Backgrounder: USDA Announces Additional Actions to Address Concentration Release No. 0182.97 Backgrounder USDA Announces Additional Actions to Address Concentration and Promote Competition in Markets Today, the Department reports progress to date on actions underway and additional actions the Department will initiate, to address recommendations made by the USDA Advisory Committee on Agricultural Concentration. Actions are in the areas of regulatory enforcement, research and education, and market information. Regulatory and Enforcement Actions To strengthen efforts under the P&S Act to ensure fair trade practices in the market, including placing additional emphasis on investigations of potential anti-competitive practices, four major investigations are currently underway--dealing with cattle procurement in the Texas Panhandle, slaughter hog procurement in the central United States, poultry contract settlements in several states, and lamb procurement: * The fed cattle investigation will specifically examine packer procurement and pricing practices, procedures, and will look for any evidence of anti-competitive activity or arrangements. It includes 16 months of procurement data, over 37,000 transactions, and approximately 6 million head of cattle. * The Iowa-Southern Minnesota slaughter hog investigation will focus on 11 major hog slaughter plants accounting for about one-third of the slaughter hogs. This investigation includes an analysis of pricing and procurement methods, procurement areas, and contractual agreements. * An investigation has been initiated to examine poultry contracts which compare a grower's cost of production with the cost of other growers settling during a given settlement period. The focus of the investigation is to examine the effects of this type of contract on individual growers by analyzing grower settlements over a period of time at several complexes. Data collected will include a year of settlement data from complexes in several states, including data from 5 of the top 10 firms in broiler production. An outside review of the program agency that administers the Packers and Stockyards Act (P&S Act) will lead to restructuring of that organization: * The Office of the Inspector General completed its review of the Department's efforts to monitor and investigate anti-competitive practices under the P&S Act. To maximize the P&S program effectiveness and make full use of authority to investigate and correct anti-competitive practices and arrangements, plans are underway to reorganize and restructure the program. Operations will be streamlined, and investigative activities will be strengthened, by placing persons with more background and expertise in economics, statistics, and the law regarding competition in field offices. Restructuring will affect both headquarters and field offices, and will allow USDA to focus on core responsibilities under the P&S Act--protecting the industry and public from anti-competitive and unfair trade practices and providing financial protection for livestock sellers. * Congress appropriated an additional $400,000 (approximately one-third of the increase in budget requested by the Department), in fiscal year 1997, for administration of the P&S Act. Surveillance teams created using personnel with specialized training and backgrounds will investigate competitive issues. Two projects have already been initiated using the surveillance teams: 1) the investigation of slaughter hog procurement practices in Iowa and Minnesota; and 2) the investigation of the lamb slaughter industry's use of supply contracts and formula pricing arrangements and their impact on market access. * In its fiscal year 1998 budget request, the Administration requested an additional $1.65 million for increased legal, economic, and statistical expertise to pursue investigations of anti-competitive issues, and requested $750,000 for investigation and enforcement in the poultry area. * The Department will also use the data gathered during the current investigation in the Texas Panhandle as well as the data compiled from the similar investigation conducted in Kansas in 1995 to perform additional economic analyses of the use and effect of captive supplies. * On January 14, the Department published a notice in the Federal Register seeking comments on a petition requesting the initiation of rulemaking to restrict certain livestock procurement practices by meat packers, submitted by the Western Organization of Resource Councils (WORC). The Department published the petition to seek public comment on the issues raised, and received over 1,700 comments by the April 14 closing date. A USDA team with economic, legal, and industry expertise is reviewing and analyzing those comments. * Reflecting the advisory committee's conclusion that the Concentration Study (released February 14, 1996) was inconclusive concerning the effects of concentration on livestock prices, the Department has funded two cooperative agreements with separate teams of university researchers. These teams will use the same data used in the Concentration Study but different theoretical models and methods to evaluate the effect of concentration on prices. The Department also will seek statutory authority to ensure that all market participants are offered an opportunity to compete on a level playing field without fear of discrimination or reprisal, to bargain, negotiate, and settle disputes, and to ensure producers a safety net in the event of natural or economic disasters or other emergencies: * The Department will seek statutory authority to provide the same administrative enforcement for violations of section 202 of the P&S Act by live poultry dealers as it has for violations by packers. At present, poultry processors are not subject to the same enforcement procedures as meat packers for alleged violations of section 202, and cases alleging violation of section 202 by live poultry dealers must be referred to the Department of Justice. New administrative authority for the Department will provide more uniform enforcement, maximize the effectiveness of current resources under the P&S Act, and provide a more effective and timely deterrent to behavior in violation of the Act. * A February 10 advance notice of proposed rulemaking in the Federal Register sought comments on the need for additional rules to assure poultry growers that their settlements will be equitable, and to address contract poultry growers concerns about settlements tied to the performance of other growers, procedures for delivering and weighing feed, and procedures for weighing live birds. Over 3,000 comments were received by the May 12 closing date. * To strengthen the ability of producers to bargain collectively, the Department will seek administrative enforcement authority under the Agricultural Fair Practices Act (AFPA), and will ask for civil penalty authority as a sanction for violations. Currently, violations of the AFPA must be referred to the Department of Justice or pursued through private legal action. Civil penalty and administrative enforcement authority for the Department would enable more timely and effective enforcement of violations such as discrimination or failure to bargain fairly with producers because of affiliation with or membership in an association of producers. * To provide a safety net in the event of economic emergencies or other disasters, the Department will pursue statutory authority to restore the Secretary's discretionary authority to extend Commodity Credit Corporation loans for up to 6 months in the event of economic or other emergency situations. The increased flexibility in loan maturity may be of assistance in avoiding rail car shortages, by allowing more orderly movements of grain. Programs & Customer Service The Department continues to pursue initiatives to improve customer awareness of its programs and services: * Under the Customer Service Initiative of the National Performance Review launched by the Clinton Administration, agencies are reviewing plans for outreach to their clientele, striving to target specific groups within the agricultural and rural communities to improve their awareness of how to access programs and services, as well as actions taken by agencies. * The Department will pursue initiatives designed to educate producers about new market strategies for managing risk and successfully competing in today's global markets. The Secretary will convene a roundtable, inviting leaders of producer and agribusiness groups, and our partners in the research, academic, and Cooperative Extension System communities to attend. The Department will seek comments on current and planned research and education initiatives to address the needs outlined by the advisory committee. USDA has a number of educational initiatives currently underway or planned throughout mission areas of the Department, as well as through existing partnerships with State and local governments and universities. For example, the Managing Change Initiative, currently being developed by the Department's Cooperative State Research Education and Extension Service (CSREES), contains education initiatives about risk management strategies, contracting, and strategic planning and decision making. These and other public-private partnerships offer opportunities to focus educational initiatives to specific needs and groups in the agricultural and rural community. * In addition, the Secretary is emphasizing a specific focus within the newly created Fund for Rural America to encourage proposals for additional research on concentration and for development of programs and practical strategies that will help farmers successfully compete in concentrated and global markets. A request for proposals has been published, with selection of proposals to be based on a competitive review process. * To ensure that USDA's research helps address the problems of small- and medium-sized farming operations, the Research, Education, and Economics mission area has arranged for the National Academy of Sciences to conduct an independent review of the Department's research program, and to make recommendations to the Department. Enhanced Market Reporting Initiatives The Department continues to press ahead with new and enhanced market information reports. * The Department will expand the Missouri pork producer price reporting pilot project. Officials from the Department have met with the National Pork Producers Council (NPPC) to explore expanding the Missouri hog price reporting to three additional states--Illinois, Iowa, and Wisconsin. Expansion will take place later this year. * The Department has already published an advanced notice of rulemaking to seek comments regarding required reporting of meat export sales (see below). In addition, the Department has developed a new report to disseminate import data (already collected as part of its food safety mission) that provides up to date information about meat imports. The new meat import report was released on March 31, and is released weekly. Status of Market Reporting Initiatives Already Announced With regard to the new and enhanced market reporting initiatives announced on July 31, 1996, here is a status report on their development and release: * Expanded boxed beef reporting--Beginning September 1, 1996, the Department extended its coverage of boxed beef sale commitments to cover the upcoming 15 business days, rather than the previous coverage of 10 business days. Approximately 45 percent of volumes traded is now reported, compared with 30-40 percent previously reported. * Value-based reporting--In early October, the Department initiated a weekly report of premiums and discounts being offered for cattle in the upcoming week by meat packers. All major packers are participating, and feedlots can verify information through the report. * Livestock produced or traded under contract--Beginning with the December 1996 Hogs and Pigs Report, the Department is reporting the numbers of hogs produced under contract by large hog producing operations. Starting in October 1996, the Department also began issuing a weekly report indicating the number of cattle being produced under contract for delivery in future months. For those contracts calling for settlement relative to a futures market price, the basis difference from a futures market contract is also reported. * Regional beef quality and yield report--In early February, the Department initiated a report of beef grading results on a regional basis, for four regions of the country, that will provide better geographic detail than contained in the current national report. * Foreign trade reporting--This spring, the Department expects to begin reporting live cattle, hog, and sheep crossings from Canada and Mexico. Also, last November, the Department published an advanced notice of proposed rulemaking to solicit comment on requiring reporting of export sales of livestock, poultry, and their products. The comment period for this advanced notice, which was extended through February 12, has now closed and those comments are being analyzed. # NOTE: USDA news releases and media advisories are available on the Internet. 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