A bill to amend the Packers and Stockyards Act, 1921, to prohibit the use of certain anti-competitive forward contracts.

Summary: Livestock Marketing Fairness Act - Amends the Packers and Stockyards Act, 1921 to prohibit a livestock sale forward contract (with an exception for specified cooperatives) that: (1) does not contain a firm base price that may be equated to a fixed dollar amount on the contract day; (2) is not offered for open public bid; (3) is based on a formula price; or (4) provides for the sale of more that 40 cattle, 30 swine, or other livestock in a quantity as determined by the Secretary of Agriculture.

Defines: (1) "firm base price" as a transaction using an external source reference price; (2) "formula price" as any price term that establishes a base from which a purchase price is calculated on the basis of a price that will not be determined or reported until a date after the forward price is established (with specified exclusions); and (3) "forward contract" as a livestock purchase contract that provides for livestock delivery to a packer at a date that is more than seven days after the date on which the contract is entered into, without regard to whether the contract is for a specified lot of livestock or a specified number of livestock over a certain period of time.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Livestock Marketing Fairness Act''.

SEC. 2. PURPOSE.

    The purpose of the amendments made by this Act is to prohibit the 
use of certain anti-competitive forward contracts--
            (1) to require a firm base price in forward contracts and 
        marketing agreements; and
            (2) to require that forward contracts be traded in open, 
        public markets.

SEC. 3. LIMITATION ON USE OF ANTI-COMPETITIVE FORWARD CONTRACTS.

    (a) In General.--Section 202 of the Packers and Stockyards Act, 
1921 (7 U.S.C. 192), is amended--
            (1) by striking ``Sec. 202. It shall be'' and inserting the 
        following:

``SEC. 202. UNLAWFUL PRACTICES.

    ``(a) In General.--It shall be'';
            (2) by striking ``to:'' and inserting ``to--'';
            (3) by redesignating subsections (a), (b), (c), (d), (e), 
        (f), and (g) as paragraphs (1), (2), (3), (4), (5), (7), and 
        (8), respectively, and indenting appropriately;
            (4) in paragraph (7) (as redesignated by paragraph (3)), by 
        designating paragraphs (1), (2), and (3) as subparagraphs (A), 
        (B), and (C), respectively, and indenting appropriately;
            (5) in paragraph (8) (as redesignated by paragraph (3)), by 
        striking ``subdivision (a), (b), (c), (d), or (e)'' and 
        inserting ``paragraph (1), (2), (3), (4), (5), or (6)'';
            (6) in each of paragraphs (1), (2), (3), (4), (5), (7), and 
        (8) (as redesignated by paragraph (3)), by striking the first 
        capital letter of the first word in the paragraph and inserting 
        the same letter in the lower case;
            (7) in each of paragraphs (1) through (5) (as redesignated 
        by paragraph (3)), by striking ``or'' at the end;
            (8) by inserting after paragraph (5) (as redesignated by 
        paragraph (3)) the following:
            ``(6) except as provided in subsection (c), use, in 
        effectuating any sale of livestock, a forward contract that--
                    ``(A) does not contain a firm base price that may 
                be equated to a fixed dollar amount on the day on which 
                the forward contract is entered into;
                    ``(B) is not offered for bid in an open, public 
                manner under which--
                            ``(i) buyers and sellers have the 
                        opportunity to participate in the bid; and
                            ``(ii) buyers and sellers may witness bids 
                        that are made and accepted;
                    ``(C) is based on a formula price; or
                    ``(D) subject to subsection (b), provides for the 
                sale of livestock in a quantity in excess of--
                            ``(i) in the case of cattle, 40 cattle;
                            ``(ii) in the case of swine, 30 swine; and
                            ``(iii) in the case of other types of 
                        livestock, a comparable quantity of the type of 
                        livestock determined by the Secretary.''; and
            (9) by adding at the end the following:
    ``(b) Adjustments.--The Secretary may adjust the maximum quantity 
of livestock described in subsection (a)(6)(D) to reflect advances in 
marketing and transportation capabilities if the adjusted quantity 
provides reasonable market access for all buyers and sellers.
    ``(c) Exemption for Cooperatives.--Subsection (a)(6) shall not 
apply to--
            ``(1) a cooperative or entity owned by a cooperative, if a 
        majority of the ownership interest in the cooperative is held 
        by active cooperative members that--
                    ``(A) own, feed, or control livestock; and
                    ``(B) provide the livestock to the cooperative for 
                slaughter;
            ``(2) a packer that is not required to report to the 
        Secretary on each reporting day (as defined in section 212 of 
        the Agricultural Marketing Act of 1946 (7 U.S.C. 1635a)) 
        information on the price and quantity of livestock purchased by 
        the packer; or
            ``(3) a packer that owns 1 livestock processing plant.''.
    (b) Definitions.--Section 2(a) of the Packers and Stockyards Act, 
1921 (7 U.S.C. 182(a)) is amended by adding at the end the following:
            ``(15) Firm base price.--The term `firm base price' means a 
        transaction using a reference price from an external source.
            ``(16) Formula price.--
                    ``(A) In general.--The term `formula price' means 
                any price term that establishes a base from which a 
                purchase price is calculated on the basis of a price 
                that will not be determined or reported until a date 
                after the day the forward price is established.
                    ``(B) Exclusion.--The term `formula price' does not 
                include--
                            ``(i) any price term that establishes a 
                        base from which a purchase price is calculated 
                        on the basis of a futures market price; or
                            ``(ii) any adjustment to the base for 
                        quality, grade, or other factors relating to 
                        the value of livestock or livestock products 
                        that are readily verifiable market factors and 
                        are outside the control of the packer.
            ``(17) Forward contract.--The term `forward contract' means 
        an oral or written contract for the purchase of livestock that 
        provides for the delivery of the livestock to a packer at a 
        date that is more than 7 days after the date on which the 
        contract is entered into, without regard to whether the 
        contract is for--
                    ``(A) a specified lot of livestock; or
                    ``(B) a specified number of livestock over a 
                certain period of time.''.