Assessment of the Livestock and Poultry Industries 

Fiscal Year 2007 Report 

United States Department of Agriculture 

Grain Inspection, Packers and Stockyards Administration 

May 2008 
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1

TABLE OF CONTENTS

Table of Contents .......................................................................................................................... 1

Table of Figures............................................................................................................................. 2

Executive Summary ...................................................................................................................... 3

I. General Economic State of the Industries.............................................................................. 5

A. Aggregate Livestock Industry............................................................................................... 5 

B. Cattle Industry ....................................................................................................................... 8 

C. Hog Industry........................................................................................................................ 10 

D. Sheep and Lamb Industry.................................................................................................... 13 

E. Poultry Industry ................................................................................................................... 15 

F. Livestock and Poultry Production........................................................................................ 16 

II: Changing Business Practices of the Livestock and Poultry Industries............................ 17

A. Aggregate Livestock Industry............................................................................................. 17

B. Cattle Industry ..................................................................................................................... 17 

C. Hog Industry........................................................................................................................ 21 

D. Sheep and Lamb Industry.................................................................................................... 23 

E. Poultry Industry ................................................................................................................... 25 

III. Operations or Activities in the Livestock and Poultry Industries That Raise 

Concerns Under the Packers and Stockyards Act ................................................................... 27
2

TABLE OF FIGURES

Figure 1. Share of Total Industry Livestock Procurement Expenditures for the Four 

Largest Slaughter Firms, Ranked by Total Livestock Procurement Expenditure ..........6 

Figure 2. Total Operating Expenses and Total Operating Income as a Percentage of Sales 

for the Top 4 and the 21st-40th Firms, Ranked by Total Livestock Procurement 

Expenditure.....................................................................................................................7 

Figure 3. Total Slaughter Cattle Purchases for Firms Reporting to GIPSA .........................8 

Figure 4. Number of Cattle Slaughter Plants for Firms Reporting to GIPSA .....................9 

Figure 5. Combined Market Share (by Volume) for the Four Largest Steer and Heifer 

Slaughter Firms, Four Largest Cow and Bull Slaughter Firms, and Four Largest Boxed 

Beef Producers................................................................................................................9

Figure 6. Total Hog Purchases for Slaughter for Firms Reporting to GIPSA ....................10 

Figure 7. Number of Hog Slaughter Plants for Firms Reporting to GIPSA .......................11 

Figure 8. Combined Market Share (by Volume) for the Four Largest Hog Slaughter Firms

.......................................................................................................................................11 

Figure 9. Estimated Future Contract Hog Deliveries Compared to Actual Contract 

Deliveries During the Same Period, National Totals, All Contract Types ...................12 

Figure 10. Total Slaughter Sheep and Lamb Purchases for Firms Reporting to GIPSA....13 

Figure 11. Number of Sheep and Lamb Slaughter Plants for Firms Reporting to GIPSA .14 

Figure 12. Combined Market Share (by Volume) for the Four Largest Sheep and Lamb 

Slaughter Firms.............................................................................................................15 

Figure 13. Total Federally Inspected Broiler and Turkey Slaughter (Pounds Ready-toCook).............................................................................................................................15 

Figure 14. Combined Market Share for the Four Largest Broiler and Four Largest Turkey 

Slaughter Firms.............................................................................................................16 

Figure 15. Number of Firms Slaughtering One Class and Number of Firms Slaughtering 

Two or More Classes of Livestock ...............................................................................17 

Figure 16. Cattle Purchases on a Carcass Basis..................................................................18 

Figure 17. Percentage of Steers and Heifers Procured Through Alternative Types of 

Committed Procurement Arrangements by the Four (Five) Largest Steer and Heifer 

Slaughter Firms.............................................................................................................19 

Figure 18. Volume of Cattle (Slaughter and non-slaughter) Marketed Through Firms 

Selling on Commission.................................................................................................21 

Figure 19. Hog Purchases on a Carcass Basis ....................................................................22 

Figure 20. Volume of Hogs Marketed Through Firms Selling on Commission.................23 

Figure 21. Sheep and Lambs Purchased on a Carcass Basis...............................................24 

Figure 22. Volume of Sheep Marketed Through Firms Selling on Commission ...............25 
3

Executive Summary 

This report is prepared in accordance with the Grain Standards and Warehouse 

Improvement Act of 2000 (PL 106-472, Nov. 2000). The Act requires that by March 1st of 

each year, the Secretary of Agriculture shall submit to Congress a report that: 1) assesses 

the general economic state of the cattle and hog industries; 2) describes the changing 

business practices in those industries; and 3) identifies market operations or activities in 

those industries that appear to raise concerns under the Packers and Stockyards Act. 

Additionally, this report includes sections on the sheep-lamb and poultry industries. 

This is the seventh annual report made by the USDA Grain Inspection, Packers and 

Stockyards Administration (GIPSA) to Congress. The report focuses on data GIPSA 

collects under its regulatory authority for the livestock and meat market channels in the 

cattle-beef and hog-pork industries. By focusing on the marketing segment (livestock 

dealers, market agencies, and packers) that GIPSA regulates, the report highlights 

information unavailable from other sources. The report covers events and data available as 

of September 30, 2007, which is the close of the Government’s 2007 fiscal year. Projected 

annual outcomes are, however, on a calendar-year basis. 

Data from annual reports filed by regulated firms provide a snapshot of the industry 

each year. Time trends reveal key industry characteristics and can be used to form 

expectations for 2007. The data show that the four largest firms’ share of the total value of 

livestock purchases, i.e., aggregate industry concentration, has trended upward over the 

past 10 years. Patterns of concentration in purchase of different types of livestock, 

however, have exhibited different trends. Four-firm concentration by volume of slaughter 

in steer and heifer slaughter and boxed beef production have been relatively stable in 

recent years. Concentration in poultry slaughter was fairly constant from 2003 through 

2005, but increased in 2006. Cow and bull slaughter increased in concentration through the 

1997-2007 period. Hog slaughter increased sharply in 2003, but was stable since then until 

declining in 2006. Concentration in sheep slaughter declined from 1998 through 2004, 

increased sharply in 2005, then declined in 2006. 

Trends in marketing practices of packers vary by species. For example, carcass-basis 

purchases of cattle exhibited a strong upward trend from 1998 through 2002, remained 

about the same in 2003 before falling in 2004, and have been relatively stable since. By 

comparison, carcass-basis purchases of hogs increased steadily from 1996 through 1999, 

fell slightly in 2000, and have increased at a relatively slow rate since 2000. 

The four largest beef packers’ use of committed procurement methods increased in 

2006, but packer feeding and use of marketing agreements continue to be below levels of 

the beginning of this decade. Forward contracts and packer feeding each continue to 

represent relatively small portions of total cattle procurement. 

Another source of information on marketing arrangements is the Swine Contract 

Library (SCL) maintained in accordance with the Livestock Mandatory Reporting Act of 

1999. Reports to the SCL of estimated future deliveries under contracts provided a useful 
4

indication of expected future trends in deliveries prior to the expiration of the Act in 

September 2005. The Act was renewed in 2006, but until new regulations are issued, 

reporting is voluntary. 

As carcass-based procurement has historically increased in volume, packers have 

increased the development and testing of carcass evaluation devices in the beef industry. 

Changes to carcass merit programs for hogs were not significant in 2006, perhaps 

reflecting the fact that trends in carcass-basis purchases of hogs have stabilized at high 

levels in recent years. 
5

 I. GENERAL ECONOMIC STATE OF THE INDUSTRIES

The Packers and Stockyards Program (P&SP) of the Grain Inspection, Packers and 

Stockyards Administration (GIPSA) administers and enforces the Packers and Stockyards 

Act (P&S Act). Enforcement involves monitoring financial and business practices in the 

livestock, meatpacking, and poultry industries. As part of this monitoring, every packer, 

live poultry dealer, stockyard owner, market agency, and dealer must file a report annually 

with GIPSA. Since reporting year 1977, packers that operate in interstate commerce and 

purchase $500,000 or more of livestock on an annual basis are required to file an annual 

report with GIPSA. The reports filed by these packers contain data on the quantity and 

costs of the firms’ purchases of livestock for slaughter, the firms’ business practices, and 

financial aspects of the slaughter firms’ operations. Data available from these reports 

provide a snapshot of the industry each year. Data from reports for reporting years through 

2006 are used below to describe recent trends in key characteristics.1 The data were also 

used, along with more recent information from other sources on current industry 

conditions, to develop estimates of those characteristics for 2007. All analysis is based on 

data and information available to GIPSA at the end of fiscal year 2007. Because most of 

the data series are on a calendar-year basis, the anticipated outcomes that are described 

refer to calendar year 2007. 

A. Aggregate Livestock Industry 

Data on the total value of all livestock purchased for slaughter reveal that the four 

largest slaughter firms’ share of total industry expenditures on livestock for slaughter 

increased from 1997 to 2003 but with downturns in some years, and has declined the past 3 

years (Figure 1). The largest four firms’ share for 2007 will likely have shown a slight 

increase based on mergers that occurred during the year (see later sections). 

 

1 Unless otherwise indicated, P&SP data represented in the graphs and discussed in this report are as reported 

in various issues of the annual Packers and Stockyards statistical report (see 

http://www.gipsa.usda.gov/GIPSA/webapp?area=newsroom&subject=landing&topic=pub-stat), 

supplemented with other data from reports filed with Packers and Stockyards Program by business entities 

subject to the Packers and Stockyards Act. The majority of firms file reports on a calendar-year basis, and 

the reports for 2007 are not due until April 15, 2008. GIPSA provides a 90-day extension when requested, 

and performs a data verification process after receiving the reports. Thus 2007 data will be published in early 

2009 in the GIPSA publication Packers and Stockyards Statistical Report, 2007 Reporting Year. 
6

T.34-T

50

55

60

65

70

75

80

85

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Percent

Figure 1. Share of Total Industry Livestock Procurement Expenditures for the Four 

Largest Slaughter Firms, Ranked by Total Livestock Procurement Expenditure 

Several financial ratios can be used to provide a summary of financial conditions in the 

meat-packing industry. Two examples, one for expenses and one for income, are used 

below. First, trends in operating expenses as a percentage of revenue from sales illustrate 

the combined effects of changes in input costs, excluding livestock procurement costs, and 

in firms’ production practices on the costs of doing business over time. Second, trends in 

operating income as a percentage of revenue from sales over time provide a measure of 

profitability. 

Operating expenses expressed as a percentage of sales of large meat-packing firms have 

trended upward since 1996, whereas operating expenses as a percentage of sales for 

smaller firms have trended downward since 2000 except for a sharp increase in 2002. 

Manufacturing costs, i.e., the costs of actual slaughter and processing operations including 

labor, make up the greatest component of operating expenses. Operating expenses include 

manufacturing, advertising and selling, administrative, depreciation and amortization, 

interest, and other day-to-day expenses of running the business. This ratio for large firms 

has tended to be lower than is the case for smaller firms. For example, in only 2 years 

from 1996-2003 were operating expense as a percentage of sales higher for the four largest 

firms than for firms ranked 21st through 40th .

 The ratios were similar for both size groups 

in 2003 through 2005, and in 2006, the ratio of total operating expenses to total sales for 

the group of smaller firms declined while the ratio increased for the largest four firms 
7

(Figure 2). While these differences may suggest that larger firms historically have tended 

to operate larger, lower cost plants than the smaller firms, these financial data are highly 

aggregated across a variety of types of firms. Note that size rankings are based on total 

livestock procurement expenditures. There are differences both across and within size 

groups in combinations of species slaughtered (beef, pork, sheep, poultry) by the included 

firms. 

T.38-39 OE-OI

0

5

10

15

20

25

30

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Percent of Sales

1st - 4th Expenses

21st - 40th Expenses

1st - 4th Income

21st - 40th Income

Figure 2. Total Operating Expenses and Total Operating Income as a Percentage of Sales 

for the Top 4 and the 21st-40th Firms, Ranked by Total Livestock Procurement 

Expenditure 

 

Note also that financial data reported to GIPSA by some firms may include 

information on operations other than meat packing and processing. Variation in other 

types of non-meat activities included in the data from some firms occasionally leads to 

large swings in some of the ratios, especially for the group of smaller firms as exhibited in 

the graph in Figure 2. 

Operating income as a percentage of sales of meat-packing firms had been relatively 

constant in recent years until 2006 (Figure 2). Operating income as summarized here is 

sales minus cost of sales (primarily cost of livestock) and operating expenses, and is 

essentially a measure of profit before taxes. Since 2000, the four largest firms have 

generally had lower operating income as a percentage of sales than the firms ranked 21st

through 40th, a reversal of the relationship that existed prior to 2000. The lower ratio of 

operating income to sales of the larger packers, despite having a lower operating expenses 

ratio, is due to the larger packers paying a higher average cost for livestock (see Table 35, 

2006 P&SP Statistical Report). The larger packers all slaughter a large proportion of steers 

and heifers in their total slaughter mix, whereas about half of the group of smaller packers 
8

specialize in cow and bull slaughter and almost no steers and heifers. Given the increase in 

expense ratio for the larger firms and the decline for the smaller firms as described above, 

the difference between the income ratios for the two size groups widened in 2006, with the 

operating income ratio for the four largest firms falling below zero. 

B. Cattle Industry 

The volume of cattle slaughtered by firms reporting to GIPSA (firms with livestock 

purchases equal or exceeding $500,000 per year) fluctuates with the cattle cycle, with 

changes in total U.S. commercial slaughter trending downward over the past 10 years 

(Figure 3). Total cattle includes steers and heifers (often collectively called “fed cattle”), 

cows, and bulls. In most but not all cases, individual plants operated by firms that report to 

GIPSA tend to slaughter either fed cattle or cows and bulls. 

Data from the USDA National Agricultural Statistics Service indicate that total 

commercial cattle slaughter through the first 8 months of 2007 was slightly higher than for 

the equivalent period in 2006.2

 Assuming this pattern holds throughout the year, this 

suggests that total cattle purchases for 2007 for firms reporting to GIPSA will likewise 

have increased slightly over 2006 levels. 

T.5-C

30,000

31,000

32,000

33,000

34,000

35,000

36,000

37,000

38,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Head (000)

Figure 3. Total Slaughter Cattle Purchases for Firms Reporting to GIPSA 

The number of plants reporting to GIPSA declined by approximately 115, or 42 percent, 

from 1996 through 2003, as plant size increased and smaller plants closed. The number 

has shown some signs of stabilizing since 2004. Based on preliminary information, 

 

2

 National Agricultural Statistics Service, Livestock Slaughter, MtAn 1-2, September 21, 2007. 
9

GIPSA expects there will have been little change in the number of cattle slaughter plants 

reporting in 2007. 

T.3-C

120

140

160

180

200

220

240

260

280

300

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Number

Figure 4. Number of Cattle Slaughter Plants for Firms Reporting to GIPSA 

The percentage of the total volume of steer and heifer purchases accounted for by 

the four largest firms that slaughter steers and heifers has remained between 78 and 82 

percent since 1996. The share of boxed beef production has moved with slaughter 

concentration, although slightly higher (Figure 5). In 2006, acquisitions by larger firms 

were largely offset by plant closings among those firms, but several smaller packers also 

ceased operating, resulting in a slight increase in the combined market share of the four 

largest firms. GIPSA does not believe that firm reorganizations in 2007 will have resulted 

in any significant increase in steer and heifer slaughter concentration or in boxed beef 

production.

T.27-ALL

25.0

35.0

45.0

55.0

65.0

75.0

85.0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Percent

Steer and Heifer

Boxed Beef

Cow and Bull

Figure 5. Combined Market Share (by Volume) for the Four Largest Steer and 

Heifer Slaughter Firms, Four Largest Cow and Bull Slaughter Firms, and Four 

Largest Boxed Beef Producers. 
10

Concentration in cow and bull slaughter has trended upward since 1999. In 2006, 

several smaller packers ceased operating, with some smaller plants being acquired by 

larger firms. These factors resulted in an increase in the combined market share of the four 

largest firms slaughtering cows and bulls. Based on events through September 2007, 

GIPSA expects the market share of the four largest firms slaughtering cows and bulls will 

have remained stable in 2007. 

C. Hog Industry 

Hog slaughter has trended upward in the last 10 years, with slaughter plants reporting 

purchasing about 105 million hogs for slaughter in 2006 (Figure 6). The volume of 

slaughter by plants reporting to GIPSA tends to track total commercial slaughter. Data 

from the USDA National Agricultural Statistics Service indicate that total commercial hog 

slaughter through the first 8 months of 2007 was about 3 percent higher than for the 

equivalent period in 2006.3 Assuming continuation of this level throughout 2007, 

slaughter by plants reporting to GIPSA is expected to have increased by about 3 percent in 

2007. The number of hog slaughter plants exhibited a downward trend in all but 2 years 

since 1996 (Figure 7). Based on firm restructuring through September 2007, GIPSA 

believes it is likely that the number of plants will have declined slightly in 2007. 

T.5-H

80,000

85,000

90,000

95,000

100,000

105,000

110,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Head (000)

 

Figure 6. Total Hog Purchases for Slaughter for Firms Reporting to GIPSA 

 

3

 National Agricultural Statistics Service, Livestock Slaughter, MtAn 1-2, September 21, 2007. 
11

T.3-H

140

160

180

200

220

240

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Number

Figure 7. Number of Hog Slaughter Plants for Firms Reporting to GIPSA 

After remaining stable in the latter half of the 1990s, hog slaughter concentration 

increased from 55 percent in 2002 to about 64 percent in 2003, but declined to about 61 

percent in 2006 (Figure 8). The share of slaughter by the top four firms may have 

increased slightly from that level in 2007, based on firm acquisitions in 2007. 

T.31-H

50

55

60

65

70

75

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Percent

Figure 8. Combined Market Share (by Volume) for the Four Largest Hog 

Slaughter Firms 

In FY 2004, GIPSA implemented a Web-based Swine Contract Library (SCL) in 

accordance with the requirements of the Livestock Mandatory Reporting Act of 1999 
12

(LMRA). After the LMRA expired in September 2005, approximately half the previously 

responding plants continued reporting to GIPSA on a voluntary basis.4 The SCL reports 

swine contract information from swine (hog) packing plants with a slaughter capacity of 

100,000 or more swine per year. The SCL reports information from the submitted 

contracts by region, including price, premiums, discounts, grids, formulas, and other 

important contract terms that GIPSA extracts from offered and available contracts that 

packing firms use to purchase hogs. Each month the SCL also reports estimates of total 

future deliveries of hogs under contract for the following 6-month and 12-month periods. 

The SCL data are known in advance of Agricultural Marketing Service (AMS) data on 

actual deliveries and thus provide a forecast estimate (Figure 9). 

SC 01

10

15

20

25

30

35

Jan-04

Mar-04

May-04

Jul-04

Sep-04

Nov-04

Jan-05

Mar-05

May-05

Jul-05

Sep-05

Nov-05

Jan-06

Mar-06

May-06

Jul-06

Sep-06

Nov-06

Jan-07

Mar-07

Month of Estimate

Million Head

AMS Reported Actual Contract

Deliveries

SCL Estimated Future Contract

Deliveries

Figure 9. Estimated Future Contract Hog Deliveries Compared to Actual Contract 

Deliveries During the Same Period, National Totals, All Contract Types 

Prior to the expiration of the LMRA, GIPSA found that packers’ reports to the SCL of 

estimated future deliveries under contract tended to under-estimate actual deliveries 

subsequently reported by AMS but still provided a useful indication of the trend in 

deliveries. When reporting to the SCL and to AMS became voluntary in September 2005, 

fewer plants provided data to the SCL about estimated future deliveries under contract than 

those that voluntarily provided data to AMS about actual deliveries. As a result, SCL 

estimates became a less accurate predictor of the trend than they had been previously. In 

October 2006, President Bush signed legislation renewing the Livestock Mandatory 

Reporting Act, including the SCL provision. Submission of contract information continues 

 

 4 The Act actually expired briefly in the fall of 2004 but was extended for 1 year. During the 2004 period when the 

Act had expired, about half of the plants reported to GIPSA on a voluntary basis, thus the large decline in late 2004 

shown in the graph in Figure 9. Normal reporting then resumed during the 1-year extension. 
13

to be voluntary until GIPSA regulations are issued. GIPSA expects that the relationship 

between estimated and actual deliveries should approach a more consistent pattern once all 

packers resume filing reports to the SCL as required. 

D. Sheep and Lamb Industry 

The volume of sheep and lambs slaughtered by packers reporting to GIPSA declined in 

every year but 2 from 1996 through 2005, but remained relatively constant in 2006 (Figure 

10). Data from the USDA National Agricultural Statistics Service indicate that total 

commercial sheep and lamb slaughter through the first 8 months of 2007 was slightly less 

than in the equivalent period in 2006.5

 Assuming this pattern held throughout 2007, this 

suggests that total sheep and lamb purchases by firms reporting to GIPSA will have 

declined slightly in 2007. 

 The number of plants slaughtering sheep and lambs declined in 2006 after increasing 

somewhat in 2004 and 2005 (Figure 11). Given the apparent adjustments in slaughter 

capacity as evidenced by the decline in number of plants in 2006, GIPSA does not expect 

much further change in number of plants to have taken place in 2007. 

T.5-S/L

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Head (000)

Figure 10. Total Slaughter Sheep and Lamb Purchases for Firms Reporting to 

GIPSA 

 

5

 National Agricultural Statistics Service, Livestock Slaughter, MtAn 1-2, September 21, 2007. 
14

T.3-S/L

45

55

65

75

85

95

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Number

Figure 11. Number of Sheep and Lamb Slaughter Plants for Firms Reporting 

to GIPSA 

The combined market share of the four largest sheep and lamb slaughter firms trended 

steadily downward from 1998 through 2004 as the largest plants in the industry decreased 

slaughter at a greater rate than total industry slaughter declined (Figure 12). Due to the 

small total slaughter of the industry, large volume adjustments among the largest four 

firms can result in exceptions to the steady downward trend, resulting instead in relatively 

large changes in the percent of slaughter by those firms. For example, in 1997 total 

slaughter of the four largest firms as a group declined at a greater rate than total industry 

slaughter. The next year, a large new plant entered the industry as a new member of the 

group of four largest, and increased the share of the top four. The long-run decline in share 

then resumed until 2005. In that year, one of the four largest firms exited but the 

remaining three large firms increased their combined volume by an amount equal to the 

output of the exiting firm. Since an additional firm then entered the group of four largest, 

there was a net increase total slaughter of the four largest firms and in their share of total 

industry slaughter. The share of the four largest then declined in 2006, and is expected to 

have remained near the 2006 level in 2007. 
15

T.32-S/L

64

65

66

67

68

69

70

71

72

73

74

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Percent

Figure 12. Combined Market Share (by Volume) for the Four Largest Sheep and 

Lamb Slaughter Firms 

E. Poultry Industry 

Federally inspected broiler slaughter (measured in pounds of ready-to-cook broilers) has 

trended upward since 1996, while turkey slaughter has increased only slightly throughout 

the past 10 years (Figure 13). Current information suggests that slaughter of both types of 

poultry may have increased in 2007, as through August 2007 total broiler slaughter 

equaled 99 percent of the volume for the same period in 2006, while total turkey slaughter 

increased during the first 8 months of the year and totaled 104 percent of the volume for 

the equivalent period in 2006.6

BT-1

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Pounds (million)

Broilers 

Turkeys

Figure 13. Total Federally Inspected Broiler and Turkey Slaughter (Pounds Readyto-Cook)7

 

6

 National Agricultural Statistics Service, Poultry Slaughter, Pou 2-1, September 28, 2007. 7

 National Agricultural Statistics Service, Poultry Slaughter, Annual Summary, various issues. 
16

Concentration in broiler and in turkey slaughter remained fairly constant from 2003 

through 2005, but increased as a result of firm acquisitions in 2006 (Figure 14).8

 Any 

additional growth among the top 4 firms in 2007 likely will have been offset by 

restructuring and acquisitions among smaller firms (see section below). 

T-B/HHI1

40

42

44

46

48

50

52

54

56

58

60

2000 2001 2002 2003 2004 2005 2006

Percent

Broilers Turkeys

Year

Figure 14. Combined Market Share for the Four Largest Broiler and Four Largest 

Turkey Slaughter Firms 

F. Livestock and Poultry Production 

GIPSA does not have jurisdiction over livestock producers and poultry growers and 

does not obtain data from those operations. The Economic Research Service (ERS) and 

World Agricultural Outlook Board (WAOB) within USDA devote considerable resources 

to the tracking and analysis of economic conditions in livestock and poultry production. 

According to projections by the ERS, the value of livestock production in 2007 is forecast 

at $140.2 billion, exceeding $100 billion for the fifth consecutive year and $15 billion 

more than the previous record high in 2005.9

 

8

 Concentration or 4-firm market shares reported here for broilers and turkey refers to share of total industry 

output, rather than share of total industry input as in other sections of this report for livestock slaughter firms. 9

 Economic Research Service, Farm Income and Costs Briefing Room, “2007 Net Farm Income Is Forecast 

To Be $87.1 Billion,” http://www.ers.usda.gov/Briefing/FarmIncome/nationalestimates.htm. 
17

II: Changing Business Practices of the Livestock and Poultry Industries 

A. Aggregate Livestock Industry 

A long-term decline in the number of livestock slaughter firms reporting to GIPSA has 

been accompanied by a trend toward increased specialization in slaughter. This is 

illustrated by a greater decline since 1996 in the number of firms slaughtering two or more 

classes of livestock than in the number of firms slaughtering a single class (Figure 15).10 

The decline in number of firms, however, has followed similar patterns for both types for 

the last few years, and GIPSA expects small additional declines in both classes to have 

occurred in 2007. 

T.25-1A

80

100

120

140

160

180

200

220

240

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Number

Firms Slaughtering One Class

Firms Slaughtering Two or More Classes

Figure 15. Number of Firms Slaughtering One Class and Number of Firms Slaughtering Two 

or More Classes of Livestock 

B. Cattle Industry 

Major Acquisitions, Divestitures, and Plant Closures in the Cattle Industry 

There were some major changes in ownership and operations among the largest U.S. beef 

processing firms. J&F Participações S.A. of Sao Paulo, Brazil, parent company of Brazil’s 

JBS S.A., completed its acquisition of Swift & Co. in July 2007. The new company, JBS 

 

 10 For purposes of this comparison, the separate classes of livestock are steers and heifers; cows and bulls; 

calves; sheep and lambs; and hogs. 
18

Swift & Co., initiated a second shift at its Greeley, Colorado, beef processing plant in 

September 2007. It planned for the new shift to have reached its full capacity by January 

2008. 

Tyson Foods closed its Boise, Idaho, fed cattle slaughter plant in October 2006. In 

February 2007, XL Four Star Beef reopened the Nampa, Idaho, cow and bull slaughter 

plant it acquired from Swift & Co. North Star Beef, formerly Minnesota Beef Industries, 

Buffalo Lake, Minnesota, reopened a plant in September 2007 that had closed in February 

2006. 

Carcass-Basis Purchases 

Purchases of cattle on a carcass basis, as opposed to on a live-weight basis, trended 

upward from 1998 through 2002 (Figure 16). Since a sharp decline in 2004, the volume 

stabilized in 2005 and 2006. GIPSA expects the volume purchased on a carcass basis to 

have increased slightly in 2007.

T.15-C

14,000

15,000

16,000

17,000

18,000

19,000

20,000

21,000

22,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Head (000)

Figure 16. Cattle Purchases on a Carcass Basis 

Packers have increased the development and testing of carcass evaluation devices in the 

beef industry. GIPSA has attended carcass tests conducted jointly by AMS and device 

manufacturers to evaluate device performance under real-time conditions in packing 

plants. While these devices are not yet being used as a basis for payment to producers, the 
19

industry is poised to augment traditional USDA AMS meat grading services with complex 

images that provide a “score” of carcasses for both yield grade and marbling. 

Procurement Methods 

Packers use multiple procurement methods to obtain live cattle for slaughter. The 

methods commonly fall into two categories: (1) cash sales for immediate delivery or 

sometimes on a delayed delivery, normally within a 2-week period, and (2) “committed 

procurement” arrangements that create an assured exchange and commit the cattle to a 

particular packer in excess of 14 days prior to delivery. Since 1999, GIPSA has collected 

and audited data on the three major committed procurement methods used by the four 

largest firms that slaughter fed cattle and, beginning in 2006, it collected the data from the 

five largest fed cattle slaughter firms. These methods include packer feeding, forward 

contracts, and marketing agreements. 

GIPSA defines “packer fed” livestock as all livestock obtained for slaughter that a 

packer, a subsidiary of the packer, the packer’s parent firm, or a subsidiary of the packer’s 

parent firm owns, in whole or part, for more than 14 days before the packer slaughters the 

livestock. The percentage of total purchases of fed cattle that are obtained through packer 

feeding arrangements by the largest steer and heifer slaughter firms declined in 2004 and 

2005 but increased slightly in 2006 (Figure 17). GIPSA expects that the percentage of 

total procurement obtained from packer feeding by these firms will have remained in the 7- 

8 percent range in 2007. 

T.16-All

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

1999 2000 2001 2002 2003 2004 2005 2006

Year

Percent

Packer-fed Forward Contracts Marketing Agreements Total

Figure 17. Percentage of Steers and Heifers Procured Through Alternative Types of 

Committed Procurement Arrangements by the Four (Five) Largest Steer and Heifer 

Slaughter Firms11

 

 11 Prior to 2006, data refer to the four largest firms. In 2006, data include the five largest firms. 
20

Marketing arrangements termed “forward contracts” are agreements between packers 

and sellers for future delivery of a specific lot or quantity of livestock. The price of the 

cattle in a forward contract can be set at the time of the contract or determined upon 

delivery based upon an agreed pricing arrangement, e.g., using prices from the Chicago 

Mercantile Exchange futures market for live cattle with an adjustment for the basis at the 

time of delivery. 

The four largest firms’ use of forward contracts has been trending upward in recent 

years and continued with the addition of the fifth largest firm (Figure 17). The percentage 

of fed cattle procured through the use of forward contracts by the group of largest steer and 

heifer slaughter firms may have increased slightly in 2007. 

The term “marketing agreements” includes a variety of agreements that establish an 

ongoing relationship for trading multiple lots of cattle rather than negotiating single lots of 

cattle. In these arrangements, the seller agrees to deliver cattle to the packer at a future 

date, with the price generally being determined by some type of formula pricing 

mechanism. The price is often based on the current cash market at the time of delivery 

with premiums or discounts determined by evaluation of carcass characteristics. Many of 

these arrangements commit livestock through an alliance or cooperative of some type. 

Of the three categories of committed procurement, marketing agreements account for 

the largest proportion of total committed procurement. The percentage of fed cattle 

procured through the use of marketing agreements by the four largest steer and heifer 

slaughter firms fell in 2003 and 2004, then increased in 2005, and continued to grow in 

2006 with the addition of a fifth firm to the group (Figure 17). GIPSA expects that use of 

marketing agreements will continue to increase and will likely account for between 27 and 

29 percent of total procurement in 2007 by the five largest steer and heifer slaughter firms. 

Since marketing agreements account for a large portion of total committed procurement, 

the trend in the percentage of fed cattle procured through the use of all methods of 

committed procurement closely resembles that for marketing agreements (Figure 17). 

Total committed procurement (packer feeding, forward contracts, and marketing 

agreements) by the five largest steer and heifer slaughter firms in 2007 is expected to lie 

between 42 and 45 percent of those four firms’ total procurement for slaughter. 

Importance of Commission Firms 

Although the volume of cattle handled by commission firms has trended downward 

over the last 10 years, these firms continue to play an important role in the cattle industry, 

particularly for cull cows (Figure 18). While data are not available for 2007, GIPSA 

expects that the downward trend may moderate somewhat. 
21

T.42-C

35,000

36,000

37,000

38,000

39,000

40,000

41,000

42,000

43,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Head (000)

Figure 18. Volume of Cattle (Slaughter and non-slaughter) Marketed Through 

Firms Selling on Commission 

C. Hog Industry 

Major Acquisitions, Divestitures, and Plant Closures in the Hog Industry 

On October 6, 2006, Smithfield Foods announced completion of its acquisition of 

ConAgra Foods Refrigerated Meats Business. The products have been renamed under the 

Armour Eckrich brand, a unit under Smithfield’s John Morrell subsidiary. Armour Eckrich 

also announced the closing of two processing plants this year—in Kansas City, Missouri, 

and Lufkin, Texas. 

On May 7, 2007, Smithfield’s acquisition of Premium Standard Farms was finalized. 

Premium Standard’s Milan, Missouri, plant will be operated by Smithfield’s Farmland 

Foods subsidiary, and the Clinton, North Carolina, plant will be operated by Smithfield 

Packing Company. Both plants are slaughtering and processing facilities. 

In February 2007, Smithfield ceased operating the second shift at its John Morrell 

slaughter and processing plant in Sioux City, Iowa. The shift was restored in September 

2007 to supply the Chinese market, which was significantly affected by the outbreak of 

blue ear disease in China. An additional 3,200 hogs per day, or half a regular production 

shift, were being slaughtered and processed as of September 2007. 

JBS S.A. of Brazil completed its purchase of Swift & Company on July 12, 2007. On 

March 26, 2007, Sara Lee Corporation ceased operations at its Bryan Foods hog 
22

slaughtering and processing plant in West Point, Mississippi. The plant had capacity to 

process around 6,200 head daily. 

Carcass-Basis Purchases 

Carcass-basis purchases of hogs have stabilized at high levels in recent years, gradually 

increasing from 70,000 head in 2000 to 80,000 head in 2005, after increasing more rapidly 

from 1996 through 1999 (Figure 19). With continuation of long-term trends, carcass-basis 

hog purchases for 2007 would range between 76.3 million head and 93.4 million head. 

However, given the trend since 1999, GIPSA expects that the number will have been near 

the bottom end of the range. 

T.15-H

35,000

40,000

45,000

50,000

55,000

60,000

65,000

70,000

75,000

80,000

85,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Number of Head (000)

 

Figure 19. Hog Purchases on a Carcass Basis 

Procurement Methods 

Production contracts and marketing contracts continue to be the most common methods 

that packers use to procure hogs. In production contracts, contractors provide hogs, retain 

ownership, and contract with growers to care for and raise hogs according to contract 

standards. In marketing contracts, producers who own the hogs contract with a packer to 

sell them under agreed-upon terms. Although these methods continue to evolve, GIPSA 

did not observe major changes in the use of production and marketing contracts during 

2007. 
23

Importance of Commission Firms 

The volume of hogs marketed through firms selling on commission declined from 1998 

through 2002 (Figure 20). The volume of hogs marketed through commission firms has 

trended upward since 2003, and likely will be shown to have continued to increase in 2007. 

T.42-H

6,000

7,000

8,000

9,000

10,000

11,000

12,000

13,000

14,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Head (000)

Figure 20. Volume of Hogs Marketed Through Firms Selling on Commission 

D. Sheep and Lamb Industry 

Major Acquisitions, Divestitures, and Plant Closures in the Sheep and Lamb Industry 

Producers Lamb & Goat, L.P., which had started business as a new firm in 2005 by 

reopening a closed plant previously operated by Rancher’s Lamb in San Angelo, TX, 

ceased operations in the spring of 2006. The closed plant’s capacity had been among the 

largest in the industry. 

Carcass-Basis Purchases 

The volume of sheep and lambs purchased on a carcass basis has fallen by half since 

1996 and continued declining the past 2 years after exhibiting some stability in 2003 and 

2004 (Figure 21). The decline in carcass purchases has corresponded to the decline in total 

slaughter over time, so GIPSA expects that purchases of sheep and lambs on a carcass 

basis will have declined slightly in 2007 given the expected small decline in total volume 

of sheep and lamb slaughter noted above. 
24

T.15-S/L

900

1,100

1,300

1,500

1,700

1,900

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Head (000)

Figure 21. Sheep and Lambs Purchased on a Carcass Basis 

Procurement Methods 

Procurement methods used in the purchase of sheep and lambs for slaughter are similar 

to those used for other species and include purchase in spot markets, use of marketing 

agreements, use of various other forms of advance sales contracts, and packer feeding. 

Some lamb producers who feed their own lambs market their lambs through a lamb 

feeding operation or feedlot that has a supply contract agreement with a packer. There are 

also business arrangements where individuals who have a financial interest in large lamb 

packing companies also have lamb feeding operations and supply lambs to the packing 

company. Some producers participate in cooperatives, associations, or pools of lamb 

producers to collectively market their lambs and lamb products. As with other species, the 

various procurement methods used for lambs continue to evolve but GIPSA did not 

observe major changes in the methods during 2007.12 

Use of Commission Firms 

Use of commission firms for the sale of sheep and lambs has followed a downward 

trend similar to the trends for cattle, but has been constant the past 2 years (Figure 22). 

GIPSA expects the recent stability to have continued in 2007. 

 

 12 For additional information, see GIPSA Livestock and Meat Marketing Study, Volume 5: Lamb and Lamb 

Meat Industries, Final Report, RTI International, January 2007, 

http://archive.gipsa.usda.gov/psp/issues/livemarketstudy/LMMS_Vol_5.pdf 
25

T.42-S/L

3,000

3,500

4,000

4,500

5,000

5,500

6,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Head (000)

Figure 22. Volume of Sheep Marketed Through Firms Selling on Commission 

E. Poultry Industry 

Major Acquisitions, Divestitures, and Plant Closures in the Poultry Industry 

In 2007 Koch Foods, Inc. purchased two Tyson Foods, Inc., Alabama-based complexes 

in Gadsden and Ashland. Pilgrim’s Pride Corporation, Pittsburg, Texas, completed its 

takeover of Gold Kist, Inc., making Pilgrim’s Pride Corporation the largest broiler 

processor in the United States.13 

Procurement Methods 

The poultry industry has been almost completely vertically integrated for several 

decades, and the use of spot markets for poultry is virtually nonexistent. Live poultry 

production is coordinated through production (grow-out) contracts, company-owned farms, 

and marketing agreements. In production contracts, the integrator (poultry slaughter and 

processing firm) owns the birds and the feed and provides them to the contract grower. 

The grower’s compensation is based on the services the grower provides, including labor, 

housing, water, and in some cases other purchased inputs. In marketing agreements, 

growers retain ownership of both the birds and the feed, and growers’ compensation is 

determined by the difference between the stipulated price of the finished product and the 

cost of producing it. There are no marketing agreements in broiler production, but they are 

used in turkey production. GIPSA did not observe any major changes in the basic industry 

structure and procurement methods used in the poultry industry in 2007. 

 

13 Watt Poultry, USA, February 2007, http://www.wattpoultryusadigital.com/wattpoultryusa/200702/?pg=14&search=rankings&per_page=5&results_page=1&doc_id=-1 
26

Changing Production Technology 

Genetic and nutritional improvements in broiler production have increased the 

efficiency of broiler meat production, but reaching the full genetic and growth potential of 

broilers requires a controlled environment in the broiler house. Housing construction, 

equipment, and operating methods affect the efficiency of broiler houses. Contract 

growers continue to face rapidly rising energy costs. Some older houses that are currently 

structurally capable of growing birds are rapidly becoming “energy obsolete” because of 

high operating costs. Although modernization of broiler houses may benefit some growers 

by improving their productivity, the modernization cost of upgrading broiler houses will 

most likely fall directly on the growers with a possible net negative effect on the cash flow 

of some broiler operations. 
27

III: OPERATIONS OR ACTIVITIES IN THE LIVESTOCK AND POULTRY INDUSTRIES

THAT RAISE CONCERNS UNDER THE PACKERS AND STOCKYARDS ACT 

Industry Annual Reports 

Regulations issued under the authority of the P&S Act require that every packer, live 

poultry dealer, stockyard owner, market agency, and livestock dealer, unless exempt, file a 

report annually with GIPSA.14 Completeness and timeliness of these annual filings are a 

concern to GIPSA. Firms operating on a fiscal-year basis must file their report not later 

than 90 days after the close of their fiscal year. Firms operating on a calendar-year basis 

must file their report not later than April 15, which is the latest a report can be received 

without being late in a given filing year. GIPSA grants extensions of up to 90 days to 

firms that report difficulty in completing reports by the firm’s established due date. Not 

counting extensions, for the 2006 reporting year GIPSA received 46 percent of its reports 

late (or the forms were so incomplete as to require re-filing). Receiving a large percentage 

of late or incomplete annual reports affects other GIPSA operations adversely, including 

timely determination of bond requirements; custodial account and firm solvency 

validations; accurate determination of active businesses; and public reporting requirements 

GIPSA itself must meet. Statistical analysis shows a high positive correlation between late 

reports and other violations of the Packers and Stockyards Act that do directly affect 

sellers.15

GIPSA Actions 

GIPSA had historically relied heavily on voluntary compliance, including granting 

extensions and working with respondents to correct and complete reports. Starting in 

2006, GIPSA began identifying firms with a history of repeated late filings, or incomplete 

filings, and developed cases to be referred to the Office of the General Counsel (OGC) for 

processing in conjunction with the Department of Justice (DOJ). Because the filing of a 

late report is a violation of Section 6 of the Federal Trade Commission Act, these cases are 

prosecuted by Assistant U.S. Attorneys within the Department of Justice. Fines can be 

substantial (in the $10,000 range) based on a $110 per day assessment for each day the 

report is late. In fiscal year 2006, 4 files were referred to OGC for review and transmittal 

to DOJ, and in fiscal year 2007, 35 files were forwarded to OGC. In addition to seeking 

stronger enforcement action, GIPSA is examining its annual report forms and has 

contacted industry associations to schedule meetings within industry to determine if there 

are options available that would facilitate timely reporting including formats for electronic 

submission of data and less detailed forms. GIPSA will also consider regulations in 2008 

that would establish a 5-year registration limit to aid in tracking active businesses. 

 

14 As noted in Section I of this report, since 1977 packers that purchase less than $500,000 of livestock on an 

annual basis have been exempt from filing an annual report with GIPSA. 

15 The 2007 composite compliance rate was 73 percent for regulated industry behavior that directly affects 

sellers. 
28

Structural Change and Increased Coordination in Meat Packing 

Concerns about increases in concentration and related changes in industry structure, and 

the perception that these changes are inherently anticompetitive continue to be expressed 

as criticisms of economic efficiency within the livestock and meat industry. Although 

concentration has stabilized somewhat in recent years in some segments of the livestock 

and meat industry, continued mergers and acquisitions, plant closings, and plans of leading 

firms to build new plants all suggest concentration and structural change will continue to 

be a source of concern. With increasing concentration (share of total market or production 

at a given stage), there has also been an increase in consolidation of control by individual 

firms. Consolidation refers to changes that often reduce the number of firms but also 

increase individual firms’ coordination and control of activities across stages of the 

production and marketing system. Increased cross-stage coordination and control are often 

associated with use of production contracts, marketing contracts and ownership of 

production operations at another stage in the production and marketing system. 

GIPSA Actions 

GIPSA has administrative authority in the livestock sector under the P&S Act and acts 

to enforce the Act and enhance competitive markets. GIPSA does not have authority to 

review or to prevent mergers and acquisitions, but often cooperates with and lends its 

industry expertise to DOJ in its review of mergers in the livestock, meatpacking, and 

poultry industries. 

Changes in industry structure, such as concentration levels and vertical integration, tend 

to alter the focus GIPSA has on particular firms and behavior. These industry-wide 

changes reflect the dynamics of competition, and hence are not prohibited by the P&S Act. 

It is important to note that many of the changes in coordination associated with industry 

consolidation may also provide for improved economic performance of the industry, that 

is, lower processing costs and consumer prices. Also, structural change can lead to 

downstream market alliances to facilitate penetration of retail markets with branded 

products to increase consumer choices. Merger and acquisition activity in recent years has 

increased the market shares of firms with management expertise in supply channel 

management across channels, including value-added processing and branded product 

retailing. The capability to increase branded retail products depends on high levels of 

input supply management to achieve uniform and high levels of packing plant utilization, 

and production of carcasses that can be processed into uniform retail products. 

In fiscal year 2003, GIPSA received $4.5 million in appropriations for a broad study of 

marketing practices in the entire livestock and red meat industries from farmers to retailers, 

food service firms, and exporters. The study addressed many questions and concerns that 

have been raised about changes in the structure and business practices in the livestock and 

meat industries. RTI, International Inc. delivered a final report in the late fall of 2006, and 

GIPSA publicly released the report in February 2007 after briefing Congress on the results 
29

of the study.16 The study provided a quantitative analysis of prices and of costs-benefits of 

alternative marketing arrangements, and it assessed the implications of potential future 

changes in the use of various types of marketing arrangements, including packer feeding. 

The study found that alternative marketing arrangements provide net benefits to 

producers, packers, and consumers, and that net economic losses would result from 

restrictions on the use of such arrangements. 

In particular, the study found that packers and consumers receive better quality and 

more consistent product as a result of alternative arrangements, and producers receive 

value for better quality livestock. All parties are better able to set delivery/sale dates. The 

arrangements help to stabilize the flow of supply, and provide cost savings in sellers and 

buyers interactions to arrive at a market price (i.e., the price discovery process). In 

general, the use of alternative marketing arrangements provides livestock buyers and 

sellers with improved risk management options that lower costs or allow for the creation 

and capture of greater value. 

Currently, GIPSA inspects the procurement records of the five largest fed cattle packers 

to verify firm reporting accuracy for cattle procured under alternative marketing 

agreements, including cattle procured through packer ownership, forward contracts, market 

agreements, and the spot market. In 2008, GIPSA will expand its inspection of 

procurement practices to include the five largest hog packers. GIPSA’s review assists in 

correctly categorizing the cattle procured under contract into one of the committed 

procurement methods, or alternatively into a non-committed method. The review also 

contributes to available information on the trends and methods by which the packers 

procure cattle. 

Adequacy of Bonds for Regulated Entities 

The P&S Act provides that the Secretary may require packers, market agencies, and 

livestock dealers to have reasonable bonds (7 USC§204). The regulations issued under the 

P&S Act prescribe bond requirements and bonding formulas for market agencies either 

buying or selling on commission or acting as clearing agencies; for livestock dealers; and 

for packers purchasing over $500,000 of livestock annually. These entities must maintain 

a bond or bond equivalent to protect unpaid livestock sellers. The bonding formulas, last 

modified in 1983, rarely provide full coverage to livestock sellers when a bonded entity 

experiences financial difficulty. Between fiscal years 2002 and 2007, sellers who were not 

paid as a result of financial failures by market agencies selling on commission recovered 

between 35 and 78 percent of their total claim amounts each year. During the same period, 

the recovery rate ranged between 5 and 21 percent for livestock sellers owed by dealers 

that failed financially. Members of the livestock industry and Congress have expressed 

 

16 Copies of the report can be obtained at: 

http://www.gipsa.usda.gov/GIPSA/webapp?area=home&subject=lmp&topic=ir-mms. 
30

concerns about the adequacy of bonds and GIPSA is concerned about the low recovery 

rates and the effect on orderly marketing of livestock. 

GIPSA Actions 

GIPSA has analyzed options to improve the recovery rate of payment owed to livestock 

sellers. GIPSA is preparing to publish an Advance Notice of Public Rulemaking in the 

Federal Register in fiscal year 2008. The notice will seek public comment on an industrywide bond increase and on an additional increase for regulated entities identified as a high 

risk. 

Transparency of Market and Dealer Information 

 

Livestock sellers have indicated to GIPSA that they have difficulty obtaining 

information about the tariff schedules of markets and bond protection levels carried by 

livestock dealers, markets, and packers. This is nonproprietary information that should be 

readily available to sellers. 

GIPSA Actions 

To facilitate improved access to public information of businesses regulated under the 

P&S Act, GIPSA will initiate Web postings in 2008 of the bond levels carried by regulated 

entities and their tariff schedules if applicable. 

Live Poultry Dealer (Poultry Processor-Integrator) Requirements To Upgrade 

Broiler Housing Types 

A range of poultry housing technologies is currently in use in the broiler industry. 

Older conventional houses are generally equipped with fans for circulating air and curtains 

on the house for ventilation. Conventional houses continue to be replaced with broiler 

houses utilizing tunnel ventilation and cool cells enhancing the ability to control the birds’ 

environment. This added control allows growers to produce birds more efficiently using 

less feed, with lower mortality rates and a reduction in the age of the broiler to reach target 

weights. These efficiencies in turn reduce the live poultry dealer’s costs of growing 

broilers. These new houses may also benefit growers by allowing live poultry dealers, i.e., 

integrators, to place more birds per square foot in houses in the summer, increasing output 

per square foot of house and thus payments to growers. 

Adoption of the new technologies requires the grower to make substantial investments 

in new housing or improvements to existing broiler houses. In order to encourage growers 

to adopt these technologies, integrators often offer a higher base pay, base pay adjustments, 

or bonuses on top of normal pay to growers producing in houses using the improved 

technologies. These practices may result in different growers receiving different 

compensation per pound for producing the same size broiler. Moreover, the growers using 

improved housing technologies have an advantage when competing with growers using 

older technologies under the relative performance payment systems used in many broiler 

contracts. Under relative performance payment systems, a group of growers receives birds 
31

for feeding simultaneously. Payment to an individual grower is in part determined by the 

cost per pound to the integrator for birds grown by that grower relative to the cost per 

pound for birds grown by other growers in the group. In addition, more favorable contract 

terms, such as longer contract length, may be offered to growers using the improved 

housing technologies. 

GIPSA Actions: 

Differences in contracts or payments are not prohibited by the P&S Act unless they 

constitute engaging in or using an unfair or unjustly discriminatory or deceptive practice or 

device in commerce, or unless they constitute making or giving, in commerce, an undue or 

unreasonable preference or advantage, or result in undue or unreasonable prejudice or 

disadvantage as between persons or localities. Live poultry dealers may have valid 

business reasons for requiring upgrades to broiler houses, and growers may benefit from 

increased productivity and reduced growing costs. Many courts have found that to 

constitute a violation of the P&S Act, such practices must be shown to result in an adverse 

impact on competition or that they are likely to produce an adverse competitive impact. 

Examples of practices that potentially could be deemed unfair include: 

• Live Poultry Dealers may offer contracts to some of their poultry growers with less 

advantageous contract terms than those offered to other poultry growers without a 

justifiable and reasonable business reason. 

• Live Poultry Dealers may abuse their power by requiring poultry growers already 

under contract to make significant capital improvements in their operations as a 

condition for continued placement of chicks, or other benefits, with no guarantee that 

the growers will continue to be offered contracts or placements of chicks for a period 

long enough to recover their investment. 

GIPSA continues to actively monitor developments in this and other areas of concern to 

determine whether action is warranted, and, if so, the nature of the action. 
OMB Control No. 0580-0015 

Form P&SP-6020 February 2007 page 1 of 2 

U.S. DEPARTMENT OF AGRICULTURE

GRAIN INSPECTION, PACKERS AND 

STOCKYARDS ADMINISTRATION

PACKERS AND STOCKYARDS 

PROGRAM

ANNUAL ASSESSMENT REPORT COMMENT FORM

Thank you for your interest in GIPSA’s Report, Assessment of the Livestock and Poultry

 Industries. As a means of both improving the publication and gaining insight on the 

issues arising in the cattle, hog, poultry, and sheep industries we invite your comments and ideas 

for future publications. 

1. Please indicate which area of the report you found to be the most useful (please check 

one box): 

 General Economic State  Changing Business Practices  Operations or Activities that Raise Concerns 

2. Please indicate which area of the report you found to be the least useful (please check 

one box): 

 General Economic State  Changing Business Practices  Operations or Activities that Raise Concerns 

3. Please rate your overall satisfaction with the report (please check one box): 

 Excellent  Good  Average  Poor  Very Poor 

4. Please identify each industry you are involved with (please check all that apply): 

 Cattle  Hog  Poultry  Sheep  Other: ____________ 

5. Please identify your primary role(s) in the industry: 

 Producer  Processor  Packer  Stockyard  Feedlot  Other: ____________ 

6. What changing business practices have you witnessed in the livestock, poultry, or meat 

industry?

7. What concerns in your industry would you like us to address in future publications? 

8. Additional comments or suggestions: 
Form P&SP-6020 July 2004 page 2 of 2 

9. If you would like to provide your contact information, please do so below. 

Name: _________________________________________________________________ 

 Last Name First Name 

Business Name (if applicable): ______________________________________________ 

Mailing Address:_________________________________________________________ 

Street 

_______________________________________________________________________ 

City/Town State Zip Code 

E-mail Address: __________________________________________________________ 

Telephone Number: (including area code) _____________________________________ 

Thank you for your response to this questionnaire. 

Please submit the completed questionnaire using one of the following methods: 

1) Mail the document to the following address: 

 Grain Inspection, Packers and Stockyards Administration 

Packers and Stockyards Program, Assessment Report 

1400 Independence Ave. SW, Stop 3647 

Washington, DC 20250-3647 

2) E-mail the form to: pspiad.gipsa@usda.gov with the subject line as “Assessment 

Report,” or 

3) Fax the form to: (202) 690-1266, ATTN: Assessment Report Coordinator. 

According to the Paperwork reduction Act of 1995, no persons are required to respond to a collection of information unless it displays a valid 

OMB control number. The valid OMB control number for this information is 0580-0015. The time required to complete this collection is 

estimated to average 10 minutes per response, including the time to review instructions, search existing data resources, gather the data needed, 

and complete and review the information collection. 
P&SP-6020i February 2007 Page 1 of 1 

 

Instructions for Completing 

The Annual Assessment Report Comment Form P&SP-6020 

You may use any of the following methods to submit the form: 

1) Mail the document to the following address: 

 USDA Grain Inspection, Packers and Stockyards Administration 

Packers and Stockyards Program, Assessment Report 

1400 Independence Ave. SW, Stop 3647 

Washington, DC 20250-3647 

2) E-mail the form to: pspiad@usda.gov, with the subject line as “Assessment Report,” or 

3) Fax the form to: (202) 690-1266, ATTN: Assessment Report Coordinator. 

Line 

No. 

Subject Instruction 

1. Most Useful Part of the 

Report 

Check the appropriate box to indicate which part of the 

report you found most useful. 

2. Least Useful Part of the 

Report 

Check the appropriate box to indicate which part of the 

report you found least useful. 

3. Overall Satisfaction Check the appropriate box to indicate your overall opinion 

of the report. 

4. Industry Segment Check the appropriate box(es) to indicate each livestock 

category you work with. 

5. Industry Roles Check the appropriate box(es) to indicate your primary 

roles in the livestock, poultry, or meat industries. 

6. Changing Business 

Practices 

Enter a description of the changing business practices that 

you noticed during the past year. 

7. Industry Concerns Enter a description of the concerns you experienced in the 

livestock, poultry, or meat industries over the past year that 

you would like us to address in future publications. 

8. Additional Comments Enter any additional comments that will help to improve 

future annual assessment reports. 

9. Contact Information Enter your name, business name, mailing address, e-mail 

address, and telephone number.