Release No. 0132.98 Backgrounder ACTIONS TO ADDRESS CONCENTRATION AND PROMOTE COMPETITION In further response to the recommendations of the Department of Agriculture (USDA) Advisory Commission on Agricultural Concentration, Secretary Glickman has announced additional actions to address concentration and promote competition in livestock, poultry, and meat markets. Restructure the Program Agency that Enforces the Packers and Stockyards Act (P&S Act):  The Grain Inspection, Packers and Stockyards Administration (GIPSA) will restructure its Packers and Stockyards (P&S) Programs to strengthen enforcement against anticompetitive practices and provide greater flexibility and efficiency in enforcing the trade practice and payment protection provisions of the P&S Act. The principal purpose of the P&S Act is to assure the integrity of livestock, meat, and poultry markets. This includes fostering fair and open competition and guarding against deceptive, discriminatory, and monopolistic practices that affect the movement or price of meat animals or their products.  GIPSA will restructure the headquarters offices of P&S, consolidate field offices, and add staff with economic, statistical and legal expertise to work on investigations of anticompetitive practices.  At headquarters, two operating divisions and six branches will be consolidated into one office with three branches. A new Office of Policy and Litigation Support will be responsible for development of regulations, enforcement policies and procedures, and litigation support. This office will include three branches: Competition Branch, Trade Practices Branch, and Financial Branch. Headquarters also will include an Office of Field Operations and an Economic and Statistical Support Staff. The Office of Field Operations will be responsible for managing delivery of all P&S activities and functions at the field level. The Economic and Statistical Support Staff will provide economic advice and support on issues related to GIPSA's mission.  P&S' regional offices carry out program activities under the provisions of the P&S Act within their assigned areas. The 11 existing field offices will be consolidated into 3 regional offices located in Denver, Colo.; Des Moines, Iowa; and Atlanta, Ga. This will allow significantly larger staffs to be located in those regions with concentrations of beef, pork, and poultry production and slaughter. As part of the restructuring, the three field offices will include staff with economic, statistical, and legal expertise to perform the full range of investigations of alleged anticompetitive practices and financial and trade practice violations in each region.  The Denver, Colo., office will handle all trade practice and financial protection issues in its geographic area (Arizona, California, Colorado, Idaho, Kansas, Montana, Nebraska, Nevada, New Mexico, Oklahoma, Oregon, Texas, Washington, Wyoming, Utah, Hawaii, and Alaska) and all major competition and industry issues in the United States relating to cattle and sheep.  The Des Moines, Iowa, office will handle all trade practice and financial protection issues in its geographic area (Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, North Dakota, South Dakota, Ohio, and Wisconsin) and all major competition and industry issues in the United States relating to hogs.  The Atlanta, Ga., office will handle all trade practice and financial protection issues in its geographic area (Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Louisiana, Maine, Massachusetts, Maryland, Mississippi, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, and West Virginia) and all major competition and industry issues in the United States relating to poultry.  In order to assure basic services are maintained across the nation, the reorganization plan includes resident agents who will either work out of their homes or three suboffices located in Sacramento, Calif.; Fort Worth, Texas; and Lancaster, Penna.  Congress appropriated an additional $800,000 for P&S in fiscal year 1998 to pursue investigations of anticompetitive practices in the concentrated meat packing industry. These funds are being used to recruit staff with economic, statistical, and legal expertise.  Restructuring of field operations will require $3 million to cover the one time cost. GIPSA FY 99 budget also includes increases of $800,000 to address competition issues in meatpacking and $750,000 for strengthening poultry compliance. USDA will also initiate regulatory actions in two areas to address concerns of livestock and poultry producers:  USDA is considering a proposed regulation that would make purchasing or selling livestock with the condition that the price not be reported a violation of the P&S Act. To create a public forum for discussion of this issue, USDA will publish an Advance Notice of Proposed Rulemaking (ANPR) in the Federal Register seeking public comments.  A February 10, 1997, ANPR in the Federal Register sought comments on the need for additional rules to ensure that settlements under contract production of poultry are equitable. Over 95 percent of the country's poultry and an increasing number of livestock, especially hogs, are produced under various forms of contractual arrangements. Contract production has afforded small farmers a viable alternative to traditional feeding operations while lessening the risk associated with price fluctuations. USDA recognizes the importance of the accuracy of feed weights in contract production and will publish a proposed rule that would require firms subject to the P&S Act to accurately weigh feed provided to contract growers when feed weights are used in determining producer compensation. USDA will take the following additional actions to improve market information for producers: USDA will propose adding beef and pork to the weekly "U.S. Export Sales" report. The proposed rule, which will be published shortly for comment, would require exporters to report weekly on the quantity, destination, and the marketing period of their export sales of beef and pork. This change would provide the livestock industry with an early indication of export sales, before export shipments actually occur. USDA's GIPSA and Agricultural Marketing Service (AMS) will conduct a comprehensive analysis of the relationship between prices reported to AMS and prices that GIPSA has obtained during its investigation of major beef packers in Texas. Data from recent investigations will be used to evaluate the statistical validity of current voluntary price reporting efforts. All future GIPSA investigations of competitive issues in the livestock industry include an investigation of price reporting. Market Reporting Initiatives Resulting from Advisory Committee Recommendations:  Producer pork reporting -- USDA is expanding the Missouri pork producer price reporting pilot project. Officials from USDA have met with the National Pork Producers Council to explore expanding the Missouri hog price reporting to three additional States -- Illinois, Iowa, and Wisconsin.  Expanded boxed beef reporting -- Beginning September 1996, USDA 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 volume traded is now reported, compared with 30-40 percent previously reported.  Value-based reporting -- In October 1996, USDA 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, USDA is reporting the numbers of hogs produced under contract by large hog producing operations. Starting in October 1996, USDA 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 February 1997, USDA 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. Programs & Customer Service: USDA will continue 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. USDA has increased efforts to provide more and better market information, and producer knowledge of and ability to use market information is crucial to marketing success. In order to increase the capacity of cattle producers to use market information, USDA has participated with the land grant university system to develop a planning program for cattle producers called "Marketing for Today's Cattle Market and Beyond." Twenty-nine livestock and farm management experts from 15 States have cooperated to produce a series of materials to aid producers in comprehensive planning. To date, workshops have been conducted in over 12 States and notebooks of materials have been distributed. USDA also kicked off its Risk Management Education Initiative with a national forum in Kansas City in September 1997 with plans underway for a more comprehensive conference in early 1998 using an "expert team approach." Since then, the 10 regional offices of USDA's Risk Management Agency (RMA) have been working with educational and extension partners to create expert teams to reach producers through conferences at the State and local level. In early 1998, RMA will issue a Request for Proposals to award $3 million in grants to support the Risk Management Initiative. Grants will focus in three areas: delivery of risk management programs, development of curricula, and research and decision aids.  To ensure that USDA's research helps provide opportunities for 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 USDA's research program and to make recommendations to USDA. # March 24, 1998