Livestock and Meat Marketing Report Released

February 23, 2007 - The U.S. Department of Agriculture's Grain Inspection, Packers and Stockyards Administration (GIPSA) released the "GIPSA Livestock and Meat Marketing Study," a report by RTI International on the use and impacts of marketing arrangements in the livestock and meat industries.

Overall, the report found that alternative marketing arrangements (AMAs) increase the economic efficiency of the cattle, hog and lamb markets, and these economic benefits are distributed to consumers, as well as to producers and packers who use AMAs.

The study, mandated by Congress in 2003, presents the results of analyses of the effects of AMAs on the lamb and lamb meat industries. The final report focuses on determining the extent of use of AMAs, analyzing price differences and price effects associated with AMAs, measuring the costs and benefits associated with using AMAs and assessing the broad range of implications of AMAs.

AMAs are methods by which livestock and meat are transferred through successive stages of production and marketing, including forward contracting, packer ownership, and marketing agreements.

• A few of the primary conclusions as they relate to the lamb and lamb meat industries include:
• Lamb packers procure fed lambs primarily through formula pricing arrangements and auctions.
• Given that lamb markets are relatively thin, the primary effect of mandatory price reporting may have been to reduce price risk rather than to influence price levels.
• AMAs were found to have statistically significant although economically small effects on lamb prices.
• Technological change has likely increased lamb quality over time.
• Price-risk shifting from lamb producers to lamb packers and breakers has not occurred as a result of AMAs.
• estrictions on the use of AMAs would likely reduce the competitiveness of the lamb industry.

An interim report, released in August 2005, identified and classified AMAs and described their terms, availability and reasons for use in beef, pork and lamb market channels, from production to consumption. In December 2006, the report was sent to economic academics across the country for peer review purposes. Their comments have been incorporated into the report.

The interim and final reports, including peer reviewers' comments, and additional information about the study are available on GIPSA's Web site at www.gipsa.usda.gov/GIPSA/webapp?area=home&subject=lmp&topic=ir-mms ink.

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