Livestock Mandatory Price Reporting (LMPR) was first passed in 1999 to address some producers' concerns about low livestock prices, industry concentration, and the availability of accurate market information. LMPR expired on September 30, 2005, and then operated on a voluntary basis, as the 109th Congress considered whether to reauthorize LMPR, for how long, and what if any changes should be made. In September 2006, the Senate cleared a bill (H.R. 3408) passed by the House one year earlier to extend LMPR for five years and to amend hog reporting provisions. It was signed into law (P.L. 109-296) on October 5, 2006. This report will not be updated.
Under the Agricultural Marketing Act of 1946 (7 U.S.C. 1621-1627), USDA's Agricultural Marketing Service (AMS) has long collected livestock and meat price and related market information, on a voluntary basis. The agency's trained market reporters have attended public livestock auctions, visited feedlots and packing plants, personally contacted many individual buyers and sellers, and consulted with trade associations to develop data. The information (along with similar types of data covering other major commodities such as grains, dairy, and produce) has been disseminated through hundreds of daily, weekly, monthly, and annual written and electronic reports on sales of live cattle, hogs, and sheep, and wholesale meat products from these animals. The goal has been to provide all buyers and sellers with accurate and objective market information.
By the 1990s, the livestock industry had undergone many sweeping changes, including increased concentration in meat packing and animal feeding, more production specialization, and more vertical coordination. For example, animals were more frequently being sold under private marketing arrangements (e.g., formula sales, value-based pricing) with prices not publicly disclosed or reported. Some livestock producers, believing such arrangements made it difficult or impossible for them to determine "fair" market prices, called for mandatory price reporting for packers and others who process and market meat. USDA had estimated in 2000 that the former voluntary system was not reporting 35%-40% of cattle, 75% of hog, and 40% of lamb transactions.
Prior to the 1999 enactment of livestock mandatory price reporting (LMPR), opponents, including some meat packers and other farmers and ranchers, had argued that a mandate would impose costly new burdens on the industry and could cause the release of confidential company information. Some had argued that voluntary reporting was more effective because those in the industry were willing, not compelled, participants. It was also argued that if certain desired information was lacking, it might be better remedied by providing more resources to AMS (i.e., funding and staff) to improve the voluntary program.
Nonetheless, some of these earlier opponents decided to support a "consensus" LMPR law. These included the National Cattlemen's Beef Association (NCBA) and National Pork Producers Council (NPPC), many of whose members had been hit by very low prices in the late 1990s. Some meat packers also decided to support a national consensus bill at least partly to preempt what they viewed as an emerging "patchwork" of state price reporting laws as well as the specter of a more onerous national law. Congress responded in 1999 by enacting LMPR as Title IX of P.L. 106-78, USDA's FY2000 appropriations law.
LMPR authority had lapsed briefly on October 22, 2004, but President Bush signed legislation (P.L. 108-444) extending the program through September 30, 2005. This authority also expired. While the 109th Congress pondered the program's future, participants voluntarily reported transaction data to AMS. The program again became mandatory with House and Senate passage of H.R. 3408 (P.L. 109-296).
AMS published a final rule implementing LMPR on December 1, 2000.1 The mandatory program included the following elements:
The program has received some 500,000 pieces of data each day; USDA in turn has made the data public through more than 100 daily, weekly, or monthly reports. Required to report this information were 116 packers and importers. The program has captured information from 85-90% of the boxed beef market, 75% of the lamb meat market, 75-80% of the steer and heifer cattle market, 60% of the lamb market, and 95% of the hog market.2
AMS has operated LMPR with a staff of 50 and an annual budget of nearly $8 million. Some voluntary price reporting also was continued alongside LMPR, but AMS only was collecting such data not being covered under the newer, mandatory program. (AMS's total market news budget for all commodities is approximately $30 million per year.)
The House Agriculture Committee on July 27, 2005, approved a bill (H.R. 3408) to extend LMPR for five years (through September 30, 2010) and also to expand the information collected for certain types of pork products (see below for explanation). The measure passed the full House on September 14, 2005, under a suspension of the rules.
Taking a different approach, the full Senate on September 13, 2005, approved by unanimous consent a simple one-year extension (S. 1613). At a Senate Agriculture Committee hearing on the program, held June 22, 2005, disagreement had emerged over the length of any proposed extension. Some Senators on the panel had expressed support for a shorter renewal in order to await the results of a Government Accountability Office (GAO) review of LMPR. GAO was examining among other things the accuracy, timeliness, and completeness of the AMS reports, and the extent of coordination with USDA's Grain Inspection, Packers and Stockyards Administration (GIPSA).3 The final GAO report was not expected until late 2005 (and was issued in December 2005; see below). Those calling for a longer reauthorization had argued that modifications could be made later in response to any GAO recommendations.
On September 20, 2006, the Senate agreed to the House version, passing H.R. 3408 by unanimous consent. The chairman of the Senate Agriculture Committee promised that he would provide an opportunity in 2007 to explore any other needed changes to LMPR. President Bush signed the measure into law on October 5, 2006.
A number of national farm organizations and the American Meat Institute (AMI) pushed for the five-year extension. "Mandatory price reporting makes markets more transparent and offers new market information with respect to pricing, contracting for purchase and supply, and demand conditions for cattle, hogs, and sheep," five organizations wrote in a May 6, 2005, letter to House Agriculture Committee leaders. The letter noted that the pork industry was recommending three industry-specific amendments: broadening the scope of packers required to report to more accurately reflect sales and prices paid in the sow market; altering data reporting deadlines to better balance USDA's workload and increase report accuracy and efficiency; and enabling USDA to publish price distributions for net prices to provide more useful information than is now provided by statutorily prescribed price ranges.
The five groups said in 2005 that they would oppose the reauthorization package if any other amendments were adopted that lacked their prior agreement. AMI, NPPC, NCBA, the American Sheep Industry Association, and the American Farm Bureau Federation signed the letter. Their goal was to forge and maintain a consensus on an extension bill to help ensure its passage without additional amendments that could prove divisive and controversial, according to several industry lobbyists. An AMI spokesman said its members, although skeptical of the value of mandatory reporting, supported a simple extension because they already had made the investments needed to comply with the original law.
At its 2005 annual convention in Kentucky, the National Farmers Union (NFU) endorsed a policy that Congress should renew and make permanent the mandatory reporting law. The NFU policy also calls on USDA to eliminate the so-called 3/60 rule, to require open reporting to occur at least twice daily by region, and to provide transparent information without exemptions to farmers and ranchers.4
It was anticipated that the simple extension of LMPR from 2004 to 2005 would provide lawmakers with additional time to consider a number of possible LMPR issues. These included whether the program has in fact brought more transparency to livestock markets, and is more effective at transmitting price information, than voluntary reporting; and whether the cost and administrative burdens outweigh LMPR benefits. Some critics contended that the LMPR information has not been as widely used as it could be, despite USDA's continuing efforts to improve its clarity, accessibility, and timeliness.
Two 2003 papers discuss the impacts and effectiveness of LMPR, and various reauthorization issues.5 The two papers observe that mandatory price reporting resulted not only in gains in available information, but also in losses. For example, LMPR does not provide the same timeliness or frequency of reports as under the voluntary system, and the need to protect confidentiality of those reporting may cause less transparency, they conclude. LMPR has resulted in less local information on terms of cattle trade for those regions once covered by voluntary reporting but no longer included in regional daily and weekly mandatory reports.6 On the other hand:
At the national level, it is now possible to compare prices across purchasing methods, the short run supply situation is more transparent, packer ownership and captive supply can be observed and price impacts of such examined, and, perhaps most notable, the Act ensures that data available to and used by market participants are representative of actual market transactions.7
Schroeder and Wachenheim raise several questions for further study, such as:
After initiation of LMPR in April 2001, the so-called 3/60 rule, which was aimed at protecting confidentiality (see footnote 4), was causing USDA/AMS to withhold a substantial amount of data from the public. So, AMS replaced this rule in August 2001 with new "3/70/20" guidelines. They specified that for 60 days prior to a report, at least three entities had to provide data at least half the time; no single entity could provide more than 70% of the report's data; and no single entity could be the sole reporting source for a report more than 20% of the time. As a result, AMS releases of the regional fed cattle morning reports increased from 24% to 77%, according to the department.9
USDA observed: "Confidentiality guidelines present a difficult challenge for USDA. Note that LMPR imposes the reporting requirement on packers. Cattle slaughter is so concentrated—in many regions, only three or four packers may be active—that confidentiality guidelines designed to protect the information of individual reporting entities may often apply, restricting the release of market news." It added that the issue is of less concern in hog slaughter.10
In a more recent (September 2005) report, USDA evaluates the LMPR to determine whether it has improved the amount and quality of information available in fed cattle markets, compared with the previous voluntary program. The report concludes that prices received under formula purchasing arrangements, which were not comprehensively reported under the voluntary system, appear to closely match prices received with negotiated purchases. It observes that the trend toward formula purchases has slowed since implementation of LMPR, and the volume of cattle under negotiated purchases has increased—although other market factors like lower cattle inventories and the discovery of BSE in North America may also have influenced this shift.11
The long-awaited GAO report, Livestock Market Reporting: USDA Has Taken Some Steps to Ensure Quality, but Additional Efforts Are Needed (GAO-06-202), was released December 12, 2005. GAO found that USDA's market reporters had not informed users about the extent to which they regularly excluded some packer data in preparing the reports, and that packers themselves had not always fully and accurately reported their transactions nor promptly corrected problems. GAO also concluded that coordination between AMS and GIPSA, the two agencies charged with addressing competition in livestock markets, was limited, largely because of their different statutory authorities. GAO recommended improvements in the transparency of the market reports and the auditing of packer transactions.
In the 110th Congress, interest could focus on, among other things, USDA's reaction to and adoption of the GAO recommendations and the need, if any, for additional legislative amendments. If new options are proposed, they might be debated along with other livestock issues as part of a new omnibus farm bill (see also CRS Report RL33037, Previewing a 2007 Farm Bill, by [author name scrubbed] et al.)
| 1. |
65 Federal Register 75464-75542. |
| 2. |
Testimony of Kenneth Clayton, AMS Acting Director, before the Senate Agriculture Committee, June 22, 2005. |
| 3. |
Among GIPSA's major responsibilities is maintaining fair livestock marketing practices; for example, GIPSA conducts livestock procurement investigations that examine firms' compliance with the Packers and Stockyards Act, including their payment and pricing practices. |
| 4. |
Under the "3/60" rule, USDA was to collect but not report data from markets with fewer than three reporting entities or where any one entity handles more than 60% of the total volume in a particular area. Although not required by the law, the rule was sought by the White House Office of Management and Budget to preserve firm confidentiality. USDA in 2001 modified this rule; see page 4. |
| 5. |
Wachenheim, C.J., The Livestock Mandatory Reporting Act of 1999. Also, Schroeder, Ted C., Livestock Mandatory Price Reporting in the Beef Industry. Although these papers were prepared prior to the first (one-year) extension of LMPR in 2004, material in their discussions may be relevant. |
| 6. |
Schroeder. See also explanation of the 3/60 rule in footnote 4. |
| 7. |
Wachenheim. |
| 8. |
The Congressional Budget Office (CBO) has estimated that total federal costs of the proposed program approved by the House Agriculture Committee (in H.R. 3408) would be $8 million to $9 million annually; aggregate compliance costs for packers would amount to $1 million to $3 million annually. These estimates can be found via the CBO website at http://www.cbo.gov/. |
| 9. |
USDA, Economic Research Service (ERS), Contracts, Markets, and Prices: Organizing the Production and Use of Agricultural Commodities (AER-837), November 2004. |
| 10. |
Ibid. |
| 11. |
USDA, ERS. Did the Mandatory Requirement Aid the Market? (LDP-M-135-01), September 2005. |