Backgrounder: USDA Announces Additional Actions to Address Concentration


                                              Release No. 0182.97

Backgrounder

  USDA Announces Additional Actions to Address Concentration 
               and Promote Competition in Markets

Today, the Department reports progress to date on actions underway and
additional actions the Department will initiate, to address recommendations
made by the USDA Advisory Committee on Agricultural Concentration.  Actions
are in the areas of regulatory enforcement, research and education, and
market information.

Regulatory and Enforcement Actions

To strengthen efforts under the P&S Act to ensure fair trade practices in the
market, including placing additional emphasis on investigations of potential
anti-competitive practices, four major investigations are currently underway--dealing with cattle procurement in the Texas Panhandle, slaughter hog
procurement in the central United States, poultry contract settlements in
several states, and lamb procurement:

     * The fed cattle investigation will specifically examine packer
     procurement and pricing practices, procedures, and will look for any
     evidence of anti-competitive activity or arrangements.  It includes 16
     months of procurement data, over 37,000 transactions, and approximately
     6 million head of cattle.  

     * The Iowa-Southern Minnesota slaughter hog investigation will focus on
     11 major hog slaughter plants accounting for about one-third of the
     slaughter hogs.  This investigation includes an analysis of pricing and
     procurement methods, procurement areas, and contractual agreements.

     * An investigation has been initiated to examine poultry contracts
     which compare a grower's cost of production with the cost of other
     growers settling during a given settlement period.  The focus of the
     investigation is to examine the effects of this type of contract on
     individual growers by analyzing grower settlements over a period of
     time at several complexes.  Data collected will include a year of
     settlement data from complexes in several states, including data from 5
     of the top 10 firms in broiler production.

An outside review of the program agency that administers the Packers and
Stockyards Act (P&S Act) will lead to restructuring of that organization:

     * The Office of the Inspector General completed its review of the
     Department's efforts to monitor and investigate anti-competitive
     practices under the P&S Act.  To maximize the P&S program effectiveness
     and make full use of authority to investigate and correct anti-competitive practices and arrangements, plans are underway to
     reorganize and restructure the program.  Operations will be
     streamlined, and investigative activities will be strengthened, by
     placing persons with more background and expertise in economics,
     statistics, and the law regarding competition in field offices. 
     Restructuring will affect both headquarters and field offices, and will
     allow USDA to focus on core responsibilities under the P&S Act--protecting the industry and public from anti-competitive and unfair
     trade practices and providing financial protection for livestock
     sellers.

     * Congress appropriated an additional $400,000 (approximately one-third
     of the increase in budget requested by the Department), in fiscal year
     1997, for administration of the P&S Act.  Surveillance teams created
     using personnel with specialized training and backgrounds will
     investigate competitive issues.  Two projects have already been
     initiated using the surveillance teams: 1) the investigation of
     slaughter hog procurement practices in Iowa and Minnesota; and 2) the
     investigation of the lamb slaughter industry's use of supply contracts
     and formula pricing arrangements and their impact on market access.

     * In its fiscal year 1998 budget request, the Administration requested
     an additional $1.65 million for increased legal, economic, and
     statistical expertise to pursue investigations of anti-competitive
     issues, and requested $750,000 for investigation and enforcement in the
     poultry area.

     * The Department will also use the data gathered during the current
     investigation in the Texas Panhandle as well as the data compiled from
     the similar investigation conducted in Kansas in 1995 to perform
     additional economic analyses of the use and effect of captive supplies.

     * On January 14, the Department published a notice in the Federal
     Register seeking comments on a petition requesting the initiation of
     rulemaking to restrict certain livestock procurement practices by meat
     packers, submitted by the Western Organization of Resource Councils
     (WORC).  The Department published the petition to seek public comment
     on the issues   raised, and received over 1,700 comments by the April
     14 closing date.  A USDA team with economic, legal, and industry
     expertise is reviewing and analyzing those comments.

     * Reflecting the advisory committee's conclusion that the Concentration
     Study (released February 14, 1996) was inconclusive concerning the
     effects of concentration on livestock prices, the Department has funded
     two cooperative agreements with separate teams of university
     researchers.  These teams will use the same data used in the
     Concentration Study but different theoretical models and methods to
     evaluate the effect of concentration on prices.

     The Department also will seek statutory authority to ensure that all
market participants are offered an opportunity to compete on a level playing
field without fear of discrimination or reprisal, to bargain, negotiate, and
settle disputes, and to ensure producers a safety net in the event of natural
or economic disasters or other emergencies:

     * The Department will seek statutory authority to provide the same
     administrative enforcement for violations of section 202 of the P&S Act
     by live poultry dealers as it has for violations by packers.  At
     present, poultry processors are not subject to the same enforcement
     procedures as meat packers for alleged violations of section 202, and
     cases alleging violation of section 202 by live poultry dealers must be
     referred to the Department of Justice.  New administrative authority
     for the Department will provide more uniform enforcement, maximize the
     effectiveness of current resources under the P&S Act, and provide a
     more effective and timely deterrent to behavior in violation of the
     Act.

     * A February 10 advance notice of proposed rulemaking in the Federal
     Register sought comments on the need for additional rules to assure
     poultry growers that their settlements will be equitable, and to
     address contract poultry growers concerns about settlements tied to the
     performance of other growers, procedures for delivering and weighing
     feed, and procedures for weighing live birds.  Over 3,000 comments were
     received by the May 12 closing date.

     * To strengthen the ability of producers to bargain collectively, the
     Department will seek administrative enforcement authority under the
     Agricultural Fair Practices Act (AFPA), and will ask for civil penalty
     authority as a sanction for violations.  Currently, violations of the
     AFPA must be referred to the Department of Justice or pursued through
     private legal action. Civil penalty and administrative enforcement
     authority for the Department would enable more timely and effective
     enforcement of violations such as discrimination or failure to bargain
     fairly with producers because of affiliation with or membership in an
     association of producers.

     * To provide a safety net in the event of economic emergencies or other
     disasters, the Department will pursue statutory authority to restore
     the Secretary's discretionary authority to extend Commodity Credit
     Corporation loans for up to 6 months in the event of economic or other
     emergency situations.  The increased flexibility in loan maturity may
     be of assistance in avoiding rail car shortages, by allowing more
     orderly movements of grain.


Programs & Customer Service

The Department continues 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.

     * The Department will pursue initiatives designed to educate producers
     about new market strategies for managing risk and successfully
     competing in today's global markets.  The Secretary will convene a
     roundtable, inviting leaders of producer and agribusiness groups, and
     our partners in the research, academic, and Cooperative Extension
     System communities to attend.  The Department will seek comments on
     current and planned research and education initiatives to address the
     needs outlined by the advisory committee.  
     
USDA has a number of educational initiatives currently underway or planned
throughout mission areas of the Department, as well as through existing
partnerships with State and local governments and universities.  For example,
the Managing Change Initiative, currently being developed by the Department's
Cooperative State Research Education and Extension Service (CSREES), contains
education initiatives about risk management strategies, contracting, and
strategic planning and decision making.  These and other public-private
partnerships offer opportunities to focus educational initiatives to specific
needs and groups in the agricultural and rural community. 

     * In addition, the Secretary is emphasizing a specific focus within the
     newly created Fund for Rural America to encourage proposals for
     additional research on concentration and for development of programs
     and practical strategies that will help farmers successfully compete in
     concentrated and global markets.  A request for proposals has been
     published, with selection of proposals to be based on a competitive
     review process.

     * To ensure that USDA's research helps address the problems of 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 the Department's research
     program, and to make recommendations to the Department.   

Enhanced Market Reporting Initiatives

The Department continues to press ahead with new and enhanced market
information reports.  

     * The Department will expand the Missouri pork producer price reporting
     pilot project.  Officials from the Department have met with the
     National Pork Producers Council (NPPC) to explore expanding the
     Missouri hog price reporting to three additional states--Illinois,
     Iowa, and Wisconsin.  Expansion will take place later this year.

     * The Department has already published an advanced notice of rulemaking
     to seek comments regarding required reporting of meat export sales (see
     below).  In addition, the Department has developed a new report to
     disseminate import data (already collected as part of its food safety
     mission) that provides up to date information about meat imports.  The
     new meat import report was released on March 31, and is released
     weekly.


Status of Market Reporting Initiatives Already Announced

With regard to the new and enhanced market reporting initiatives announced on
July 31, 1996, here is a status report on their development and release:

     * Expanded boxed beef reporting--Beginning September 1, 1996, the
     Department 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 volumes traded is now
     reported, compared with 30-40 percent previously reported.

     * Value-based reporting--In early October, the Department 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, the Department is reporting the
     numbers of hogs produced under contract by large hog producing
     operations.  Starting in October 1996, the Department 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 early February, the
     Department 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.

     * Foreign trade reporting--This spring, the Department expects to begin
     reporting live cattle, hog, and sheep crossings from Canada and Mexico. 
     Also, last November, the Department published an advanced notice of
     proposed rulemaking to solicit comment on requiring reporting of export
     sales of livestock, poultry, and their products.  The comment period
     for this advanced notice, which was extended through February 12, has
     now closed and those comments are being analyzed.

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