GAO Cattle Market Report Uses Broad Brush to Describe Cattle Market Problems
For Immediate Release: Contact: R-CALF USA CEO Bill Bullard Phone: 406-252-2516; email@example.com
Billings, Mont. – After a two-year investigation into the cause of the sudden, 15.1 price drop in cattle prices that occurred during the latter half of 2015, today the Government Accountability Office GAO issued its findings in a report titled, “Additional Data Analysis Could Enhance Monitoring of U.S. Cattle Market.” In early 2016, R-CALF USA submitted a formal request to the U.S. Senate Judiciary Committee (Committee) for an investigation into the 2015 price collapse. In its request, R-CALF USA stated the price collapse was unprecedented, with cattle prices falling farther and faster than during any time in history.
In response to R-CALF USA’s request, the Committee requested the GAO “to conduct an assessment of the cause of the 2015 price drop, including a review of the structure of the market and of any possible anticompetitive conduct.”
The report found that cattle prices dropped 40 percent from late 2014 through 2016.
“The report used a very broad brush to describe a few of the more obvious problems in our U.S. cattle market and while it did identify some specific problems, it left several of the largest stones unturned,” said R-CALF USA CEO Bill Bullard.
Although the report acknowledged that the profitability of America’s cattle farmers and ranchers is dependent in part on international trade in cattle and beef and that fluctuations in the strength of the dollar can influence consumer purchases of cheaper imports, Bullard said the report ignores the elephant in the room.
“In 2015 the cattle market was burdened by an unprecedented surge in imports that resulted in a record $9.1 billion in cattle and beef imports while our U.S. exports were only $6.3 billion. This sudden increase of foreign cattle and beef had a much greater impact on the 2015 market collapse than is specifically acknowledged in the report,” he said.
Bullard cited the following examples of how the GAO report answers some other important questions but not others:
The report found that cattle prices began increasing concurrent with a tightening of cattle supplies caused by widespread drought from 2010 to 2013, and that the drought eased in late 2013. However, the report did not address how supplies could possibly have increased so quickly to trigger the mid-2015 price collapse, particularly in light of the long biological cycle of cattle that would have limited domestic supply expansion for three years beyond late 2013.
The report found that packer concentration levels remained relatively unchanged from 2013 to 2015 and concluded, therefore, that packer concentration did not likely contribute to the price collapse. However, the report did not explain why a concentration level in which just four packers control 85 percent of the market would have to change at all for those few packers to exert abusive market power upstream into the live cattle supply chain.
The report concluded that in some fed cattle procurement regions, limited competition was associated with lower fed cattle prices in those regions and, therefore, the report suggested that “some packers may have been able to exercise market power.” However, the report did not address the extent to which the packers may have cooperated with each other to cause such reduced competition in certain regions.
The report found that because fed cattle purchases are now concentrated to one to two days per week, an information gap exists caused by insufficient pricing signals. However, the report does not address how, if the marketplace is competitive, the four packers could nevertheless reach an agreement to limit cattle trade to such a narrow window of time each week.
The report found that the Packers and Stockyards Administration (PSA), which is charged with ensuring that packers do not engage in anticompetitive practices, has not properly monitored the fed cattle market. However, after suggesting two specific remedies to correct this problem, the U.S. Department of Agriculture (USDA) responded in the report that it did not intend to correct the deficiency whereby the PSA is not granted access to USDA’s daily cattle pricing data. Thus, the PSA will be relegated to reviewing only old data, which will clearly impede its ability to identify anticompetitive buying practices on a timely basis.
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R-CALF USA (Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America) is the largest producer-only cattle trade association in the United States. It is a national, nonprofit organization dedicated to ensuring the continued profitability and viability of the U.S. cattle industry. For more information, visit www.r-calfusa.com or, call 406-252-2516.
Posted by admin on Tuesday, April 10th, 2018 @ 5:32PM
Categories: News Releases
Tags: Agriculture, beef, Bill Bullard, cattle, Cattle Industry, cattleMarket, Cattlemen, Country-of-Origin, GAO, Imports, Mandatory Country of Origin Label, meatpackers, Packers and Stockyards Act, R-CALF, R-CALF USA, Rancher, ranchers, U.S. Cattle Industry, United States Department of Agriculture, USDA