Assessment of the Livestock and Poultry Industries 

FY 2006 Report 

United States Department of Agriculture 

Grain Inspection, Packers and Stockyards Administration 

March 2007 
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1

Table of Contents 

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

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

Executive Summary...................................................................................................................... 4 

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

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

B. Cattle Industry .................................................................................................................... 7 

C. Hog Industry........................................................................................................................ 9 

D. Sheep and Lamb Industry................................................................................................ 12 

E. Poultry Industry................................................................................................................ 13 

F. Livestock and Poultry Producers..................................................................................... 14 

II: Changing Business Practices of the Livestock and Poultry Industries Industries ......... 16 

A. Aggregate Livestock Industry.......................................................................................... 16 

B. Cattle Industry .................................................................................................................. 16 

C. Hog Industry...................................................................................................................... 20 

D. Sheep and Lamb Industry................................................................................................ 22 

E. Poultry Industry................................................................................................................ 23 

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

Under the Packers and Stockyards Act .................................................................................... 25 
2

Table of Figures 

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

Slaughter Firms, Firm Size Ranked by Total Livestock Procurement Expenditure................ 5 

Figure 2. Total Operating Expenses as a Percentage of Sales for the Top 4 and the 21st-40th

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

Figure 3. Operating Income as a Percentage of Sales for the Top 4 and the 21st-40th Firms, 

Ranked by Total Livestock Procurement Expenditure............................................................ 7 

Figure 4. Total Slaughter Cattle Purchases for Firms Reporting to GIPSA .................................. 7 

Figure 5. Number of Cattle Slaughter Plants for Firms Reporting to GIPSA .............................. 8 

Figure 6. Combined Market Share (by Volume) for the Four Largest Steer and Heifer Slaughter 

Firms........................................................................................................................................ 8 

Figure 7. Combined Market Share (by Volume) for the Four Largest Firms Producing Boxed 

Fed Beef................................................................................................................................... 9 

Figure 8. Combined Market Share (by Volume) for the Four Largest Cow and Bull Slaughter 

Firms........................................................................................................................................ 9 

Figure 9. Total Hog Purchases for Slaughter for Firms Reporting to GIPSA ............................. 10 

Figure 10. Number of Hog Slaughter Plants for Firms Reporting to GIPSA.............................. 10 

Figure 11. Combined Market Share (by Volume) for the Four Largest Hog Slaughter Firms.... 11 

Figure 12. Actual Total Contract Deliveries Over Following Six Months Versus Swine Contract 

Library Estimates of Future Deliveries Over Same Periods, National Totals, All Contract 

Types...................................................................................................................................... 11 

Figure 13. Total Slaughter Sheep and Lamb Purchases for Firms Reporting to GIPSA............. 12 

Figure 14. Number of Sheep and Lamb Slaughter Plants for Firms Reporting to GIPSA.......... 12 

Figure 15. Combined Market Share (by Volume) for the Four Largest Sheep and Lamb 

Slaughter Firms...................................................................................................................... 13 

Figure 16. Total Federally Inspected Broiler and Turkey Slaughter (Pounds Ready-to-Cook) .. 13 

Figure 17. Combined Market Share for the Four Largest Broiler Slaughter Firms..................... 14 

Figure 18. Combined Market Share for the Four Largest Turkey Slaughter Firms .................... 14 
3

Figure 19. Number of Firms Slaughtering One Class and Number of Firms Slaughtering Two or 

More Classes of Livestock..................................................................................................... 16 

Figure 20. Cattle Purchases on a Carcass Basis........................................................................... 17 

Figure 21. Percentage of Steers and Heifers Procured Through Packer Feeding Arrangements by 

the Four Largest Steer and Heifer Slaughter Firms............................................................... 18 

Figure 22. Percentage of Steers and Heifers Procured Through Forward Contracts by the Four 

Largest Steer and Heifer Slaughter Firms ............................................................................. 18 

Figure 23. Percentage of Steers and Heifers Procured Through Marketing Agreements for the 

Four Largest Steer and Heifer Slaughter Firms..................................................................... 19 

Figure 24. Percentage of Steers and Heifers Procured Through all Methods of Committed 

Procurement for the Four Largest Steer and Heifer Slaughter Firms.................................... 19 

Figure 25. Volume of Cattle (Slaughter and non-slaughter) Marketed Through Firms Selling on 

a Commission Basis............................................................................................................... 20 

Figure 26. Hog Purchases on a Carcass Basis ............................................................................. 21 

Figure 27. Volume of Hogs Marketed Through Firms Selling on Commission ......................... 21 

Figure 28. Sheep Purchased on a Carcass Basis.......................................................................... 22 

Figure 29. Volume of Sheep Marketed Through Firms Selling on a Commission Basis............ 23 

 
4

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. 

This is the sixth annual report made by the 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. Additionally, the report 

includes sections on the sheep-lamb and poultry industries. By focusing on the marketing segment 

(livestock dealers, markets, and packers) that GIPSA regulates, the report highlights information 

unavailable from other sources. The report covers events and data available as of September 30, 2006, 

which is the close of the government fiscal year. Most of the discussion of the projected annual 

outcomes, however, is on a calendar year basis. 

Data available from annual reports filed with GIPSA by packers provide a snapshot of the industry each 

year through the most recent year of data available. The data were used to reveal trends over time in key 

industry characteristics and project expectations for 2006. The data show that the four largest firms’ 

share of the total value of livestock purchases, i.e., aggregate industry concentration, has trended steadily 

upward over the last 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 total cattle, 

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

recent years, while cow and bull slaughter and hog slaughter have exhibited increases in concentration, 

and concentration in sheep slaughter has declined over this period. 

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, then increased in 2005. By comparison, carcass-basis purchases of hogs increased steadily from 

1995 through 1999, fell slightly in 2000, and have increased at a relatively slow rate since since 2000. 

The four largest beef packers’ use of committed procurement methods increased slightly in 2005, but 

packer feeding and use of marketing agreements have both declined notably since the first 3 years of this 

decade. Only forward contracting exhibits a continuing upward trend. Forward contracts currently, 

however, represent a relatively small portion 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 indication of expected future trends in deliveries prior to the expiration of the 

Act in September 2005. The Act was recently renewed.

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 already-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) and 

monitors financial and business practices in the livestock, meatpacking, and poultry industries. 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 

2005 are used below to describe recent trends in key characteristics.1

 The data were also used to develop 

simple statistical estimates (predictions) of expected ranges for those characteristics in 2006. If additional 

information is available to GIPSA, the predictions based upon the statistical estimates have been adjusted 

to reflect that data. All analysis is based on data and information available to GIPSA at the end of fiscal 

year 2006. Because most of the data series are on a calendar year basis, the anticipated outcomes that are 

described refer to calendar year 2006. 

A. Aggregate Livestock Industry 

Data on the value of livestock purchased for slaughter reveal that the four largest packing firms’ share of 

total industry expenditures on livestock for slaughter has trended upward over the last 10 years (Figure 1). 

If the trend continued, the four largest firms’ share of total industry procurement expenditure for 2006 

would be between 65.0 and 72 percent. 

T.34-T

60

61

62

63

64

65

66

67

68

69

70

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Percent

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

Largest Slaughter Firms, Firm Size Ranked by Total Livestock Procurement Expenditure 

 

 1 Unless otherwise indicated, 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 2006 are not due until April 15, 2007. GIPSA provides a 90-

day extension when requested, and performs a data verification process after receiving the reports. Thus 2006 data will be published in early 

2008 in the GIPSA publication Packers and Stockyards Statistical Report, 2006 Reporting Year. 
6

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 sales illustrate the combined effects of changes in input costs and in firms’ 

production practices on the costs of doing business over time. Second, trends in operating income as a 

percentage of sales over time provide a measure of profitability. 

Operating expenses expressed as a percentage of sales of meat packing firms have trended upward over 

the last several years. Manufacturing costs, i.e., the costs of actual slaughter and processing operations 

including labor, make up the greatest component of operating expenses.2

 This ratio for large firms tends 

to be lower than is the case for smaller firms. For example, in every year but one since 1997, this ratio as 

a percentage of sales has been lower for the four largest firms than for firms ranked 21st through 40th (size 

rankings based on total livestock procurement expenditures) (Figure 2).3 GIPSA anticipates that total 

operating expenses for the top four firms for 2006 will be between 18.8 and 22 percent of the value of 

sales. GIPSA expects that the anticipated range of total operating expenses for the 21st-40th firms for 

2006 will be between 18.6 and 24.4 percent of the value of sales. 

T.38.-OE

11

13

15

17

19

21

23

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Percent

1st - 4th

21st - 40th

Figure 2. Total Operating Expenses as a Percentage of Sales for the Top 4 and the 21st-40th

Firms, Ranked by Total Livestock Procurement Expenditure 

Operating income as a percentage of sales of meat packing firms has trended slightly upward in recent 

years, with considerable year-to-year variation (Figure 3).4

 Since 2000, the four largest firms have 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 operating income of the larger packers, despite having 

lower operating expenses (Figure 1), is due to the larger packers paying a higher average cost for 

livestock.5

 The anticipated range of operating income as a percentage of sales for the top four firms, 

ranked by total livestock procurement expenditure, for 2006 is between 0.7 and 2.8 percent. The 

anticipated range of operating income as a percentage of sales for the 21st-40th firms for 2006 is between 

1.5 and 2.9 percent. 

 

 2 Operating expenses include manufacturing, advertising and selling, administrative, depreciation and amortization, interest, and other day-today expenses of running the business. Note that financial data reported to GIPSA by some firms may include information on operations other 

than meat packing and processing. 

 3

 While this difference may suggest that larger firms tend to operate larger, lower-cost plants than the smaller firms, these financial data are 

highly aggregated across a variety of types of firms. There are differences both across and within size groups in combinations of species 

slaughtered (beef, pork, sheep, poultry) by the included firms and also in other types of non-meat activities included in the data from some firms. 

 4

 Operating income as summarized here is sales minus cost of sales (primarily cost of livestock) and minus operating expenses, and is 

essentially a measure of profit before taxes. 

 5

 See Table 35, Packers and Stockyards Statistical Report, 2005 Reporting Year. 
7

T.39-OI

0.3

0.8

1.3

1.8

2.3

2.8

3.3

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Percent

1st - 4th

21st - 40th

Figure 3. Operating Income as a Percentage of Sales for the Top 4 and the 21st-40th Firms, 

Ranked by Total Livestock Procurement Expenditure 

B. Cattle Industry 

The volume of cattle slaughtered by firms reporting to GIPSA fluctuates with the cattle cycle and changes 

in total U.S. commercial slaughter and has trended downward over the last 10 years (Figure 4).6

 Total 

cattle purchases for 2006 for firms reporting to GIPSA are anticipated to range between 31 million head 

and 34 million head, with the expected value being closer to the lower boundary. 

T.5-C

31,150

31,650

32,150

32,650

33,150

33,650

34,150

34,650

35,150

35,650

36,150

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Head (000)

Figure 4. Total Slaughter Cattle Purchases for Firms Reporting to GIPSA 

The number of plants reporting to GIPSA declined by approximately 100 plants or 38 percent from 1995 

through 2003 as plant size increased and smaller plants closed, but that trend shows some signs of 

slowing since 2002 (Figure 5). Based on preliminary information on changes in the number of cattle 

 

 6 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. 
8

slaughter plants, GIPSA anticipates that the downward trend of the late 1990s has stabilized at 150 to 170 

plants for 2006. 

T.3-C

150

170

190

210

230

250

270

290

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Number

Figure 5. 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 1995 (Figure 6). 

Projecting the trend since 1995 would suggest that this measure of concentration in 2006 would range 

between 79 and 83 percent.7

 Several factors, however, have influenced the combined market share of the 

four largest firms slaughtering steers and heifers since 2004. Acquisitions by larger firms were largely 

offset by plant closings among those firms, but several smaller packers also ceased operating. Taking 

these partially offsetting factors into account suggests a modest additional increase from the 2004 level in 

the combined market share of the four largest firms in 2006. While continuation of the trend in boxed 

beef since 1995 (Figure 7) would result in concentration between 80 and 84 percent in 2006, the same 

factors influencing changes in market shares in steer and heifer slaughter will likely lead to a modest 

increase from the 2004 level in concentration in boxed beef production as well. 

T.27-SH

78.0

78.5

79.0

79.5

80.0

80.5

81.0

81.5

82.0

82.5

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Percent

Figure 6. Combined Market Share (by Volume) for the Four Largest Steer and Heifer 

Slaughter Firms 

 

 7 In this report the terms “concentration” and “combined market share” are both used to refer to the combined volume of the four largest firms as 

a share of the total volume of all industry firms. 
9

T.33-BB

82.0

82.5

83.0

83.5

84.0

84.5

85.0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

Percent

Figure 7. Combined Market Share (by Volume) for the Four Largest Firms Producing 

Boxed Fed Beef 

Concentration in cow and bull slaughter has trended upward since 1995 (Figure 8). In 2006, plant 

closings were offset by capacity increases driven by acquisitions by larger firms. Several smaller packers 

also ceased operating. Taking these factors into account leads to the suggestion that the combined market 

share of the four largest firms slaughtering cows and bulls could increase to 50 percent in 2006. 

T.28-CB

25

30

35

40

45

50

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Percent

Figure 8. Combined Market Share (by Volume) for the Four Largest Cow and Bull 

Slaughter Firms 

C. Hog Industry 

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

101.1 million hogs for slaughter in 2005 (Figure 9). Continuation of recent trends would result in an 

anticipated number of total hog purchases for 2006 between 96.8 and 102.5 million head. With respect to 

number of hog slaughter plants, continuation of the trend since 1995 would suggest that the anticipated 

number for 2006 could range between 136 and 150. However, the rate of decline has slowed since 1999 

and the number of hog slaughter plants increased in 2004 (Figure 10). Based on preliminary data on 
10

changes in number of plants since 2004, GIPSA believes it is likely that the number of plants in 2006 will 

be slightly above the upper end of that range. 

T.5-H

82,150

84,150

86,150

88,150

90,150

92,150

94,150

96,150

98,150

100,150

102,150

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Head (000)

Figure 9. Total Hog Purchases for Slaughter for Firms Reporting to GIPSA 

T.3-H

150

160

170

180

190

200

210

220

230

240

250

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Number

Figure 10. 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 and remained at 64 percent since (Figure 11). Based on the 

trend since 1995, the four largest firms’ share of total hog slaughter for 2006 could range between 61.6 

and 68.5 percent. The mix of plant closings and openings since 2005 by firms of different sizes is 

expected to reduce the four largest firms’ market share to the lower end of that 2006 range estimate.8

 

 8 Smithfield’s announced acquisition of Premium Standard Farms likely would not affect concentration for 2006. 
11

T.31-H

45

47

49

51

53

55

57

59

61

63

65

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Percent

Figure 11. 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 (LMRA). After the LMRA expired in 

September 2005 approximately half the previously responding plants continued reporting to GIPSA on a 

voluntary basis.9

 The SCL reports swine contract information from swine (hog) packing plants with a 

slaughter capacity of 100,000 swine or more 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 12). 

SC 01

20

22

24

26

28

30

32

34

Jan-03

Mar-03

May-03

Jul-03

Sep-03

Nov-03

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

Month of Estimate

Million Head

AMS Reported Actual Contract

Deliveries Over Following 6 Months

SCL Estimated Future Contract

Deliveries Over Following 6 Months

Figure 12. Actual Total Contract Deliveries Over Following Six Months Versus Swine 

Contract Library Estimates of Future Deliveries Over Same Periods, National Totals, All 

Contract Types 

 

 9 The Act actually expired briefly in the fall of 2004 but was extended for 1 year. During that period 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 12). 
12

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. 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 increased in 2004 for the first 

time since 1998 but declined in 2005 (Figure 13). Total purchases of sheep and lambs for slaughter for 

2006 for firms reporting to GIPSA are anticipated to range between 1.8 million head and 2.5 million head. 

The number of plants slaughtering sheep and lambs declined by 43 from 1995 through 2002 but has been 

relatively stable since then (Figure 14). GIPSA expects between 53 and 56 reporting sheep and lamb 

slaughter plants in 2006. 

T.5-S/L

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Head (000)

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

T.3-S/L

50

55

60

65

70

75

80

85

90

95

100

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Number

Figure 14. Number of Sheep and Lamb Slaughter Plants for Firms Reporting to GIPSA 
13

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

since 1998. Preliminary data indicate an increase in 2005 as the four largest firms increased their 

combined slaughter volume while total industry slaughter declined (Figure 15). The projected range in 

the largest four firms’ share of total purchases for slaughter in 2006 would be between 60 and 63 percent 

if the trend from 1995 through 2004 continued. Based on available information on actual changes in firms 

and plants since 2004, GIPSA expects concentration to be closer to the high end of that range. 

T.32-S/L

64

65

66

67

68

69

70

71

72

73

74

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Percent

Figure 15. 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 1995, while turkey slaughter has been relatively constant (Figure 16). USDA’s World Agricultural 

Outlook Board (WAOB) estimates that broiler and turkey slaughter will be 1.4 percent and 3 percent 

higher, respectively, in 2006 than in 2005.10

BT-1

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Pounds (million)

Broilers 

Turkeys

Figure 16. Total Federally Inspected Broiler and Turkey Slaughter (Pounds Ready-to-Cook) 

Source: World Agricultural Outlook Board, World Agricultural Supply and Demand Estimates, various issues. 

 

 10 World Agricultural Outlook Board, World Agricultural Supply and Demand Estimates, Table WASDE-440-31, WASDE-440, November 9, 

2006, http://usda.mannlib.cornell.edu/usda/current/wasde/wasde-11-09-2006.pdf. 
14

Concentration in broiler and in turkey slaughter has remained fairly constant since 2003, with slight 

declines in both in 2005 (Figures 17, 18).11 Recent firm acquisitions will likely increase concentration in 

broiler slaughter and turkey slaughter slightly in 2006. 

T-B/HHI1

42

44

46

48

50

52

54

56

1997 2000 2001 2002 2003 2004 2005

Year

Percent

Four-firm Concentration 

Figure 17. Combined Market Share for the Four Largest Broiler Slaughter Firms 

Source: Watt Poultry USA. “WATT Poultry USA Rankings,” various years. 

T-B/1

40

42

44

46

48

50

52

54

56

1997 2000 2001 2002 2003 2004 2005

Year

Percent

Four-firm Concentration 

 Figure 18. Combined Market Share for the Four Largest Turkey Slaughter Firms 

 Source: Watt Poultry USA. “WATT Poultry USA Rankings,” various years. 

F. Livestock and Poultry Producers 

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. Analyses and projections by those agencies indicate that 

 

 11 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. 
15

livestock and poultry producers likely experienced a reduction in income in 2006 as a result of a 

combination of lower prices and higher input costs. The decline in 2006 was relative to high levels of the 

previous 2 years, as high livestock prices relative to historical averages resulted in cash receipts for 

livestock producers that set successive records in 2004 and 2005. Hog producers’ incomes for 2006 

likely fell somewhat more than poultry and beef producers’ incomes.12 Estimates released by the WAOB 

indicate that annual turkey prices averaged higher in 2006 than in 2005 while fed cattle, hog, and broiler 

prices were all lower in 2006 than in 2005.13 All prices average higher in the latter half of the year, 

suggesting improvement in returns to producers as the year progressed.14 

 

 12 A variety of publications and data sources on economic conditions are available on the ERS web page at http://www.ers.usda.gov/. See 

especially “Income Outlook and Financial Circumstances Varies Among Farms,” at 

http://www.ers.usda.gov/Briefing/FarmIncome/Businessincome.htm (accessed November 9, 2006). 

 13 World Agricultural Outlook Board, World Agricultural Supply and Demand Estimates, Table WASDE-440-31, WASDE-440, November 9, 

2006, http://usda.mannlib.cornell.edu/usda/current/wasde/wasde-11-09-2006.pdf 

 14 Economic Research Service, Livestock, Dairy, and Poultry Outlook , LDP-M-147 and LDP-M-148 (September 18 and October 19, 2006) 

http://usda.mannlib.cornell.edu/usda/ers/LDP-M//2000s/2006/LDP-M-09-18-2006.pdf and 

http://usda.mannlib.cornell.edu/usda/ers/LDP-M//2000s/2006/LDP-M-10-19-2006.pdf 
16

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 to increased specialization in slaughter. This is illustrated by a greater decline since 1995 in 

the number of firms slaughtering two or more classes of livestock than in the number of firms 

slaughtering a single class (Figure 19).15 The anticipated number of firms slaughtering one class of 

livestock for 2006 could range between 107 and 115. The anticipated number of firms slaughtering two 

or more classes of livestock for 2006 could range between 78 and 95. 

T.25-1A

90

110

130

150

170

190

210

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Number

Firms Slaughtering One Class

Firms Slaughtering Two or More Classes

Figure 19. 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 several ownership changes and plant closures among large beef slaughter firms in 2006. 

Tyson Foods closed its fed cattle slaughter facility in West Point, NE. Cargill Meat Solutions acquired 

Fresno, CA based Beef Packers, Inc. Swift & Company announced it had agreed to sell its two non-fed 

cattle processing facilities in Nampa, ID (which had been closed since August 2005) and Omaha, NE to 

XL Foods, of Calgary, Alberta. National Beef Packing, Company LLC acquired Brawley Beef LLC of 

Brawley, CA. Tyson Foods announced that it would close its Boise, ID fed cattle slaughter plant. 

The cattle industry continued to be affected by restrictions on imports from Canada of cattle over 30 

months of age. The reduced numbers of imports resulted in some cow and bull slaughter plant closures 

prior to 2006, and continue to impact plant utilization in some areas of the Northern United States. 

 

 15 For purposes of this comparison, the separate classes of livestock are steers and heifers; cows and bulls; calves; sheep and lambs; and hogs. 
17

Carcass Basis Purchases 

Purchases of cattle on a carcass basis, as opposed to on a live-weight basis, trended upward from 1995 

through 2002 (Figure 20). Although there were declines in 2003 and 2004, an increase followed in 2005 

and GIPSA believes the upward trend will continue. GIPSA anticipates that packers reporting to GIPSA 

will purchase between 19 and 22 million head of cattle on a carcass basis in 2006.

T.15-C

14,000

15,000

16,000

17,000

18,000

19,000

20,000

21,000

22,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Head (000)

Figure 20. Cattle Purchases on a Carcass Basis 

As carcass-based procurement has become increasingly important, 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 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.16 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. GIPSA 

collects and audits data on the three major committed procurement methods used by the four largest firms 

that slaughter fed cattle. 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 four largest steer and heifer slaughter 

firms declined in 2004 and 2005 (Figure 21). GIPSA expects that the percentage of total procurement 

obtained from packer feeding by these firms in 2006 will be between 5 and 7 percent. 

 

 16 Data included in the graphs and discussed in this section for 2005 are preliminary. 
18

T.16-PF

6.0

7.0

8.0

9.0

10.0

11.0

12.0

1999 2000 2001 2002 2003 2004 2005

Year

Percent

Figure 21. Percentage of Steers and Heifers Procured Through Packer Feeding Arrangements by 

the Four Largest Steer and Heifer Slaughter Firms 

“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 accounts for a small percentage of total procurement of 

fed cattle but the proportion has been trending upward in recent years (Figure 22). The percentage of fed 

cattle procured through the use of forward contracts by the four largest steer and heifer slaughter firms in 

2006 is expected to lie between 5 and 7 percent. 

T.16-FC

1.0

2.0

3.0

4.0

5.0

6.0

1999 2000 2001 2002 2003 2004 2005

Year

Percent

Figure 22. Percentage of Steers and Heifers Procured Through Forward Contracts by the Four 

Largest Steer and Heifer Slaughter Firms 

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 
19

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, and 

increased very little in 2005 (Figure 23). GIPSA expects that marketing agreements will account for 

between 23 and 25 percent of total procurement in 2006 by the four largest steer and heifer slaughter 

firms. 

T.16-MA

20.0

22.0

24.0

26.0

28.0

30.0

32.0

1999 2000 2001 2002 2003 2004 2005

Year

Percent

Figure 23. Percentage of Steers and Heifers Procured Through Marketing Agreements for the Four 

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 24). Total committed procurement (packer feeding, 

forward contracts, and marketing agreements) by the four largest steer and heifer slaughter firms in 2006 

is expected to lie between 33 and 39 percent of those four firms’ total procurement for slaughter. 

T.16-T

30.0

32.0

34.0

36.0

38.0

40.0

42.0

44.0

1999 2000 2001 2002 2003 2004 2005

Year

Percent

Figure 24. Percentage of Steers and Heifers Procured Through all Methods of Committed 

Procurement for the Four Largest Steer and Heifer Slaughter Firms 
20

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 (Figure 25). The expected volume of 

cattle marketed through firms selling on a commission basis in 2006 is between 37 million and 39 million 

head. 

T.42-C

37,000

38,000

39,000

40,000

41,000

42,000

43,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Head (000)

Figure 25. Volume of Cattle (Slaughter and non-slaughter) Marketed Through Firms Selling on a 

Commission Basis 

C. Hog Industry 

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

Smithfield Foods closed the Smithfield Packing plant in Smithfield, VA, in 2006 and in September 

announced intent to purchase Premium Standard Farms. Triumph Foods opened a slaughter plant in St 

Joseph, MO, in 2006 and later that year expanded production by adding a second 8-hour shift. 

Carcass-Basis Purchases 

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

70,000 head in 1999 to 80,000 head in 2005, after increasing more rapidly from 1995 through 1999 

(Figure 26). With continuation of long-term trends, carcass-basis hog purchases for 2006 would range 

between 76.3 million head and 93.4 million head. However, given the stability since 1999, GIPSA 

expects that the number will be near the bottom end of this range. 
21

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

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Number of Head ('000)

Figure 26. Hog Purchases on a Carcass Basis 

Procurement Methods 

Production contracts and marketing contracts continue to be the most common methods used by packers 

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 has not observed major changes in use of production and marketing contracts 

during 2006.17 

Importance of Commission Firms 

As with cattle, the volume of hogs marketed through firms selling on commission has declined over time 

but has stabilized in recent years (Figure 27). The level at which the industry has stabilized is 

considerably lower for hogs than for cattle. The volume of hogs marketed through commission firms for 

2006 could range between 3.7 million and 7.4 million head, but is expected to remain at the upper end of 

the range. 

T.42-H

6,000

7,000

8,000

9,000

10,000

11,000

12,000

13,000

14,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Head (000)

Figure 27. Volume of Hogs Marketed Through Firms Selling on Commission 

 

 17 GIPSA provided a more comprehensive description of hog production contracting and marketing agreements in Assessment of the Cattle, 

Hog, Poultry, and Sheep Industries 2003 Report, October 2004, http://archive.gipsa.usda.gov/pubs/packers/assessment02-03.pdf. 
22

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 re-opening a closed 

plant previously operated by Rancher’s Lamb in San Angelo, TX, ceased operations in the spring of 2006. 

Carcass-Basis Purchases 

The volume of sheep purchased on a carcass basis has fallen by half since 1995, although with 

considerable year-to-year variation (Figure 28). The volume was stable from 2003 to 2004 and is 

expected to range between 1.1 and 1.3 million head in 2006. 

T.15-S/L

1,000

1,200

1,400

1,600

1,800

2,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Head (000)

Figure 28. Sheep Purchased on a Carcass Basis 

Procurement Methods 

Procurement methods used in the purchase of 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 has not observed major changes in the methods during 2006.18 

 

 18 GIPSA provided a more comprehensive description of sheep and lamb procurement methods in Assessment of the Cattle, Hog, Poultry, and 

Sheep Industries 2003 Report, October 2004, http://archive.gipsa.usda.gov/pubs/packers/assessment02-03.pdf. 
23

Use of Commission Firms 

Use of commission firms for sale of sheep has followed a downward trend similar to the trends for cattle 

and hogs (Figure 29). The anticipated number of sheep and lambs marketed through firms selling on 

commission for 2006 is between 3.2 million and 3.5 million head. 

T.42-S/L

3,000

3,500

4,000

4,500

5,000

5,500

6,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Head (000)

Figure 29. Volume of Sheep Marketed Through Firms Selling on a Commission Basis 

E. Poultry Industry 

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

In 2006, Koch Foods, Inc. purchased Alabama-based broiler processor Sylvest Farms, Inc. That same 

year ConAgra Foods sold its turkey operations to Carolina Turkeys, and Carolina Turkeys then 

created a new company, Butterball LLC, while Pilgrim's Pride Corporation purchased Gold Kist Inc. 

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. With production 

contracts, the integrator (poultry slaughter and processing firm) owns the birds and the feed and provides 

them to the contract grower. The growers’ compensation is based on the services the grower provides, 

including labor, housing, water, and in some cases other purchased inputs. With 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 2006.19

 

19 GIPSA provided a more complete description of industry structure and coordination methods for poultry in Assessment of the Cattle, Hog, 

Poultry, and Sheep Industries 2003 Report, October 2004, http://archive.gipsa.usda.gov/pubs/packers/assessment02-03.pdf
24

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. 
25

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

Under the Packers and Stockyards Act 

Adequacy of Bonds for Regulated Entities 

The Packers and Stockyards Act (P&S Act) provides that the Secretary may require that packers, market 

agencies, and dealers have a reasonable bond (7USC§204). The regulations under the P&S Act prescribe 

bond requirements and bonding formulas for packers purchasing over $500,000 of livestock annually; 

market agencies buying or selling on commission or acting as clearing agencies; and dealers. These 

entities must maintain a bond or bond equivalent to protect livestock sellers. The regulation that 

establishes formulas for computing required bond amounts was last modified in 1983. These bonding 

formulas do not always provide full coverage to livestock sellers when bonded entities fail financially. 

Between FY 2000 and FY 2005, sellers who were not paid as a result of financial failures by market 

agencies selling on commission recovered 31–78 percent of their total claim amounts each year. During 

the same period, the recovery rate was 8-28 percent for dealers that failed financially. Members of the 

livestock industry have raised concerns about the adequacy of bonds. 

GIPSA Actions: GIPSA implemented a Bonding Task Force, to evaluate and recommend an appropriate 

course of action on current bond regulations to increase bond recoveries. The Bonding Task Force 

completed its evaluation of GIPSA’s bonding program and submitted recommendations to GIPSA 

managers for their review and approval. The Task Force identified specific conditions they thought lead 

to the financial failure of a firm or create financial risk factors that increase the likelihood of financial 

failure. Risk factors were identified for each type of entity (livestock dealer, auction market, or packer) 

subject to the P&S Act. The task force also proposed using these conditions to make heuristic 

assessments of firms for required bond amounts. GIPSA extended the approach taken by the task force, 

using methods that the insurance and financial industries use to calculate “credit ratings,” to calculate risk 

factors that can be used to identify firms most likely to fail. Those risk scores can then serve as criteria to 

set bond rates. The methods used to estimate this “credit” score have been submitted to independent 

review for additional assessment. GIPSA is prioritizing its audits based on the preliminary risk 

assessment to also evaluate the method and potential refinements. GIPSA is also exploring potential 

bond substitutes such as an indemnity fund. 

Delayed Receipt of Annual Reports

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

stockyard owner, market agency, and dealer, unless exempt, file a report annually with GIPSA (9 CFR 

201.97).20 Entities that operate on a calendar-year basis generally must file their report not later than 

April 15. Those that operate on a fiscal-year basis must file their report not later than 90 days after the 

close of their fiscal year. GIPSA frequently grants extensions of up to 90 days to firms that report 

difficulty in completing reports by the normal due date. After receiving the reports, GIPSA conducts a 

report review to ensure data accuracy and completeness. During this process, GIPSA frequently finds it 

necessary to contact the reporting firms for clarifications or corrections. As a result of delays in receiving 

reports and the length of time necessary to ensure data are complete and correct, bonding requirements 

often lag behind actual business volumes, and final data on industry structure and practices are generally 

not available for public release until significant time has elapsed after the end of a given reporting year. 

 

 20 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. 
26

Additionally, the lack of completeness requires knowledgeable auditors and economists, rather than data 

entry clerks, to interpret the reports for data entry into electronic systems, substantially increasing costs of 

data processing for GIPSA. 

GIPSA Actions: Although the P&S Act and regulations under the P&S Act require that subject firms file 

reports, GIPSA has historically relied heavily on voluntary compliance, including granting extensions and 

working with respondents to correct and complete reports. GIPSA is reviewing alternatives for 

improving the timeliness and efficiency of Annual Report collection and processing. 

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 have clear side curtains on the house for 

ventilation. Older conventional houses are being replaced with broiler houses that use technologies 

(called tunnel ventilated and cool cell) to enhance the grower’s ability to control the birds’ environment. 

This control allows growers to produce birds using less feed with lower chick mortality rates and, in turn, 

reduces the integrator’s costs of growing broilers. These new houses may also benefit growers by 

allowing 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 housing 

improvements or build entirely new broiler houses. In order to encourage growers to adopt these 

technologies, integrators often offer a higher base pay or a base pay adjustment to growers producing in 

houses using the improved technologies. These practices may result in different growers receiving 

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

improved housing technologies have an advantage in competing with growers using older technologies 

under the relative performance payment systems used in many broiler contracts.21 In addition, more 

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

housing technologies but not to growers who retain conventional housing. 

GIPSA Actions: Differences in contracts or payments are not prohibited by the Packers and Stockyards 

Act unless they constitute engaging in or using an unfair or unjustly discriminatory or deceptive practice 

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

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

between persons or localities. Integrators may have valid business reasons for requiring upgrades to 

broiler houses, and growers may benefit from increased productivity and reduced growing costs. 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. Specific examples of 

practices that potentially could be deemed unfair include: 

• Live Poultry Dealers may contract with some of their poultry growers with less advantageous 

contract terms than those offered their other poultry growers without a justifiable and reasonable 

business reason. 

• Live Poultry Dealers may enter into poultry growing arrangements with poultry growers and 

subsequently change the terms of the arrangement in a manner that disadvantages growers in 

follow-on contracts; and 

 

 21 Under relative performance payment systems, a group of growers receives birds for feeding simultaneously, and 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. 
27

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

contract to make significant capital improvements in their operations as a condition for continued 

placement of chicks, for premium payments, 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 is actively monitoring developments in this area of concern to determine whether action is 

warranted, and if so, the nature of the action. 

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 among the leading, if not the leading, 

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 outright 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 ensure that these markets operate competitively. GIPSA does not have authority over mergers and 

acquisitions but often cooperates with and lends its industry expertise to the Department of Justice (DOJ) 

in DOJ’s review of mergers in the livestock, meatpacking, and poultry industries. 

Concentration, vertical integration, and other changes in industry structure may lead GIPSA to focus more 

attention on particular firms or behavior. However, these industry-wide changes, in and of themselves, 

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 performance of the industry. For 

example, structural change can lead to downstream market alliances to facilitate penetration of retail 

markets with branded products. 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 is addressing many questions and concerns that have been raised about changes in 

the structure and business practices in the livestock and meat industries. An award to the Research 

Triangle Institute (RTI) to conduct the study was announced on June 18, 2004. RTI provided an interim 

study report, which describes alternative marketing arrangements and their terms, and reasons that 

industry participants give for using alternative arrangements, on July 28, 2005. The second and final 

report was submitted to GIPSA in January of 2007. That report describes analysis of prices, costs, 

efficiency, livestock and meat quality, and of risk levels associated with alternative arrangements, and 

assesses the implications of potential future changes in the use of various types of marketing 

arrangements. 
28

Increased consolidation calls for increased vigilance by the P&S program due to the increasingly complex 

nature of new marketing and procurement practices, and to the arguably increased potential for 

anticompetitive behavior. GIPSA will continue to evaluate complaints alleging anticompetitive behavior, 

including those that arise from concerns about high levels of concentration, such as attempted restriction 

of competition, failure to compete, buyers acting in concert to purchase livestock, apportionment of 

territory, price discrimination, price manipulation, and predatory pricing. While GIPSA is not able to 

direct the form of continuing consolidation and increased coordination, it can and will play a role in 

helping to ensure that the marketing system operates in a competitive manner to the maximum potential 

benefit of the industry members and also to the benefit of U.S. food consumers. 
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 Cattle, Hog, Poultry, and 

Sheep 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.