Baseline Study of Livestock and Meat 

Marketing Trends and Implications for 

Livestock Mandatory Reporting

Research Commissioned by the Agricultural Marketing Service

United States Department of Agriculture

Project Researchers:

Joe Parcell, Glynn Tonsor, and Ted Schroeder
Acknowledgements

We gratefully acknowledge:

Industry stakeholders

Agricultural Marketing Service
LMR in a Dynamic Industry

Some industry changes occurred relatively quickly, and AMS was able to 

implement.

Some changes have been completely unforeseen, e.g., the current trend toward 

processors trimming grind at the plant instead of retail due to FSIS food safety 

concern. 

The area of continued communication with industry and USDA-AMS is a 

fruitful area for additional effort. Ultimately any efforts by USDA-AMS to 

expand communication with the industry must be reciprocated by industry 

representatives to be successful.
Key Findings

Livestock and meat are being marketed in dramatically different ways today 

than in the recent past. 

Negotiated trade has been rapidly replaced by formula pricing, forward 

markets, and longer term marketing agreements. 

There is also an ongoing shift towards pricing livestock using meat values. 

Traditional data providers are also increasingly LMR data users. This 

changes the form and role of LMR and USDA-AMS market reporting.
Trends & Observations

Increased consolidation directly affects confidentiality concerns in market price 

reporting. 

Beef, pork, and lamb industries are all experiencing consolidation directly 

affecting current price reporting confidentiality restrictions. 

The same confidentiality guideline is applied across all three species (swine, cattle, 

and sheep) and associated meat sectors. 

With markedly different industry structure and industry evolution, this is an 

issue many voiced as worthy of further consideration by LMR and USDA in the 

future.
Total Cattle Sold by Transaction

0%

10%

20%

30%

40%

50%

60%

70%

Apr-04

Sep-04Feb-05

Jul-05

Dec-05

May-06

Oct-06

Mar-07

Aug-07

Jan-08

Jun-08

Nov-08

Apr-09

Sep-09Feb-10

Jul-10

Dec-10

May-11

Oct-11

Mar-12

Aug-12

Jan-13

Jun-13

Nov-13

Apr-14

Sep-14Feb-15

Jul-15

Dec-15

May-16

Percentage maketed by purchase type

% negotiated purchase % negotiated grid % formula % forward contract

Data Source: USDA-AMS
Hogs Sold by Transaction

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Jan-04

Jun-04

Nov-04

Apr-05

Sep-05Feb-06

Jul-06

Dec-06

May-07

Oct-07

Mar-08

Aug-08

Jan-09

Jun-09

Nov-09

Apr-10

Sep-10Feb-11

Jul-11

Dec-11

May-12

Oct-12

Mar-13

Aug-13

Jan-14

Jun-14

Nov-14

Apr-15

Sep-15Feb-16

Jul-16

Percentage maketed by purchase type

% negotiated

purchase

% other

market

formula

% swine or

pork market

formula

% other

purchase

type

% packer

owned

% packer

sold

Data Source: USDA-AMS
Lambs Sold by Transaction

0%

20%

40%

60%

80%

100%

120%

Jan-04

Jun-04

Nov-04

Apr-05

Sep-05Feb-06

Jul-06

Dec-06

May-07

Oct-07

Mar-08

Aug-08

Jan-09

Jun-09

Nov-09

Apr-10

Sep-10Feb-11

Jul-11

Dec-11

May-12

Oct-12

Mar-13

Aug-13

Jan-14

Jun-14

Nov-14

Apr-15

Sep-15Feb-16

Jul-16

Percentage maketed by purchase type

% negotiated purchase

% formula purchase

Data Source: USDA-AMS
Beef Sales by Transaction

0%

10%

20%

30%

40%

50%

60%

70%

Jan-04

Jun-04

Nov-04

Apr-05

Sep-05Feb-06

Jul-06

Dec-06

May-07

Oct-07

Mar-08

Aug-08

Jan-09

Jun-09

Nov-09

Apr-10

Sep-10Feb-11

Jul-11

Dec-11

May-12

Oct-12

Mar-13

Aug-13

Jan-14

Jun-14

Nov-14

Apr-15

Sep-15Feb-16

Jul-16

Percentage maketed by sales type

% negotiated 0-21 Day % negotiated 21+ Day % formula % forward contract

Data Source: USDA-AMS
Trends & Observations

Formula pricing is becoming more common. Much of formula pricing uses 

negotiated reported prices as the base in the formula. Thus, negotiated trade 

is being leveraged more heavily even as it declines in volume. 

This has shifted the role of LMR for negotiated prices more to price discovery 

in addition to price reporting. Any changes in LMR rules or USDA-AMS 

reporting protocols for negotiated prices directly impact many formula trades. 

Industry must carefully weigh the cost versus the benefit of a change 

before recommending adjustments to AMS or the LMR Act.
Trends & Observations

There will be increased use of meat prices to establish the base price of live 

animals. 

This will magnify the scrutiny of calculations like composite and cutout 

values, as many producers will lack the knowledge of processing and 

fabrication costs, yields, and processes. 
Choice Beef Cutout & Selected Choice LC Prices

$0

$50

$100

$150

$200

$250

$300

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

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May-12

Sep-12

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May-13

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Jan-14

May-14

Sep-14

Jan-15

May-15

Sep-15

Jan-16

May-16

FOB Plant Price ($ per cwt.)

cutout value live over 80% choice live 35-65% choice

Data Source: USDA-AMS
Trends & Observations

Several participants mentioned a desire to potentially include negotiated 

transactions from intra-company transfers in AMS reports. 

Some participants went further and suggested that one party to the transaction 

be an independent producer, i.e., exclude packer intra-company transactions. 
Trends & Observations

The issue of reporting packer intentions in MPR has raised concerns about the 

original intent of MPR. 

To enhance strategic planning, producers will increasingly look to LMR 

information to shed light on forward trends in volume and prices. 

Intentions and plans for scheduled slaughter delivery by packers goes 

beyond being a mirror of what prices have been paid for livestock and 

associated volume in these transactions.
Key Findings

Changing domestic and global meat customer and consumer demands are 

driving the meat industry to be more responsive to consumer interests. 

Leading to increased product differentiation, more vertical coordination and 

integration, and relative to when the Act was established generally a much 

different product mix is being produced by meat packers who report 

information to USDA-AMS under LMR.
Branded Beef Sales

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Jan-04

Jun-04

Nov-04

Apr-05

Sep-05Feb-06

Jul-06

Dec-06

May-07

Oct-07

Mar-08

Aug-08

Jan-09

Jun-09

Nov-09

Apr-10

Sep-10Feb-11

Jul-11

Dec-11

May-12

Oct-12

Mar-13

Aug-13

Jan-14

Jun-14

Nov-14

Apr-15

Sep-15Feb-16

Jul-16

Percentage branded

Data Source: USDA-AMS
Trends & Observations

An increasing number of both livestock and meat alternative marketing 

arrangements are using USDA-AMS published weekly/rolling averages or are 

computing rolling averages for their own use in commerce and decision making. 

This can work during periods of stable markets, but when markets are moving up 

or down rapidly, increasing the length of time included in a report greatly reduces 

the value of the report.

Industry stakeholders have differing perspectives on what time period constitutes 

establishing a market price.
Choice Beef Cutout & Selected Choice LC Prices

$0

$50

$100

$150

$200

$250

$300

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

May-12

Sep-12

Jan-13

May-13

Sep-13

Jan-14

May-14

Sep-14

Jan-15

May-15

Sep-15

Jan-16

May-16

FOB Plant Price ($ per cwt.)

cutout value live over 80% choice live 35-65% choice

Data Source: USDA-AMS
Lamb Primal and Cutout Prices

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

May-12

Sep-12

Jan-13

May-13

Sep-13

Jan-14

May-14

Sep-14

Jan-15

May-15

Sep-15

Jan-16

May-16

FOB Plant Price ($ per cwt.)

232 Loin, Trimmed, 4x4

Cutout Value Less Processing/ Packaging Costs

204 Rack, 8-Rib, Medium

232E Flank, Untrimmed

Data Source: USDA-AMS
Trends & Observations

Understanding the marketing mix of medium-size meat processors is important to 

know whether they are able to add volume of meat to LMR or if their products are 

subject to confidentiality exclusion.
Trends & Observations

Producers focused on an economies of size supply chain system will 

increasingly look to vertical business relationships to maintain 

competitiveness. 
Key Findings

Major structural shifts have occurred over the past 15 years in the meat 

packing and processing sectors in cattle, swine, sheep, beef, pork, and lamb. 

Meat packing firms

Producers

Wholesale and retail

The use of LMR information has expanded beyond pricing to include 

establishing insurance contracts, futures contract settlement, indemnity loss 

payment determination, and for policy analysis.
Key Findings

New methods for pricing livestock and meat products, such as internet based 

auctions, are being launched in industries that do not necessarily conform to 

traditional LMR or USDA-AMS practices. 

These types of marketing institutions will likely see continued interest as a 

way to provide lower cost opportunities for producers, packers, processors, 

and others to participate in price discovery instead of direct negotiation.
Key Implications

The importance of LMR to the livestock industry, domestic and international 

commerce, and to rural communities was made most obvious by the shutdown 

of LMR during the October 2013 federal government shutdown. 

Structural changes in livestock and meat markets are testing confidentiality 

structures in market information reporting. 
Key Implications

Changes in products being produced by packers through value added, 

branding, specialty programs, and other differentiation challenges market 

information reporting. 

The importance of international trade is elevating in meat markets. Continued 

efforts to provide timely market information related to products moving into 

and from international markets is a worthwhile endeavor. 
Key Implications

Capability for USDA-AMS together with industry to quickly assess new market 

developments in the livestock and meat sectors and to determine how to 

modify reporting accordingly will be an important dimension of the 

effectiveness of LMR in the future.