Livestock Market Reporting:

USDA Has Taken Some Steps to Ensure Quality, but Additional Efforts Are Needed

GAO-06-202: Published: Dec 9, 2005. Publicly Released: Dec 12, 2005.

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Livestock producers, with gross income of $63 billion in 2004, depend on USDA's daily, weekly, and monthly livestock market news reports. These reports provide them and others in the industry with livestock and meat prices and volumes, which are helpful as they negotiate sales of cattle, hogs, lamb and meat products. Packers also use the average prices in these reports as a basis for paying some producers with whom the packers have contracts. In 1999, the Livestock Mandatory Reporting Act was passed to substantially increase the volume of industry sales transactions covered by USDA's market news reports and thereby encourage competition in the industry. In the context of ongoing discussions about the renewal of this act, GAO reviewed (1) USDA's efforts to ensure the quality of its livestock market news reports and (2) the coordination between two USDA agencies that are responsible for promoting competition in livestock markets.

While the U.S. Department of Agriculture (USDA) took important actions to produce quality livestock market news reports, GAO found that USDA could improve the reports' transparency. Although packers with large plants must report all of their livestock transactions to USDA, GAO found that USDA market news reporters regularly excluded some transactions as they prepared USDA's reports. For example, GAO's analysis showed that from April through June 2005, USDA reporters excluded about 9 percent of the cattle transactions that packers had reported. When USDA excluded transactions, this sometimes changed the low, high, and average prices that USDA would have otherwise reported. However, USDA has not informed its readers of the extent of this practice. Moreover, USDA's instructions for guiding its market news reporters as they prepared their reports lacked clarity and precision, leading to inconsistency in their reporting decisions. In addition, GAO found the accuracy of USDA's livestock market news reports is not fully assured. About 64 percent of 844 USDA audits of packers--conducted over 36 months ending in April 2005--identified packers' transactions that were inaccurately reported, unsupported by documentation, or omitted from packers' reports. Moreover, some packers have not promptly corrected problems. Since 2002, USDA has sent 11 packers 21 letters urging the packers to correct longstanding problems and warning them of the consequences of delay. Twice USDA has levied $10,000 fines on packers, but suspended the fines when these packers agreed to comply. As of September 2005, USDA had continuing issues with 2 of the 11 packers. USDA officials noted that packers' errors are relatively few compared to the large volumes of data that packers report daily. However, USDA has not (1) assessed the overall quality of packers' data, (2) used its audit results to help focus future audit efforts, and (3) ensured that follow-up promptly resolves problems. Two USDA agencies have addressed competition in livestock markets--the Agricultural Marketing Service (AMS) and the Grain Inspection, Packers and Stockyards Administration (GIPSA). GAO found the coordination between these agencies to be limited, primarily due to the legal authority within which each operates. AMS has implemented the Livestock Mandatory Reporting Act. That act did not provide authority for AMS to share individual packer transaction data within USDA except for enforcement purposes. In two investigations, AMS provided packers' data to GIPSA. On the other hand, GIPSA enforces the Packers and Stockyards Act and is responsible for addressing unfair and anti-competitive practices in the marketing of livestock. Furthermore, GAO found that GIPSA monitors cattle and hog markets by analyzing publicly available livestock market news reports--an approach that has limitations because it lacks the company-specific information that would be useful for detecting anti-competitive behavior.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: Should Congress extend the Livestock Mandatory Reporting Act, the Secretary of Agriculture should direct the Administrator, Agricultural Marketing Service to address the timeliness and consistency of AMS reporters' efforts to follow-up on audit findings.

    Agency Affected: Department of Agriculture

    Status: Closed - Implemented

    Comments: The Agricultural Marketing Service (AMS) took steps to better monitor the timeliness and consistency of its reporters' efforts to follow-up on audit findings. Specifically, the agency made a number of changes to its process for tracking the problems identified by its auditors, including documenting the timeliness of AMS reporter and auditor follow up and consistency across livestock types. This involved implementing a way to track interim follow-up milestones to determine whether they conform to established agency timeliness goals. It also included initiating quarterly tracking of the average time it takes to follow up on audit findings by livestock type, packer, and severity level, as well as quarterly tracking of the timeliness of follow up as compared to agency timeliness goals.

    Recommendation: Should Congress extend the Livestock Mandatory Reporting Act, the Secretary of Agriculture should direct the Administrator, Agricultural Marketing Service to further develop AMS audit strategies to identify recurring significant problems.

    Agency Affected: Department of Agriculture

    Status: Closed - Not Implemented

    Comments: Action not taken.

    Recommendation: Should Congress extend the Livestock Mandatory Reporting Act, the Secretary of Agriculture should direct the Administrator, Agricultural Marketing Service to develop information about the overall accuracy of packers' transaction data by auditing a statistical sample of packers' transactions.

    Agency Affected: Department of Agriculture

    Status: Closed - Not Implemented

    Comments: Action not taken.

    Recommendation: Should Congress extend the Livestock Mandatory Reporting Act, the Secretary of Agriculture should direct the Administrator, Agricultural Marketing Service to clarify AMS reporter's instructions to make them more specific and consistent by (1) consulting with packers, producers, agricultural economists, and other interested stakeholders, and (2) undertaking revisions that consider economic analyses of past reporting trends, livestock and meat market variations, and federal statistical and information reporting guidance.

    Agency Affected: Department of Agriculture

    Status: Closed - Implemented

    Comments: The Agricultural Marketing Service (AMS) took multiple steps to revise reporter instructions to make them more specific and consistent. This included issuing guidance to reporters that clarifies AMS' policy for excluding transactions, modifying selected report preparation manuals, holding discussions with reporters to clarify acceptable reasons for exclusions. Additionally, to encourage consistency in excluding transactions, AMS established drop-down menus in its computer system for reporters to identify their rational for excluding any transactions and published basic information on AMS' website about reporter instructions. According to agency officials, these efforts were conducted with the input of economists, marketing specialists, and others, and the agency follows federal and departmental statistical and information reporting guidance. Furthermore, additional outreach has been conducted via trade shows, industry meetings, and visits with packers and others.

    Recommendation: Should Congress extend the Livestock Mandatory Reporting Act, the Secretary of Agriculture should direct the Administrator, Agricultural Marketing Service to increase transparency by (1) reporting to market news readers on its reporters' instructions for making reporting decisions that reflect prevailing market conditions, (2) periodically reporting on the effects of reporters' decisions on AMS reported prices, and (3) reporting the results of its audit efforts.

    Agency Affected: Department of Agriculture

    Status: Closed - Implemented

    Comments: The Agricultural Marketing Service (AMS) took steps to increase transparency by posting information about program procedures on the agency's web site. This included providing information about reporter instructions for preparing reports, the effect of reporter decisions on reported prices, and the results of audit efforts.

    Recommendation: The Secretary of Agriculture should direct the Administrators of the Agricultural Marketing Service and the Grain, Inspection, and Packers and Stockyards Administration to further investigate the reporting practices of one packer's low-price purchases of livestock.

    Agency Affected: Department of Agriculture

    Status: Closed - Implemented

    Comments: The Agricultural Marketing Service (AMS) and Grain Inspection, Packers and Stockyards Administration (GIPSA) took additional steps to further investigate the reporting practices in question. According to AMS' Associate Deputy Administrator and Chief of the Livestock & Grain Market News, AMS investigated the transactions in question and collaborated with GIPSA. GIPSA opened a formal investigation into the transactions, and, according to the Director of the Business and Economic Analysis Division, made an overall finding of no violation and closed the file.

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