U.S. Department of Agriculture: Additional Data Analysis Could Enhance Monitoring of U.S. Cattle Market
The U.S. cattle industry had about $64 billion in sales in 2016. Prices for fed cattle—those ready for slaughter—have fluctuated substantially over time. For example, they increased by 39% between 2013 and 2014, then dropped by 42% by the end of 2016. Cattle producers have raised questions about these fluctuations and USDA's oversight.
We found that the Packers & Stockyards Program, which oversees the cattle industry within USDA's Agricultural Marketing Service (AMS), does not have access to certain data that AMS collects. We recommended that USDA examine the appropriate level of data sharing for oversight.
Cattle in a feedlot.
What GAO Found
Supply and demand factors , such as a drought that affected the price of cattle feed, affected changes in prices of fed cattle—those ready for slaughter from 2013 through 2016. According to industry experts and GAO's analysis, a drought from late 2010 to early 2013 led the cattle inventory to fall and rise and, in turn, fed cattle prices to fluctuate (see figure). GAO's analysis of cattle market data from the U.S. Department of Agriculture (USDA) also indicated that competition levels among packers that slaughter and process fed cattle did not appear to affect the national price changes in the fed cattle market in 2015 but that areas of the country with less competition among packers had lower cattle prices.
Fed Cattle Prices in Relation to the U.S. Cattle Inventory, 2008 through 2017
The Commodity Futures Trading Commission (CFTC)—an agency that regulates cattle futures markets where participants buy and sell standardized agreements for cattle at an agreed-upon price at a specified date in the future—did not find evidence of trading irregularities in the cattle futures market in 2015. However, to better align futures contracts with the actual fed cattle market, CFTC reviewed changes to contract terms and will continue to monitor those changes.
The Packers & Stockyards Program (P&SP), which oversees the cattle industry within USDA's Agricultural Marketing Service (AMS), does not have routine access to daily data for transactions between feedlot operators, which produce fed cattle, and packers. Those data are collected by AMS's price reporting group, which does not routinely share them with P&SP because officials said it is prohibited by statute from doing so. The Livestock Mandatory Reporting Act of 1999 specifies that the Secretary of Agriculture may authorize the sharing of these data for enforcement purposes, which USDA interprets as an ongoing investigation, not market monitoring. In November 2017, USDA reorganized P&SP under AMS and officials said it was too early in the reorganization to determine whether AMS would view routine sharing of these data any differently. Reviewing the extent to which these data can be shared with P&SP provides an opportunity to enhance P&SP's oversight of the fed cattle market. Determining whether it is advisable to request additional exceptions from information disclosure restrictions from Congress would help USDA strengthen its oversight.
Why GAO Did This Study
The U.S. cattle industry accounted for about $64 billion in receipts in 2016, according to USDA. The price of fed cattle has fluctuated widely from 2013 through 2016 and experienced a sharp downturn beginning in late 2015, raising concerns about the market and questions about USDA's oversight.
GAO was asked to review issues related to the U.S. cattle market. This report (1) describes key factors that affected changes in fed cattle prices from 2013 through 2016; (2) describes what CFTC found about possible trading irregularities in the futures market for fed cattle in 2015 and any changes to the futures contract for fed cattle since 2015; and (3) examines factors that may affect USDA's routine monitoring to ensure against discriminatory or anticompetitive practices in the fed cattle market. GAO reviewed economic data and USDA and CFTC documentation; analyzed transaction data on beef packer purchases from 2013 through 2015; and interviewed recognized experts, cattle industry stakeholders such as feedlot operators and packers, and agency officials.
GAO is making two recommendations, including that USDA review the extent to which, under statute, the price reporting group can share daily transaction data with P&SP, and if USDA determines the statute does not permit such sharing and it is advisable, submit to Congress a proposal to allow such sharing. USDA agreed and subsequently determined that the act does not allow for such sharing and it would not be advisable citing concerns about the public's trust in the program.
Recommendations for Executive Action
|Department of Agriculture||The Secretary of Agriculture should review the extent to which, under the Livestock Mandatory Reporting Act of 1999, the price reporting group can share daily transaction data with P&SP to allow P&SP to strengthen the effectiveness of its oversight. After reviewing that authority, if the Secretary determines that the statute does not permit the price reporting group to share data with P&SP for routine monitoring purposes, and that routine sharing is advisable in light of the purposes behind the statutory disclosure restrictions, the Secretary should submit to Congress a proposal to allow such sharing. (Recommendation 1)||
USDA stated that it took action and reviewed the authority provided by the Livestock Mandatory Reporting Act of 1999 and determined that the act does not allow for data sharing for routine monitoring purposes. Further, USDA stated that the agency believes considering a statutory amendment to allow for routine data sharing is not advisable due to the agency's stated concerns about maintaining the public's trust in USDA's administration of the Livestock Mandatory Reporting program. We believe the steps USDA has taken address our recommendation.
|Department of Agriculture||The Secretary of Agriculture should direct the AMS administrator to ensure that P&SP routinely conducts in-depth analysis of the transaction data that it collects. Such analysis could include but not be limited to examining competition levels in different areas of the country. (Recommendation 2)||
In response to our recommendation, in February 2022, the Agricultural Marketing Service released its plans to monitor competition levels in different areas of the country. As a result of its efforts, the agency reports that it will have regular information to (1) direct its investigative resources, (2) share findings with the Department of Justice and the Federal Trade Commission, and (3) determine the need for more effective regulation.