GIPSA LIVESTOCK AND MEAT MARKETING STUDY

NCBA Staff Contact: 
Colin Woodall, Executive Director of Legislative Affairs
202-347-0228
cwoodall@beef.org

Summary:

The Grain Inspection Packers and Stockyards Administration (GIPSA) recently finalized the ‘GIPSA Livestock and Meat Marketing Study’, a comprehensive study of the use and impacts of alternative marketing arrangements (AMAs) such as forward contracting, packer ownership and marketing agreements.   The report was released by GIPSA on February 16, 2007, and is based on 590,000 transactions representing more than 58 million cattle sold between October 2002 and March 2005.

The study, conducted by RTI International in North Carolina, also included researchers from the Wharton School at the University of Pennsylvania, Colorado State and Iowa State University.  The study was requested by NCBA and ordered by Congress during the debate over the 2002 Farm Bill. 

NCBA believes that this study’s outcomes will go a long way in addressing the questions and concerns that have been raised in recent years about changes in the business practices and structures in the livestock and meat industries including captive supply issues. 

The interim and final reports, including peer reviewers' comments and additional information about the study, are available on GIPSA's website at www.gipsa.usda.gov.

Background:

During debate of the 2002 Farm Bill, concerns from producers about packer concentration led NCBA members to ask Congress to study the livestock and meat marketing complex. In 2003, Congress authorized $4.5 million to conduct an independent study and provide a report that would be the definitive answer on this issue. The debate has raged for years in the industry and on Capitol Hill as to what the impacts of packer ownership and alternative marketing arrangements (AMAs) are on the bottom line of every rancher.

Key Points:

·         While the majority of cattle are marketed through traditional cash market means, the new study shows alternative marketing arrangements (AMAs) such as forward contracts, production contracts, packer ownership or custom feeding have provided benefits to some producers without harming the competitiveness of the marketplace.

·         The study found that producers can market their livestock in different ways and see additional economic benefits, all while maintaining a strong a viable cash market.  Proposals to ban packer ownership and limit cattle marketing options can sound very appealing on the surface, because we’re all concerned about packer concentration and keeping the marketplace competitive. But this study shows these restrictions can hurt the very people they are intended to protect.

·         Sixty-two percent of the fed cattle traded in the study were essentially cash or spot market traded cattle, while 38 percent were marketed through various AMAs.  According to the study, only 5 percent of the cattle were owned directly by packers, a number closely watched by the industry.

·         The consensus of producers surveyed for this study was that using AMAs gave many the ability to buy and sell higher quality cattle, improve supply management, and obtain better prices.

·         In today's marketplace, producers need the freedom and flexibility to market their cattle in ways that provide the best return on their investment.  The study concludes that reducing or eliminating the use of alternative marketing arrangements would result in economic losses for both cattle producers and beef consumers.

·         NCBA remains committed to protecting cattle producers’ rights to market cattle the way they see fit, and will fight government attempts to restrict or direct producers’ choices.

·         NCBA is currently analyzing the 1,200+ page report, and will develop a more detailed report for its affiliates and members in the coming weeks.