
limit our competitive ability to capture premiums and it also may disproportionately
provide greater leverage to the purchasers of our products," producer-owned
cooperative Farmland Industries testified at an earlier House hearing. AMI pointed out
that mandatory reporting of all private transactions does not exist in any other segment
of agriculture; it burdens industry and "compromises legitimate business
interests." Opponents contend that mandatory price reporting is imposing a new,
costly regulatory burden on the red meat industry at a time when it is struggling to be
competitive not only with other protein sources (i.e., poultry, which is not subject to
the new law) but also with foreign rivals in the global marketplace.
Mandatory price reporting will not address the fundamental problem
with producer prices, opponents contend. Prices have been depressed because of an
imbalance between supply and demand--that is, domestic consumption and export markets have
not been able to absorb high animal and meat production. Low prices--not concerns about
the lack of price information--impelled producer groups to seek government intervention;
when prices recover, the pressure for more "price transparency" would have
diminished, it is argued. In fact, some critics have argued that packers rather than
producers could be the ultimate beneficiaries, if they use the information about what
competitors are paying to offer less, not more, attractive prices for animals.
1. (back)For more
information about these market news services, see the AMS home page at http://www.ams.usda.gov/.
in Agriculture: A Report of the USDA Advisory Committee on Agricultural Concentration.
USDA/AMS, June 1996.
notice is available at http://frwebgate.access.gpo.gov/cgi-bin/multidb.cgi.
from these hearings can be accessed via the Internet at: http://www.senate.gov/~agriculture/ and http://www.house.gov/agriculture/.