This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

82519 

Vol. 89, No. 198 

Friday, October 11, 2024 

DEPARTMENT OF AGRICULTURE 

Agricultural Marketing Service 

9 CFR Part 201 

[Doc. No. AMS–FTPP–24–0013] 

RIN 0581–AE30 

Price Discovery and Competition in 

Markets for Fed Cattle 

AGENCY: Agricultural Marketing Service, 

Department of Agriculture. 

ACTION: Advance notice of proposed 

rulemaking. 

SUMMARY: The United States Department 

of Agriculture’s (USDA or Department) 

Agricultural Marketing Service (AMS or 

Agency) is seeking advance comment on 

a proposal to amend the regulations 

under the Packers and Stockyards Act 

(P&S Act or Act). The purpose of this 

advance notice of proposed rulemaking 

(ANPR) is to solicit feedback on an 

identified set of regulatory options that 

AMS could employ to address concerns 

regarding price discovery and fairness 

in fed cattle markets. Information from 

public comments would inform AMS’s 

approach to this topic, including any 

future regulatory changes. 

DATES: Electronic or written comments 

must be submitted by December 10, 

2024. 

ADDRESSES: Comments can be submitted 

through the Federal e-rulemaking portal 

at https://www.regulations.gov and 

should reference the document number 

and the date and page number of this 

issue of the Federal Register. AMS 

strongly prefers comments be submitted 

electronically. However, written 

comments may be submitted (i.e., 

postmarked) via mail to Docket No. 

AMS–FTPP–24–0013, S. Brett Offutt, 

Chief Legal Officer, Packers and 

Stockyards Division, USDA, AMS, 

FTPP; Room 2097–S, Mail Stop 3601, 

1400 Independence Ave. SW, 

Washington, DC 20250–3601. All 

comments submitted in response to this 

advance notice of proposed rule will be 

included in the record and will be made 

available to the public. Please be 

advised that the identity of individuals 

or entities submitting comments will be 

made public on the internet at the 

address provided above. Parties who 

wish to comment anonymously may do 

so by entering ‘‘N/A’’ in the fields that 

would identify the commenter. A plainlanguage summary of this advance 

notice of proposed rule is available at 

https://www.regulations.gov in the 

docket for this rulemaking. 

FOR FURTHER INFORMATION CONTACT: S. 

Brett Offutt, Chief Legal Officer/Policy 

Advisor, Packers and Stockyards 

Division, USDA AMS Fair Trade 

Practices Program, 1400 Independence 

Ave. SW, Washington, DC 20250; 

phone: (202) 690–4355; or email: 

s.brett.offutt@usda.gov. 

SUPPLEMENTARY INFORMATION: 

I. Executive Summary 

AMS seeks input from stakeholders 

about ways to improve price discovery 

and fair and competitive trading 

environments in fed cattle markets, 

many of which are concentrated 

markets. Those concentrated markets 

may have played a role in packers 

imposing fed cattle purchasing 

agreements on producers, commonly 

known as alternative marketing 

arrangements (AMAs), that use some 

method of calculating prices other than 

cash negotiated or ‘‘spot’’ pricing. Fed 

cattle AMAs have achieved a wellestablished position in the cattle 

industry, accounting for the majority of 

cattle traded. The vast majority of AMAs 

are formula pricing agreements that use 

an external benchmark price to establish 

a base price in the contract when 

determining the price a seller will 

receive. In formula contracts, which this 

ANPR focuses on, the base price is not 

known when the contract is signed, and 

it fluctuates in accordance with the 

benchmark. Aspects of the design of 

formula contracts have some adverse 

consequences—directly or in 

conjunction with certain trading 

practices—for producers and the 

markets in which they operate, and 

potentially for other packers seeking to 

compete for fed cattle in the market. It 

is possible that some of these adverse 

consequences could give rise to a 

violation of the Act or other antitrust 

laws. 

This ANPR seeks comment on a range 

of options designed to ensure that base 

prices in formula pricing agreements are 

broadly representative of fair market 

conditions and are not vulnerable to 

unfair, deceptive, manipulative, unduly 

preferential, or anticompetitive 

practices that could cause prices to 

shift. The targeted options also seek to 

address obstacles that market 

participants face when engaging in price 

discovery and contributing to 

transparent markets. These options are 

further intended to mitigate the market 

design, trading practices, or preferences 

that underlie the complaints AMS has 

received over the years relating to 

aspects of formula pricing agreements 

and their impact on producers and the 

cattle markets. 

AMS seeks comment on the 

experience of producers, packers, and 

other market participants in relation to 

the problems undergirding these 

complaints, as well as the effectiveness, 

workability, and economic impacts of 

several potential solutions identified. 

Relevant data, information, and 

opinions to explain those views are all 

welcome. This request for comment is 

principally focused on what could be 

done by AMS’s Packers and Stockyards 

Division (PSD) under the authority of 

the Packers & Stockyards Act of 1921, as 

amended (7 U.S.C. 181 et seq.). AMS is 

also interested, however, in 

commenters’ views on any other 

authorities that USDA could deploy. 

These could include efforts in 

connection with other authorities or 

offices of USDA—such as the Office of 

the Chief Economist (OCE)—which 

provide market-relevant information or 

analysis. Comments received in 

response to this ANPR will inform 

AMS’s approach to regulating the 

Nation’s fed cattle markets. 

II. Background 

A. Trading Practices in the Fed Cattle 

Industry 

The United States’ fed cattle industry 

involves multistage ownership, regional 

variability, and a variety of different 

contracting and trading practices. 

Careful attention to this range of factors 

is essential to successfully promoting 

fairer, more competitive markets for all 

producers. In this ANPR, the term ‘‘fed 

cattle’’ refers to cattle raised and fed for 

slaughter as beef or beef by-products; 

the term ‘‘packer’’ refers to the entities 


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82520 Federal Register / Vol. 89, No. 198 / Friday, October 11, 2024 / Proposed Rules 

1Although they served as an important outlet for 

marketing fed cattle as terminal markets declined, 

local auctions now primarily market feeder and cull 

cattle. A relatively small number of fed cattle 

continue to be sold through live and video auctions. 2The spot market technically refers to all 

transactions in the physical commodity, as opposed 

to transactions for a derivative thereof, such as a 

future. Cash negotiated transactions can also be on 

a dressed basis, where payment is made based on 

the carcass weight rather than live weight. 

3See Peel, Derrell S. ‘‘How We Got Here: A 

Historical Perspective on Cattle and Beef Markets,’’ 

in The U.S. Beef Supply Chain: Issues and 

Challenges, Ed. by B.L. Fisher et al., Texas A&M 

University, June 3–4, 2021. 

that purchase and then slaughter fed 

cattle for use as beef or other meat byproducts. Currently, the fed cattle 

industry is characterized by a high 

degree of packer concentration and 

predominant use of formula pricing 

agreements to market fed cattle. 

In the first half of the 20th century, 

producers sold cattle to packers at 

terminal stockyards. Sellers consigned 

cattle with one of the commission firms 

operating at the stockyard, which then 

negotiated the sale and collected a 

commission from the seller. Stockyards 

also served to aggregate livestock from 

widely dispersed areas. This 

centralization allowed packers to 

purchase the quantities necessary to 

operate their plants from one location, 

where the presence of many buyers 

together in one place likely improved 

competition because producers could 

sell to multiple, competing packers. 

During the latter half of the 20th 

century, the cattle feeding industry 

emerged in the Plains states, near areas 

of feed production and weather 

conditions suitable for cattle feeding. 

Packing plants relocated to areas near 

the cattle feeders, and the industry 

shifted from terminal stockyards to 

decentralized marketing through local 

auctions 1 or, more commonly, a ‘‘bid 

and ask’’ system of direct negotiations 

between packers and cattle feeders (in 

other words, cash negotiations for live 

animals). In this cash or ‘‘spot’’ market, 

the price for cattle is negotiated between 

a fed cattle producer and a packer at the 

time of sale, in other words, ‘‘on the 

spot.’’ 2 In healthy trading markets with 

multiple buyers, packers must compete 

with one another to purchase cattle. 

In the 1990s and early 2000s, the beef 

cattle industry began to move toward 

quality differentiation and ‘‘value-based 

marketing,’’ in which price premiums 

and discounts were applied for quality 

grade differences of harvested cattle 

using a ‘‘grid’’ matrix.3 Under these 

arrangements, packers offer a different 

price for each individual head, which is 

determined post-slaughter by offering a 

base price plus a premium or discount 

for a number of carcass attributes such 

as quality grade, yield grade, and 

weight. Some even offer price premiums 

for certain production practices such as 

antibiotic-free feeding. These 

arrangements contrast with traditional 

cash negotiations or auction sales, 

where the buyer would bid a single 

price per pound for an entire lot. 

Eventually, these new arrangements 

came to be known as Alternative 

Marketing Arrangements (AMAs). See 

Figure 1, which contains a graphic 

showing various types of fed cattle 

marketing arrangements. 

BILLING CODE 6001–FR–P 


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Federal Register / Vol. 89, No. 198 / Friday, October 11, 2024 / Proposed Rules 82521 

4Source: Muth, M.K., J. Del Roccili, M. Asher, J. 

Atwood, G. Brester, S.C. Cates, M.C. Coglati, S.A. 

Karns, S. Koontz, J. Lawrence, Y. Liu, J. Marsh, B. 

Martin, J. Schroeter, J. L. Taylor, and C. L. Viator. 

2007. GIPSA Livestock and Meat Marketing Study, 

Volume 3: Fed Cattle and Beef Industries. Research 

Triangle Park, NC: RTI International for USDA 

Grain Inspection, Packers and Stockyards 

Administration. 1–16. 

BILLING CODE 6001–FR–C 

Formula agreements are the most 

common AMAs. Formula prices are 

determined using a base or reference 

price, such as the reported live 

negotiated price from the cash or spot 

market for the week prior to delivery. 

Although not always made in writing, 

formula agreements commonly include 

an express or implied agreement to 

purchase all the producer’s cattle. A 

‘‘grid’’ of premiums and discounts is 

then applied to the base price. 

Over the past 20 years, the use of 

formula agreements has increased 

relative to negotiated cash agreements, 

and around 2010, formula agreements 

became the dominant method of sale. As 

shown in Figure 2, in 2005, beef packers 

acquired roughly 55 percent of their 

cattle through cash negotiations and 30 

percent through formula agreements. By 

March 2021, the same analysis found 

cash negotiations accounted for about 

20 percent of cattle purchases, and 

formula agreements accounted for 65 

percent. These statistics reflect the state 

of cattle marketing nationally; however, 

in three out of the country’s five USDAdesignated cattle procurement regions, 

the cash negotiated share is significantly 

lower than 20 percent, reaching as low 

as 12.5 percent of total cattle sales in the 

Kansas (KS) region, 8.3 percent in the 

Colorado (CO) region, and 2.6 percent in 

the Texas-Oklahoma-New Mexico (TXVerDate Sep<11>2014 16:39 Oct 10, 2024 Jkt 265001 PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 E:\FR\FM\11OCP1.SGM 11OCP1

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Figure 1 

Marketing Arrangements for Sale or Transfer of Feeder and Fed Cattle4 

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auctions 

• ~crb!Dkm 

.. Perheatt. 

"Liveweight 

• Custcm feeding and 

gruil'II, ~.,tlltl hy 

the p,"Oducer ,. Custom ~ln; end 

~I'll, marketed by 

the sel'Vice ~ 

" Carean weight wl!h 

grid premiums and 

d'-unl$ 

- C.l'tM&weoht 
82522 Federal Register / Vol. 89, No. 198 / Friday, October 11, 2024 / Proposed Rules 

5The size of feedlots, which constitute the vast 

majority of cattle sales to packers, differs 

considerably by state. In Texas and Kansas, the 

average number of head that a feedlot sold in 2022 

was 12,851 and 5,694, respectively. In contrast, the 

averages in Iowa and Minnesota were 441 and 237, 

respectively. National Agricultural Statistics 

Service, 2022 Census of Agriculture. 

6 Id. 

7 Kades Report at 24. 

8See, for example, Giles Stockton, ‘‘There is a 

Solution,’’ 2017, https://www.worc.org/cattlemarket/; Western Organization of Resource 

Councils (WORC), Petition for Rulemaking, 62 FR 

1845 (1997); In addition, even packer leadership 

noted some of these concerns. See, e.g., C. Robert 

Taylor, ‘‘Harvested Cattle, Slaughtered Markets?’’ 

(April 27, 2022) Available at https://ssrn.com/ 

abstract=4094924, pgs. 25, 29 (quoting and citing 

Bob Peterson, CEO of IBP), infra. 

9See, e.g., Bill Bullard, ‘‘Chronically Besieged: 

The U.S. Live Cattle Industry,’’ Presented at Big Ag 

& Antitrust Conference, Thurman Arnold Project at 

Yale, Jan. 2021; U.S. Department of Justice & U.S. 

Department of Agriculture, Public Workshops 

Exploring Competition in Agriculture, Livestock 

Industry Agenda, August 27, 2010, Fort Collins, 

Colorado, available at https://www.justice.gov/ 

archives/atr/event/ag-workshops-livestock-industryagenda (accessed 7/18/2024); C. Robert Taylor and 

David A. Domina, ‘‘Restoring Economic Health to 

Beef Markets,’’ Aug. 25, 2010, available at https:// 

www.dominalaw.com/documents/RestoringEconomic-Health-to-Beef-Markets.pdf. 

10United States v. Swift & Co., No. 58 C 613, 1981 

WL 2171, at *1 (N.D. Ill. Nov. 23, 1981); see also 

Aduddell, Robert M. and Louis P. Cain. ‘‘Public 

Policy Toward ‘The Greatest Trust in the World’.’’ 

Business History Review, vol. 55 (1981), pp. 217– 

42. 

11Authorized by the Consolidated 

Appropriations Act of 2022 (Pub. L. 117–103). 

Implementing rule, ‘‘Cattle Contracts Library Pilot 

Program,’’ 87 FR 74951 (December 7, 2022). 

12Azzedine M. Azzam & Dale G. Anderson, 

USDA, Grain Inspection Packers and Stockyards 

Administration, Packers and Stockyards Statistical 

Report: 1995 Reporting Year, GIPSA 97–1, 1996, 

https://www.ers.usda.gov/webdocs/publications/ 

47232/17820_tb1874h_1_.pdf?v=0 (accessed 7/3/ 

24). 

13The HHI is calculated by summing the squares 

of the individual firms’ market shares. PSD 

calculates the HHI of market concentration for 

packers from the individual packer’s market shares 

based on Annual Commercial Slaughter totals. See 

Agricultural Marketing Service, USDA, Packers and 

Stockyards Division: Annual Report 2021 & 2022, 

pg. 14, https://www.ams.usda.gov/sites/default/ 

files/media/PackersandStockyards2021_

2022ReporttoCongress.pdf. 

14Antitrust Division, U.S. Department of Justice, 

2023 Merger Guidelines, December 18, 2023, 

https://www.justice.gov/atr/2023-merger-guidelines 

(last accessed 7/17/2024). 

15Agricultural Marketing Service, USDA, 

‘‘Agricultural Competition: A Plan in Support of 

Fair and Competitive Markets,’’ May 2022, p. 4, 

available at https://www.ams.usda.gov/sites/ 

default/files/media/USDAPlan_EO_

COMPETITION.pdf. 

16See, for example, Summary in Congressional 

Research Service, ‘‘Reauthorization of the Livestock 

Mandatory Reporting (LMR) Act in the 114th 

OK-NM) region. In contrast, the IowaMinnesota (IA-MN) region has reliably 

maintained cash-market procurement of 

50 percent or more of marketed cattle, 

in part reflecting the prevalence of 

smaller ‘‘farmer-feeders.’’ Nebraska (NE) 

region’s percentage has hovered 

between 30 and 40 percent. The higher 

prevalence of cash market transactions 

in IA-MN and NE may reflect a range of 

reasons, including producer preference 

for cash negotiated transactions, the size 

and number of sellers, and smaller lot 

sizes limiting the bargaining power of 

those producers in securing more 

favorable terms through AMAs.5 These 

trends are discussed at greater length 

later in this ANPR, including in Figures 

2 and 3 below. 

Producers’ views on formula 

agreement AMAs (hereinafter, AMAs 

refer to formula agreement AMAs unless 

otherwise noted) can vary widely, and 

sometimes sharply. Producers that use 

AMAs commonly note they generally 

offer convenience, cost-savings, and 

certainty, which is valuable in securing 

financing.6 7 Other producers, especially 

smaller producers commonly referred to 

as independents, more strongly value 

attributes in the cash market, such as 

the ability to negotiate on price with 

multiple packers in real time during a 

given week and to lock in that price at 

the time of sale, rather than relying on 

the application of a grid after slaughter. 

Independent producers have also 

expressed concern that the use of AMAs 

allows packers to avoid competition and 

exploit their market power and therefore 

broadly suppresses cattle prices. Some 

assert that packers engage in strategic 

behavior to control or manipulate the 

cash market for fed cattle, including 

going in and out of cash markets or 

otherwise changing their bidding 

practices, owing to the linkage between 

the AMA’s base price and the 

underlying cash market.8 Some also 

argue that the decline in demand for 

cash transactions reduces bidding in the 

cash market, which can adversely affect 

competition—a problem commonly 

referred to as ‘‘captive supply.’’ 9

A critical factor underlying producer 

concerns around AMAs is the 

continuing market concentration in 

meat packing, which, at the regional 

level, has been both high and persistent. 

The DOJ Consent Decree of 1920, which 

secured a broad injunction enjoining 

dominant packers from consolidation 

and vertical integration, came to an end 

in 1981,10 thus permitting packers to 

merge. Some additional vertical 

integration occurred during the 1980s 

between packers and feedlots, in part 

owing to deregulation of the P&S Act. 

However, in the 2000s the largest 

packers divested their feedlot 

operations. The question of closer 

relations between packers and feedlots 

today largely centers around questions 

of preferences in contractual terms, such 

as financing, risk-sharing, and profitsharing. The AMS Cattle Contract 

Library (CCL) Pilot collects data on 

whether packers have financing, risksharing or profit-sharing terms.11

Whether the CCL Pilot discloses terms 

would depend upon a confidentiality 

analysis. However, no such terms have 

been reported to AMS under the CCL 

Pilot, either at inception in January 2023 

or to date as confirmed again this year. 

Between 1980 and 1995, the 

percentage of fed cattle slaughtered by 

the four largest packers (the four-firm 

concentration ratio or CR4) rose from 

35.7% to 79.3%.12 In other words, by 

the mid-1990s the four largest packers 

in the fed cattle industry controlled of 

almost 80% of all fed cattle slaughtered 

in the U.S. Notably, national 

concentration levels mask the impacts at 

the regional level. While four packers 

may compete directly in national 

grocery chain markets, producers 

commonly have even fewer packers to 

transact with in their regional markets. 

Based on AMS’s experience conducting 

investigations and monitoring markets, 

there are commonly only one or two 

buyers in some local geographic 

markets, and few sellers have the option 

of selling fed cattle to more than three 

or four packers. In Colorado, for 

example, AMS Market News cattle price 

reports are usually withheld because 

two packers account for most purchases 

and Market News guidelines require at 

least three packers to be active in the 

reporting period to disclose price data. 

The Herfindahl-Hirschman Index 

(HHI) is a standard used to measure 

industry concentration,13 and current 

U.S. Department of Justice and Federal 

Trade Commission Merger Guidelines 

state that ‘‘markets with an HHI greater 

than 1,800 are highly concentrated.’’ 14

At a national level, the HHI for fed cattle 

packing was 1,687 in 2021, but in some 

regional markets the HHI exceeded 

3,000. Although the regional areas 

defined for Market News reporting do 

not perfectly define the extent of 

regional markets and may therefore 

overstate or understate concentration to 

some degree, these regional HHI 

measurements are nevertheless 

revealing of limited competition. 

Annual adjusted regional HHIs as of 

2021 ranged between 2,200–2,400 in 

Kansas and Nebraska and over 3,200 in 

Texas-Oklahoma-New Mexico.15

In response to concerns that ongoing 

packer concentration and the rise of 

AMAs were negatively impacting 

transparency in the cash markets, 

Congress passed the Livestock 

Mandatory Reporting Act of 1999 (Pub. 

L. 106–78, title IX).16 The law enhances 


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Federal Register / Vol. 89, No. 198 / Friday, October 11, 2024 / Proposed Rules 82523 

Congress.’’ November 20, 2015, https://

crsreports.congress.gov/product/pdf/R/R44025/4, 

last accessed 8/14/2024. 

17The Secretary of Agriculture was directed to 

establish, among other things, a cattle marketing 

information program that would ‘‘provide[s] 

information that can be readily understood by 

producers, packers and other market participants, 

including information with respect to the pricing, 

contracting for purchase, and supply and demand 

conditions for livestock, livestock production, and 

livestock products.’’ (7 U.S.C. 1635 Purpose). 

18The program is renewed periodically per 

statute. It was renewed most recently by the 

Consolidated Appropriations Act of 2024, which 

extended LMR authority to September 30, 2024 

(Pub. L. 118–42). 

19AMS Livestock Mandatory Reporting 

Background, https://www.ams.usda.gov/rulesregulations/mmr/lmr/background#:∼:text=

On%20April%202%2C%202001%2C%20

the%20USDA%E2%80%99s%20Agricultural

%20Marketing,sales%20of%20livestock%20

and%20livestock%20products%20to%20AMS 

(accessed 7/3/24). 20 65 FR 75464, 75490 (December 1, 2000). 

21 2012 Annual Report, Packers and Stockyards 

Program, pg. 39, https://www.ams.usda.gov/sites/ 

default/files/media/2012_psp_annual_report.pdf 

(accessed 7/3/2024). 

22Packers and Stockyards Division: Annual 

Report 2021 & 2022, p. 19, https://

www.ams.usda.gov/sites/default/files/media/ 

PackersandStockyards2021_

2022ReporttoCongress.pdf. 

transparency and accuracy in reporting 

by requiring covered packers to report 

all livestock and meat transactions to 

AMS, which then must compile the 

reports and make them publicly 

available, subject to appropriate 

confidentiality protections.17 USDA 

implemented this statute by establishing 

the Livestock Mandatory Reporting 

(LMR) program (65 FR 75464, December 

1, 2000; and 66 FR 8151, January 30, 

2001 (postponing the rule’s effective 

date)).18 The LMR program provides 

weekly reports on ‘‘livestock and meat 

price trends, contracting agreements, 

and supply and demand conditions.’’ 19

The Regulatory Impact Analysis 

Summary of Benefits of the LMR 

implementing rule described how 

mandatory price reports would serve as 

benchmark prices (also called base 

prices or reference prices) for formula 

agreements, and thus enhance price 

discovery in the face of declining 

negotiated cash transactions in the cattle 

industry.20

Following the implementation of LMR 

and the associated increase in price 

transparency, packers widely adopted 

LMR-based reference prices as base 

prices in AMAs due to the widespread 

trust in LMR-based price reports. 

However, as more cattle were purchased 

under AMAs, the percentage of cattle 

purchased on the spot market declined, 

leaving the regional cash markets 

heavily used as AMA base price 

benchmarks with fewer spot 

transactions to draw from. (Note, 

different LMR reports will cover 

different transactions; some focus on a 

regional cash trade, while others show 

AMA transactions with various degrees 

of aggregation or confidentiality. All 

transactions are reported in some way, 

including AMA purchases). LMR has 

greatly expanded transparency in fed 

cattle markets overall, which is critical 

for all producers, but its authorities are 

not designed to address the use of LMR 

reports by market participants in 

contracts and the competitive impacts 

on the broader markets from doing so. 

In the last two decades, the fed cattle 

market has become even more reliant on 

formula pricing agreements. In 2008, 

formula pricing agreements accounted 

for 34.4% of fed cattle purchases, while 

spot market transactions accounted for 

50.5%.21 By 2021, formula pricing 

agreements accounted for 61% of fed 

cattle procurement, while spot market 

(i.e., cash negotiated live and dressed) 

transactions accounted for 19%.22 This 

shift to formula pricing agreements 

varies by region, with relatively low 

usage in the Northern Midwest (which 

is more commonly characterized by 

smaller ‘‘farmer-feeder’’ operations 

where cash negotiated transactions still 

account for 40–50% of sales) and very 

high usage in Texas and Kansas (where 

larger ‘‘corporate’’ feedlots are the norm 

and cash negotiated transactions are as 

low as 6–10%). See Figure 2. Some 

regions, notably Texas and Kansas, saw 

the number of cattle transacted in the 

cash market approach zero in some 

weeks. See Figure 3. 

BILLING CODE P 


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Figure 2 

90.0% 

80.0% 

Percentage of Fed Cattle Purchased by Purchasing Type - National 

Monthly-Jan 2005 - May 2024 
Federal Register / Vol. 89, No. 198 / Friday, October 11, 2024 / Proposed Rules 82525 

23Adjemian, Michael K., Tina L. Saitone, and 

Richard J. Sexton. 2016. ‘‘A Framework to Analyze 

the Performance of Thinly Traded Agricultural 

Commodity Markets’’ Amer. J. Agr. Econ. 98(2): 

581–596; and Koontz, Steven R. 2015. ‘‘Marketing 

Method Use in Trade of Fed Cattle: Causes and 

Consequences of Thinning Cash Markets and 

Continued 

BILLING CODE C 

Although it varies from plant to plant 

and region to region, the cash market 

can now be considered a residual 

market 23 where packers fill in gaps in 


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Figure 3 

Weekly Head Sold -Beef Type All Negotiated Methods - July 2019 -April 2024 

lowa-Minnesota 

Kansas 

Nebraska 

Texas-Oldahoma-New Mexico 

60000 i ~ -

a so,ooo .,, 

j 40~000 

j 30,000 _____ , 

z 
82526 Federal Register / Vol. 89, No. 198 / Friday, October 11, 2024 / Proposed Rules 

Potential Solutions’’ Invited Paper American 

Applied Economics Association and Western 

Agricultural Economics Association Joint Annual 

Meeting, June 2015. 

24https://mymarketnews.ams.usda.gov/Cattle_

Contract_Library (accessed 7/3/2024). The CCL 

Pilot presents these base prices as ‘‘options’’ in the 

contract. About 11 percent small percent of 

contracts contain an CME Live Cattle Futures 

Market option for a base. Less than 10 percent have 

a negotiated option, while less than 4 percent have 

a ‘‘top of the market’’ option. Some contacts may 

use more than one option: for example, a contract 

may set out that a negotiated option is to be utilized 

when one or more of the LMR-reported base price 

region fails to hit a targeted volume of cash trade 

in the week. 

25Taylor, C.R. ‘‘Risk Shifting via Partial Vertical 

Integration: Beef Packers’ Acquisition of Slaughter 

Cattle,’’ November 2022, https://ssrn.com/ 

abstract=4276805. 

their supply needs not otherwise served 

first by cattle purchased with AMAs. 

Thin markets—meaning those with few 

purchasers or limited trading volume or 

liquidity—have received attention from 

policymakers because of concerns that 

processing firms could depress farmlevel prices below those that would 

prevail in a competitive market. Cash 

markets and, in particular, the regional 

cash negotiated live markets, continue 

to serve as the primary price discovery 

vehicle for all cattle traded. Data from 

USDA’s CCL Pilot shows that more than 

75% of contracts analyzed rely on an 

AMS Market News price report to 

determine the base price used in the 

contract.24 Moreover, the CCL Pilot 

revealed that more than 90% of those 

contracts use one of three regional cash 

markets—negotiated cash purchases in 

Nebraska, Kansas, or Texas-OklahomaNew Mexico—to price their cattle. 

These AMA contract base prices almost 

always use the reported average from 

the previous week’s cash trade. 

Those trading in the negotiated cash 

market—who are, generally, smaller 

producers without AMAs—generally 

absorb weekly fluctuations in packer 

demand. Cash markets are commonly 

viewed as a residual market, as packers 

usually prioritize AMA purchases to fill 

plant needs first. The relationship of the 

variation week-to-week in numbers of 

cattle purchased through negotiated 

cash and formula methods differs 

between regions. Notably, the difference 

in measured variation between the two 

markets is markedly lower in Iowa and 

Nebraska, and markedly higher in 

Texas-Oklahoma-New Mexico and in 

Kansas.25 Figure 4 displays a ratio 

between the coefficients of variation 

(CV) calculated annually for number of 

cattle sold weekly through negotiated 

cash and formula purchase methods in 

each region as a measure of relative 

variability. A CV ratio equal to one 

indicates equal variability, and higher 

values of the ratio indicate greater 

variability of quantities purchased in 

the negotiated cash market relative to 

formulas. The figure shows that in 

recent years CV ratios have been 

consistently higher in the Kansas region 

and the Texas, Oklahoma, and New 

Mexico region where formula methods 

predominate. Although there could be 

reasons for the differences other than 

thin markets, the figure below is 

consistent with the idea that as regional 

negotiated cash markets become 

thinner, cash sellers in those markets 

face increasing volatility and 

uncertainty in marketing their cattle 

relative to those selling with a formula. 

Additionally, AMA base prices 

established using cash negotiated 

market price reports simply reflect the 

quality or specification of cattle that 

were traded during the week in the 

reporting area. Most AMA formulas use 

prices that weight the average weekly 

prices by number of head but do not 

standardize or weight the cattle to a 

particular quality grade (for example, 

USDA Choice—Yield Grade 3, etc.). 

That is to say, the base price simply 

reflects the numerical average of the 

prices of whatever qualities of cattle 

appear in the market that week; 


ddrumheller on DSK120RN23PROD with PROPOSALS1EP11OC24.014</GPH>

Figure 4 

7.i) 

Annual Cl Ratios, CV Neg<>/Joted Casi> / CV formula 

llei,lonaf and N<>tiooa! 

1005 200& 2007 200a ?009 :WU! Wll WU l-013 l!l14 llll5 ~!l:16 W!.7 2018 lOl!I i070 ion 21121 2021 ?lll4 

Vear 

Source: Calculated from USDA-AMS Market News LMR Weekly Data. Coefficient of variation (CV= standard 

deviation divided by mean). CV Ratio = CV of Weekly Head Purchased of Negotiated Cash Divided by CV of 

Weekly Head Purchased Formula. 
Federal Register / Vol. 89, No. 198 / Friday, October 11, 2024 / Proposed Rules 82527 

26Note, previous academic studies have 

highlighted the potential value of augmenting the 

amount of information reported and collected on 

fed cattle premiums and discounts. Ted C. 

Schroeder, Brian K. Coffey, and Glynn T. Tonsor, 

‘‘Hedonic Modeling to Facilitate Price Reporting 

and Fed Cattle Market Transparency,’’ Applied 

Economic Perspectives and Policy vol 45(3), Jan. 

2022, p. 1716. 

Sheppard G. Rogers, Ted C. Schroeder, Glynn T. 

Tonsor, and Brian K. Coffey, ‘‘Describing Variation 

in Formula Base Prices for U.S. Fed Cattle: A 

Hedonic Approach,’’ Journal of Agricultural and 

Applied Economics vol 55(1), Feb. 2023 p. 117. 

27Types of transactions that are not included in 

Livestock Mandatory Reporting (LMR) include 

those for which confidentiality is not met (such as 

frequently occurs in the Colorado region), or 

information is not required to be submitted (such 

as auction purchases). See Livestock Mandatory 

Reporting Excluded Transaction Summaries: 

https://www.ams.usda.gov/rules-regulations/mmr/ 

lmr/excluded-transactions. 

28Petition submitted to USDA on October 8, 

1996; published by USDA in the Federal Register, 

62 FR 1845, January 14, 1997. 

29See title XI of the Food, Conservation and 

Energy Act of 2008 (2008 Farm Bill) (Pub. L. 110– 

246); see also, U.S. Department of Justice & U.S. 

Department of Agriculture, Public Workshops 

Exploring Competition in Agriculture, Livestock 

Industry Agenda, August 27, 2010, Fort Collins, 

Colorado, available at https://www.justice.gov/

archives/atr/event/ag-workshops-livestock-industryagenda (accessed 7/18/2024); see also 75 FR 35338, 

June 22, 2010; see also, e.g., C. Robert Taylor and 

David A. Domina, ‘‘Restoring Economic Health to 

Beef Markets,’’ Aug. 25, 2010, available at https:// 

www.dominalaw.com/documents/RestoringEconomic-Health-to-Beef-Markets.pdf. 

30USDA, GIPSA, Packers and Stockyards 

Program, Western Regional Office, Investigation of 

Beef Packers’ Use of Alternative Marketing 

Arrangements, July 2014, https://www.rcalfusa.com/wp-content/uploads/2020/07/200721- 

2014-GIPSA-Investigation-of-Cattle-Market.pdf 

(accessed 7/3/2024). 

31 Id., pg. i. 

32 Id., pg. ii. 

however, the value of cattle—and thus 

the prices—can vary greatly depending 

on quality.26 The benchmarks, therefore, 

are vulnerable to fluctuation based on 

the different types of cattle sold in the 

market. It is commonly understood that 

different states reflect different qualities 

of quality, and that producers will seek 

to use base prices for regions that reflect 

their own cattle trading strategy. Yet the 

benchmark remains inherently 

vulnerable to changes in the quality that 

appear during a given week. 

Tying the price of AMA cattle to the 

cash negotiated market price without a 

quality specification also creates 

unusual incentives that may distort 

cattle trading. The packer, for example, 

may seek to avoid cattle with higher 

quality specifications that would raise 

the price of its AMA formula cattle, or 

to underpay for such cattle. AMS has 

heard reports that packers may find 

other ways to trade that keep 

transactions out of the relevant region’s 

cash market (and hence not affect the 

relevant AMA base price) for similar 

reasons.27 These AMA base price 

benchmark practices contrast with the 

Chicago Mercantile Exchange’s (CME’s) 

Live Cattle Futures, which is tied to 

particular specifications for a lot of 

cattle. Cattle of all range of quality and 

type may still trade in the spot market 

at whatever value or premium that 

packers and producers agree upon, but 

the futures market is grounded in a 

clear, transparent basket of cattle for 

valuation and transparency purposes. 

AMS understands that packers will 

internally weight or standardize all 

purchases to a particular quality grade, 

usually USDA Choice—Yield Grade 3, 

so that the packer can measure its 

procurement efficiency even while 

permitting cattle quality to vary. 

B. Longstanding Concerns and Market 

Shocks 

For over 20 years, a range of 

producers have complained about the 

unfairness of the prices they are paid for 

fed cattle arising out of the relationship 

between AMAs and the regional cash 

markets that form their base price. 

Producers have highlighted adverse 

impacts on trading behavior, fewer and 

commonly lower bids on cattle, 

difficulty attempting to negotiate with 

packers, increased pricing and sales risk 

in the cash market overall, and packer 

pickup problems, among other 

concerns. Some producers assert a 

predatory pricing strategy to lock up the 

industry among only favored players. 

They also fear the loss of independence 

and further vertical integration as has 

occurred in other protein species. 

However, the boldest reform attempts to 

date have not met with success. 

As early as 1996, the Western 

Organization of Resource Councils 

(WORC), a federation of grassroots 

organizations, submitted a petition to 

the Secretary of Agriculture to issue 

rules that would restrict the use of 

forward contracts and packer ownership 

of cattle, including a prohibition on the 

use of base prices that reference a 

future, as yet unknown, price.28 WORC 

put forth this petition out of concern 

that forward contracts using formulas 

for the base price encourage 

manipulation of cash fed cattle markets 

to lower formula base prices. Also, the 

petition asserted that higher quality 

cattle are sold on a formula basis, even 

as the base price for such sales are set 

on the negotiated cash market, where 

cattle are lower quality. The petition 

asserted that the combination of 

incentives leads to lower fed cattle 

prices on negotiated cash markets and to 

lower formula prices than would be the 

case if cattle purchasing was conducted 

in a more competitive, open manner. 

Complaints about AMAs were central 

to many of the reforms that were 

considered during the 2008–2010 

period, including both the 2008 Farm 

Bill’s provision on ‘‘undue preferences’’ 

and subsequent efforts by USDA to 

write rules under the P&S Act in 2010.29

More recently, in 2014, USDA’s then 

Grain Inspection, Packers and 

Stockyards Administration (GIPSA) 

completed an investigation into 

complaints from cattle industry 

participants regarding possible 

anticompetitive behavior by the four 

largest packers, in part due to the 

packers’ use of formula pricing 

agreements (which are referred to in the 

report as AMAs).30 Complainants 

asserted to USDA that packers are able 

to lower prices in the cash market and 

thus impact prices paid under AMAs by 

(1) buying fewer cattle on a cash basis, 

which results in thinner volumes; (2) 

making unreasonably low bids (or 

bidding less aggressively, making ‘‘take 

it or leave it’’ short-term pressure bids); 

and (3) only offering market-based price 

bids once a lower market price is 

established. The investigation found 

that, ‘‘on a week-to-week basis, higher 

levels of AMA procurement [as a 

percentage of slaughter capacity] were 

associated with lower negotiated cash 

prices.’’ 31 This suggests that cash or 

spot market prices are more likely to be 

depressed in weeks when packers rely 

more heavily on AMA procurement to 

fill slaughter needs. Yet the report 

focused on AMAs as a whole, rather 

than on base price selection, and found 

that AMAs ‘‘have significant economic 

benefits,’’ including for packers, 

consumers, and fed cattle producers.’’ 32

Reported benefits to packers included a 

reduction in transaction costs; benefits 

to consumers included improvement in 

beef quality, and benefits to cattle 

feeders, included a reduction in 

transaction costs, assurance of timely 

market access, and reduction in the 

price risk associated with raising and 

selling fed cattle. AMS does not, 

however, endorse cross-market 

balancing, as benefits and harms should 

only be considered within a market. 

Smaller producers selling in the 

negotiated cash market have 

complained to USDA for many years 

about unfair practices leading to lower 

prices in the cash markets and so-called 

‘‘sweetheart deals’’ in the form of 

AMAs, where the AMA-receiving 

producer secured pricing better than 

that secured in cash negotiated markets 


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82528 Federal Register / Vol. 89, No. 198 / Friday, October 11, 2024 / Proposed Rules 

33See, e.g., Bill Bullard, ‘‘Chronically Besieged: 

The U.S. Live Cattle Industry,’’ Presented at Big Ag 

& Antitrust Conference, Thurman Arnold Project at 

Yale, Jan. 2021; Bill Bullard, ‘‘Under Siege: The 

U.S. Live Cattle Industry,’’ S. Dakota L. Rev., 2013; 

2010 GIPSA Hearings; Taylor, Legal and Economic 

Issues (supra). 

34For more on the costs/risks and collective 

action problems associated with price discovery, 

see Darrell Peel, David Anderson, et al, ‘‘Fed Cattle 

Price Discovery Issues and Considerations,’’ 

Oklahoma State University Extension, (E–1053), 

Nov. 2020, available at https://

extension.okstate.edu/fact-sheets/printpublications/e/fed-cattle-price-discovery-issuesand-considerations-e-1053.pdf and John D. 

Anderson, James L. Mitchell, and Andrew M. 

McKensie, ‘‘Analysis of the Cattle Price Discovery 

and Transparency Act of 2021, University of 

Arkansas (FC–2022–001), Jan. 2022, available at 

https://wordpressua.uark.edu/fryar-center/files/

2023/02/CPDTA-analysis-01.18.22.pdf. 

35For the first half of 2024 34.2% of all contracts 

in the Cattle Contract Library Pilot dashboard 

received base price adjustments. During the same 

time frame, the average base price adjustment for 

contracts that used USDA Market News LMR data 

to determine a base price and applied quality 

premiums and discounts made an average base 

price adjustment of $1.10/cwt before quality 

premiums and discounts were applied. 

36Michael Nepveux, American Farm Bureau 

Federation, ‘‘Impacts of the Packing Plant Fire in 

Kansas,’’ September 10, 2019, https://www.fb.org/

market-intel/impacts-of-the-packing-plant-fire-inkansas (accessed 7/5/2024). 

37USDA, AMS, ‘‘Boxed Beef & Fed Cattle Price 

Spread Investigation Report,’’ July 22, 2020, https:// 

www.ams.usda.gov/sites/default/files/media/Cattle

andBeefPriceMarginReport.pdf (accessed 7/5/2024). 

38Nepveux, ‘‘Impacts of the Packing Plant Fire in 

Kansas.’’ 

39 ‘‘Boxed Beef & Fed Cattle Price Spread 

Investigation Report,’’ pg. 3. 

40 Id. at pg. 5. 

41 Ibid. 

42 Kate Vaiknoras, et. al., USDA, ERS, ‘‘COVID– 

19 Working Paper: COVID–19 and the U.S. Meat 

and Poultry Supply Chains,’’ February 2022, 

https://www.ers.usda.gov/webdocs/publications/

103178/ap-098.pdf?v=8386.2 (accessed 7/5/2024). 

43 J.E. Hobbs, ‘‘The Covid–19 pandemic and meat 

supply chains,’’ Meat Sci, November 2021, https:// 

www.ncbi.nlm.nih.gov/pmc/articles/PMC9761612/, 

(accessed 7/5/2024). 

44 ‘‘Boxed Beef & Fed Cattle Price Spread 

Investigation Report,’’ pg. 9. 

45 Ibid. 

46 Id., pg. 9. 

47 ‘‘Beefing up Competition: Examining America’s 

Food Supply Chain’’: U.S. Senate Committee on the 

Judiciary (July 28, 2021) (Written Testimony of the 

Iowa Cattlemen’s Association, https://

www.judiciary.senate.gov/imo/media/doc/Schaben

%20-%20Testimony.pdf (accessed 7/5/2024)). 

48 Ibid. 

49AMS, ‘‘Agricultural Competition,’’ supra. See 

also www.usda.gov/meat (last accessed July 2024). 

for the same quality cattle.33 Part of the 

concern from these producers is that 

they engage in the work of price 

discovery—the risks, the costs, the 

inability to place cattle, etc.—yet are not 

compensated for those costs and risks, 

as AMA formulas incorporate whatever 

the cash negotiated price is into the 

AMA.34 Moreover, as revealed by the 

CCL Pilot, AMA contracts commonly 

pay adjustments above the base price, 

although the ultimate economics of the 

agreement depends upon the premiums 

and discounts. To the extent that 

packers seek to lower their procurement 

costs by only purchasing lower quality 

cattle within relevant markets, or 

through exercising softer bidding or 

other trading practices, producers 

selling in cash markets would also 

experience harms compared to AMA 

holders, who receive upwards 

adjustments in the base price beyond 

the LMR prices 35 along with quality 

bonuses based on the grid. 

Concerns raised by producers 

regarding concentration and insufficient 

price discovery came to a head as a 

result of a series of market shocks in 

2019 and 2020. The first arose following 

the closure of one processing plant, 

which, due to the plant’s size, impacted 

the entire industry. On August 9, 2019, 

a beef packing plant in Holcomb, Kansas 

closed after extensive damage from a 

fire.36 The plant was responsible for 5 

to 6% of the Nation’s beef processing 

capacity.37 Though the plant’s owner 

quickly transferred cattle to its other 

facilities,38 an AMS investigation found 

significant economic impacts resulted 

from the fire. With respect to pricing, for 

the week ending August 24, 2019, the 

spread (the difference between the 

average price packers paid to cattle 

producers for fed cattle and the average 

price paid by wholesale beef buyers for 

USDA Choice grade beef) was $67.17, 

representing a 143% increase from the 

average spread between 2016 and 

2018.39 Though this eventually 

stabilized, the spread remained above 

2016–2018 levels.40 With respect to 

trading, AMS found that in the 

aftermath of this crisis, sales in the spot 

market decreased while formula trading 

increased: in the week after the fire, spot 

market trading decreased by 27%, while 

formula trading increased by 15,000 

head of fed cattle.41 This is significant 

because, as noted above in this ANPR’s 

overview of the fed cattle industry, more 

than 75% of formula pricing agreements 

base the price paid for cattle on prices 

paid in the spot market. Therefore, the 

nature of the trading that is conducted 

in the spot market—for example, the 

number of packers competing against 

one another to bid on the price paid for 

cattle, whether those trades are public, 

and the quality of information disclosed 

publicly—heavily impacts the amount 

paid for cattle under formula pricing 

agreements. As AMAs are commonly 

exclusive with an express or implied 

obligation that the packer will take all 

of the producer’s cattle, market shocks 

such as this more heavily impact trading 

in spot markets, leaving those producers 

unable to timely sell their cattle. 

The COVID–19 pandemic also 

impacted pricing, trading, and the beef 

supply chain, but even more severely. 

By late March of 2020, slaughter rates 

fell as workers fell sick and plants 

closed, and consumer demand surged, 

shifting from restaurant demand to retail 

demand.42 43 44 Fed cattle purchases 

declined, as did fed cattle prices.45 An 

AMS investigation found that, ‘‘[f]rom 

the beginning of April until the third 

week of May, the spread rose from 

approximately $66/cwt. to just over 

$279/cwt., an increase of approximately 

323 percent . . . and the largest spread 

between the price of fed cattle and the 

price of boxed beef since the inception 

of Mandatory Price Reporting in 

2001.’’ 46 The investigation found that, 

although the spread fell in subsequent 

months, it remained high by historical 

standards. A year later, cattle producers 

were still suffering economically while 

packers profited as COVID–19 kept 

plants at reduced capacity for an 

extended period: in its July 2021 

Congressional testimony, a cattle trade 

association reported that ‘‘gross packer 

margin . . . exceeded $1,000 per head’’ 

while fed cattle producers across the 

nation ‘‘struggled to break even.’’ 47

During this time, ‘‘[o]n average, 

estimated returns for cattle producers 

were below cost of production.’’ 48

Cattle inventories continued to 

contract at the national level after 2021, 

and widespread drought conditions 

contributed to the beef cow herd 

reaching its lowest level in more than 60 

years. Concurrent with herd contraction, 

cattle prices had recovered, reaching 

record highs during 2023 and 2024 and 

leading to estimated returns above cost 

of production for producers. 

In response to the disruptions caused 

by COVID and the closed plant in 

Holcomb, Kansas, USDA has taken a 

wide range of measures to boost 

resiliency and competitiveness in the 

meat supply chain, including investing 

more than $1 billion into new local and 

regional meat processing capacity.49

Yet, given the interdependent nature of 

the fed cattle industry and the 

continuing level of concentration in the 

beef industry, future packer crises may 

still have far-reaching pricing and 

trading impacts. AMS believes that 

regulatory consideration of trading 

market structures and practices must be 

part of any effort to increase the 

resiliency and competitiveness, as well 

as fairness, of the cattle pricing system 


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Federal Register / Vol. 89, No. 198 / Friday, October 11, 2024 / Proposed Rules 82529 

50 In 2023, the National Cattlemen’s Beef 

Association (NCBA) adopted a similar resolution in 

favor of adopting a 7-day standard for picking up 

cattle purchased on a negotiated cash basis, after 

which cattle would be weighed up and the buyer 

would be responsible for additional expenses. 

Policy handbook (p. 98) available at https://

www.ncba.org/Media/NCBAorg/Docs/2024-ncbapolicy-book.pdf (last accessed 7/18/2024). 

51Examples include among others Emmett Elam. 

1992. ‘‘Cash Forward Contracting versus Hedging of 

Fed Cattle, and the Impact of Cash Contracting on 

Cash Prices’’ Journal of Agricultural and Resource 

Economics, 17(1): 205–217. 

Clement E. Ward, Stephen R. Koontz, and Ted C. 

Schroeder. 1998. ‘‘Impacts from Captive Supplies 

on Fed Cattle Transaction Prices’’ Journal of 

Agricultural and Resource Economics 23(2):494– 

514. Schroeter John R. and Azzeddine Azzam. 1999. 

‘‘Econometric analysis of fed cattle procurement in 

the Texas Panhandle’’ Report to USDA, Grain 

Inspection Packers and Stockyards Administration. 

Ji, In Bae and Chanjin Chung. 2012. ‘‘Causality 

Between Captive Supplies and Cash Market Prices 

in the U.S. Cattle Procurement Market’’ Agricultural 

and Resource Economics Review, 41/3 (Dec. 2012) 

340–350. 

52See, e.g., Garrido, F.G. and M. Kim, N.H. Miller, 

and M.C. Weinberg. ‘‘Buyer Power in the Beef 

Packing Industry: An Update on Research in 

Progress,’’ Report prepared for Washington Center 

for Equitable Growth, March 30, 2022; C. Robert 

Taylor, ‘‘Harvested Cattle, Slaughtered Markets’’; 

USDA, GIPSA, Packers and Stockyards Program, 

Western Regional Office, Investigation of Beef 

Packers’ Use of Alternative Marketing 

Arrangements, July 2014, https://www.rcalfusa.com/wp-content/uploads/2020/07/200721- 

2014-GIPSA-Investigation-of-Cattle-Market.pdf 

(accessed 7/3/2024). 

53 Garrido, F., M. Kim, N.H. Miller, and M.C. 

Weinberg. ‘‘Buyer Power in the Beef Packing 

Industry,’’ January 2024, https://

www.nathanhmiller.org/cattlemarkets.pdf (accessed 

9/25/2024). 

54Schroeder, T.C., B.K. Coffey, and G.T. Tonsor. 

‘‘Enhancing Supply Chain Coordination through 

Marketing Agreements: Incentives, Impacts, and 

Implications,’’ in The U.S. Beef Supply Chain: 

Issues and Challenges: Proceedings of a Workshop 

on Cattle Markets, ed. by Fisher, B.L, J.L. Outlaw, 

and D.P. Anderson, Agricultural and Food Policy 

Center Texas A&M University, June 3–4, 2021, p. 

81. 

55See, for example, Ward, C.E., T.C. Schroeder, 

and D.M. Feuz, ‘‘Grid Pricing of Fed Cattle: Base 

Prices and Premiums-Discounts,’’ Oklahoma 

Cooperative Extension Service, AGEC–560, 

available at: https://extension.okstate.edu/factsheets/print-publications/agec/grid-pricing-of-fedcattle-base-prices-and-premiums-discounts-agec560.pdf. 

56Some standard pricing incentives used in fed 

cattle contracts are reported in the Cattle Contract 

Library Pilot Program. For more information, please 

see USDA AMS LPGMN Cattle Contracts Library— 

Explanatory Notes: https://www.ams.usda.gov/

sites/default/files/media/CCL_

ExplanatoryNotes.pdf. 

that undergirds our nation’s meat 

supply. 

An additional concern relates to when 

cattle sold on a liveweight basis are 

picked up. Feedlots typically sell their 

animals when they reach a weight that 

is considered ‘‘finished,’’ or ready for 

slaughter. In most cases, the packer 

schedules a subsequent time to pick up 

the purchased cattle, also known as 

‘‘calling for cattle.’’ Feedlot sellers incur 

ongoing costs of feed, yardage, etc., for 

cattle from the time of sale until the 

buyer picks the animals up and takes 

them to the plant. Although a seven-day 

pickup window is often considered 

standard practice, sellers have reported 

packers waiting more than six weeks 

after purchase before picking up cattle. 

In major cattle feeding regions, a 

seven-day pick-up time has been the 

accepted industry practice. After seven 

days have elapsed, it is common 

practice for sellers to ‘‘weigh-up’’ cattle, 

which means weighing them before 

putting them back on feed and shifting 

responsibility for all future costs of feed, 

yardage, death loss, etc., to the packer. 

Weighing-up cattle helps clearly 

determine the value of cattle that have 

been sold on a negotiated cash live 

weight basis. The packer owes the seller 

an amount equal to the negotiated price 

multiplied by weight at the time of the 

weighing-up. From that point forward, 

the packer must pay all future costs for 

animal maintenance, while also 

accruing the benefit of any weight gain 

that occurs after the weigh-up.50

Notably, failure to pick up cattle in a 

timely manner adds, in the view of 

some producers, to the packer’s ‘‘captive 

supply’’ of cattle that reduces demand 

for bidding in the cash market. 

C. Academic Review and Other 

Regulatory Models 

There exists a relatively large body of 

empirical research into AMAs in 

livestock markets and fed cattle markets 

specifically. The presentation of some 

research here is necessarily exemplary 

of the available research and is not 

intended to reflect AMS’s endorsement 

of conclusions or even the relative 

balance of the presentation, be it 

perceived as favorable or unfavorable to 

certain aspects of AMAs. 

Early studies consistently found a 

small but significant negative 

correlation between fed cattle prices and 

the number of cattle purchased through 

AMAs from week to week. While these 

studies were unable to prove 

conclusively that this negative 

correlation was due to market power, 

the correlation has remained robust 

across time.51 52 A recent study found a 

continued statistically significant 

negative correlation between spot fed 

cattle prices and AMAs, and empirically 

demonstrates that increases in AMAs 

may have contributed to an increase in 

the observed spread between the prices 

that packers pay for cattle from feedlots 

and the value of the beef they sell to 

retailers.53

A range of studies have explored the 

benefits of AMAs, almost always 

looking at them holistically. McDonald 

and McBride and several others have 

documented efficiency gains from 

contracting in livestock markets. In the 

2007 GIPSA Meat and Livestock 

Marketing Study, Muth et al., found 

benefits to packers, cattle producers, 

and consumers. Benefits to cattle 

producers were larger than any potential 

decrease in prices to producers, whether 

due to market power or otherwise. 

AMAs enable packers and feeders to 

make better use of their capacity, further 

reducing costs, and reducing risk for 

producers as they know they have a 

buyer for their cattle well in advance. 

AMS does not endorse the type of crossmarket balancing that would seek to 

justify harms to smaller producers with 

benefits to larger producers. AMS does 

not express an opinion in this ANPR 

regarding whether the conclusions from 

these studies would still hold given 

significant market shifts over the last 17 

years, even if attempting to balance 

harms and benefits to producers. Nor 

does AMS express an opinion on 

whether it would utilize the same 

methodology used in earlier studies. 

Researchers have also explored how 

AMAs and grid pricing have changed 

risk and pricing signals between packers 

to producers.54 AMAs use the grid to 

link pay premiums and discounts that 

are added to or subtracted from base 

prices directly to valued characteristics 

of fed beef cattle such as degree of 

marbling and yield of sellable meat.55

AMAs are also used to encourage 

production of some process-verified 

cattle characteristics (including natural, 

organic, non-hormone treated, grass-fed, 

or age and source verification) that 

require increased coordination between 

beef producers and packer buyers. 

These pricing incentives are clearly laid 

out for producers in contracts and 

evaluated post-slaughter.56 That is, in 

contrast to a simple live cash price paid 

before harvest as a single per pound rate 

for a group of cattle ‘‘on the hoof,’’ 

AMAs typically link payment to carcass 

performance after harvest (e.g., yield 

and quality grade) and other valueadded characteristics, including process 

verification. Accordingly, the risks that 

the packer bears in cash markets 

through its buyer agents’ ability to 

identify and signal to producers the 

importance of particular quality 

characteristics are borne by producers in 

AMAs. In doing so, AMAs have been 

found to be more effective at passing 

price signals from consumers—as 

identified by the packer—up to 


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57See, for example, Doumit, K.M. and T.C 

Schroeder, ‘‘Fed Cattle and Beef Premiums and 

Discounts: Trends and Implications,’’ Kansas State 

University Department of Agricultural Economics 

Extension Publication, 8/28/2023. Available at: 

https://agmanager.info/livestock-meat/marketingextension-bulletins/marketing-strategies-andlivestock-pricing/fed-cattle-0 (last accessed 10/1/ 

2024). 

58See, e.g., Thayer, A.W., Benavidez, J.R., and 

Anderson D.P., ‘‘Exploring the Impact of Fed Cattle 

Grade on Transaction Type,’’ ASFMRA 2024 

Journal, available at https://higherlogicdownload.

s3.amazonaws.com/ASFMRA/aeb240ec-5d8f-447f80ff-3c90f13db621/UploadedImages/Journal/2024/

Impact_of_Fed_Cattle_Grade.pdf; Taylor, C.R. 

(2022) Harvested cattle, slaughtered markets? 

Available at: http://dx.doi.org/10.2139/ 

ssrn.4094924. 

59Fischer, B.L., and J.L. Outlaw. 2021. 

‘‘Introduction.’’ The U.S. Beef Supply Chain: Issues 

and Challenges. B.L. Fischer, J.L. Outlaw, and D.P. 

Anderson, eds. College Station, TX: Agricultural 

and Food Policy Center, Texas A&M University. 

60Carstensen, P.C., ‘‘Dr. Pangloss as an 

Agricultural Economist: The Analytic Failures of 

‘The U.S. Beef Supply Chain: Issues and 

Challenges,’ ’’ (2022), available at https://

papers.ssrn.com/sol3/papers.cfm?abstract_

id=4049230. 

61 Koontz, Stephen R. 2016, ‘‘Price Discovery 

Research Project—Objective Measures Findings 

Summary,’’ Colorado State University, 10, available 

at https://webdoc.agsci.colostate.edu/koontz/ 

thinmarkets/Price%20Discovery%20Objective

%20Measures%20Report%202016-06.pdf. 

62 Koontz, Stephen R. 2021. ‘‘Another Look at 

Alternative Marketing Arrangement Use by the 

Cattle and Beef Industry.’’ The U.S. Beef Supply 

Chain: Issues and Challenges. B.L. Fischer, J.L. 

Outlaw, and D.P. Anderson, eds. College Station, 

TX: Agricultural and Food Policy Center, Texas 

A&M University. 

63Op Cit. 

64Adjemian, M.K., W. Brorsen, W. Hahn, T. 

Saitone, and R. Sexton. 2016. ‘‘Thinning Markets in 

U.S. Agriculture: What Are the Implications for 

Producers and Processors?’’ ERS EIB number 148. 

65 Dennis, E.J. and Lubben, B.D., ‘‘Regional 

Minimums in the U.S. Beef Complex,’’ (2022), 

available at https://cap.unl.edu/livestock/newreport-regional-minimums-us-beef-complex. 

66 Gina-Gail S. Fletcher, ‘‘Benchmark 

Regulation,’’ 102 Iowa Law Review 1929–1982 

(2017), available at: https://

scholarship.law.duke.edu/faculty_scholarship/4014 

67Hatfield, J.W. and R. Lowery. ‘‘Facilitating 

Collusion with Spot-Price Contracting,’’ University 

of Texas—Austin: McCombs School of Business, 

August 2, 2023. https://ssrn.com/abstract=4529677 

(accessed 7/5/2024). 

68See, Davis, D. ‘‘Does Top of the Market Pricing 

Facilitate Oligopsony Coordination?’’ South Dakota 

State University Discussion Paper, August 9, 2000; 

see also Xia, T. and R.J. Sexton. ‘‘The Competitive 

Implications of Top-of-the-Market and Related 

Contract-Pricing Clauses,’’ American Journal of 

Agricultural Economics 92(4): 1181–1194, April 

2010. 

69 Garrido, F., M. Kim, N.H. Miller, and M.C. 

Weinberg. ‘‘Buyer Power in the Beef Packing 

Industry,’’ January 2024, https://

www.nathanhmiller.org/cattlemarkets.pdf (accessed 

9/25/2024); Garrido, F. G and M. Kim, N.H. Miller, 

and M.C. Weinberg. ‘‘Buyer Power in the Beef 

Packing Industry: An Update on Research in 

Progress,’’ Report prepared for Washington Center 

for Equitable Growth, March 30, 2022. 

70See, e.g. TAMU, https://afpc.tamu.edu/ 

research/publications/710/cattle.pdf. 

71See, e.g., S. 4030 (117th Cong., 2021–2021); 

Letter from Marty Smith, President, National 

Cattlemen’s Beef Association, to Fellow Cattle 

Producers, Oct. 15, 2020, available at https://

cdn.farmjournal.com/s3fs-public/inline-files/Letter

%20from%20Marty%20to%20NCBA

%20Membership%20-%20FINAL.pdf. 

producers.57 Negotiated grid 

transactions, in which a firm base price 

is negotiated between buyer and seller, 

also apply quality premiums and 

discounts to the prices paid for fed 

cattle based on actual carcass 

performance, but lack the vertical 

coordination aspect of AMAs and thus 

do not provide price incentives for 

process-verified characteristics such as 

organic or all natural that feeders need 

to know they will receive prior to 

feeding. 

The above line of argument remains 

contested, however. Indeed, most lower 

quality cattle have historically been 

purchased through AMAs in the 

southern feeding regions, while in the 

northern feeding regions a larger 

proportion of cattle are higher quality 

and are much more likely to be 

purchased using negotiated methods.58

Packer buyers are highly skilled at 

predicting how live cattle will grade out 

after slaughter as their job depends on 

it. They also are skilled at 

communicating to sellers what they are 

looking for in a pen of cattle. Moreover, 

negotiated grid transactions preserve the 

benefits of the grid while also retaining 

the advantages of a negotiated base 

price, although they lack the buyer 

commitment dimension of AMAs. 

Nevertheless, as the number of cattle 

that packers purchased with AMAs 

became considerably larger than the 

spot negotiated market, academic focus 

shifted to the issue of thin negotiated 

markets. Market stakeholders also began 

to question whether spot market prices 

are representative of the value of fed 

cattle on the market, and thus cast doubt 

on the merits of using them as base 

prices in AMAs.59 Carstensen (2022) 

and others have argued that the full 

extent of how buyer power influences 

the use of AMAs remains 

underappreciated in mainstream 

agricultural economic analysis.60

Economic research into price 

discovery in thin markets has, however, 

generally been skeptical of interventions 

that would set a floor number or 

percentage of fed cattle to be traded in 

spot markets each week. Koontz 

examined the role that different regions 

play in leading price discovery, as well 

as the relative thinness and thickness of 

the regional markets.61 He also 

estimated high costs to the industry 

from proposed interventions that would 

impose a limit on AMA usage in fed 

cattle markets.62 Peel et al. (2020) added 

that such steps to mandate negotiated 

trade could have the unintended effect 

of undermining the reliability of market 

price reporting by creating incentives 

for misrepresenting transaction types.63

Adjemian et al. also suggested a floor 

percentage would not be beneficial. 

They also pointed out that thin markets 

tended to benefit large firms, so 

programs to aid small producers might 

be a good focus for regulatory 

agencies.64 Dennis and Lubben (2022) 

surface potential factors and tradeoffs 

around the effectiveness of regionalbased minimums.65

There is less available research on 

how benchmarks are used as base prices 

in marketing agreements. Cattle markets 

are not the only markets that employ 

benchmarked prices with manipulation 

concerns. Oil and financial markets are 

two examples of markets that rely on 

benchmarks, and both have seen large 

manipulation schemes.66 In a game 

theory model, Hatfield and Lowery 

found that pegging prices in formula 

pricing agreements to spot market prices 

can facilitate collusion among packers 

and facilitate monopsonistic pricing. 

The authors suggest that these 

advantages could explain why packers 

have shifted toward the use of what they 

call spot-contracting (i.e., the use of 

variable spot-market prices in formula 

pricing agreements).67 Earlier 

theoretical work by Xia and Sexton and 

Davis found that use of ‘‘top-of-themarket pricing’’ (TOMP) arrangements 

in particular bears similarities to ‘‘mostfavored’’ nation (MFN) clauses and that 

their use exhibits similar potential to 

facilitate coordination between 

competitors, as well as dampen 

competition and prices.68 The structure 

of TOMP purchasing arrangements 

reduces packer incentives to buy cattle 

in the spot market. A more recent study 

by Garrido et al. also suggests more 

generally that referencing reported 

prices in marketing agreements distorts 

packer’s incentives, reducing a packer’s 

incentive to increase bids to procure 

more cattle.69

Policy discussions following from this 

research have tended to frame the 

problem as a zero-sum debate between 

the use of formula contracts and cash 

negotiated transactions.70 Legislative 

proposals for mandatory minimum cash 

trading and voluntary industry 

proposals to address concerns around 

price discovery commonly focus on the 

numerical volume of spot, negotiated 

grid, or otherwise qualified trading.71

However, it may be that it’s not an 

either/or question, but rather how 

formula contracts are developed, and 


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72 Gina-Gail S. Fletcher, ‘‘Benchmark 

Regulation,’’ 102 Iowa Law Review 1929–1982 

(2017), available at: https://

scholarship.law.duke.edu/faculty_scholarship/ 

4014; Andrew Verstein, Benchmark Manipulation, 

56 Boston College Law Review 215 (2015), available 

at https://papers.ssrn.com/sol3/

papers.cfm?abstract_id=2482021. 

73See, e.g., Deutsche Bank’s London Subsidiary 

Agrees to Plead Guilty in Connection with LongRunning Manipulation of LIBOR,’’ available at 

http://www.justice.gov/opa/pr/deutsche-bankslondon-subsidiary-agrees-plead-guilty-connectionlong-running-manipulation. 

74See, generally, Federal Reserve Board and 

Federal Reserve Bank of New York, ‘‘Transition 

from LIBOR,’’ available at https://

www.newyorkfed.org/arrc/sofr-transition; 

Alternative Reference Rates Committee, ‘‘ARRC 

Closing Report: Final Reflections on the Transition 

from LIBOR,’’ Nov. 2023, available at https://

www.newyorkfed.org/medialibrary/Microsites/arrc/

files/2023/ARRC-Closing-Report.pdf. 

75 Kumar Venkataraman, ‘‘Market Transparency, 

Liquidity Externalities, and Institutional Trading 

Costs in Corporate Bonds,’’ available at https://

papers.ssrn.com/sol3/papers.cfm?abstract_

id=827984. Also on FINRA’s TRACE: https://

www.finra.org/filing-reporting/trace/traceindependent-academic-studies. 

76See, e.g., Chair Gary Gensler, U.S. Securities 

and Exchange Commission, ‘‘Market Structure and 

the Retail Investor:’’ Remarks Before the Piper 

Sandler Global Exchange Conference,’’ June 8, 2022, 

available at https://www.sec.gov/newsroom/

speeches-statements/gensler-remarks-piper-sandlerglobal-exchange-conference-060822; Commissioner 

Kara M. Stein, U.S. Securities and Exchange 

Commission, ‘‘Market Structure in the 21st Century: 

Bringing Light to the Dark,’’ Sept. 30, 2015, 

available at https://www.sec.gov/newsroom/

speeches-statements/stein-market-structure; 

Commissioner Michael S. Piwowar, U.S. Securities 

and Exchange Commission, ‘‘The Benefit of 

Hindsight and the Promise of Foresight: A Proposal 

for A Comprehensive Review of Equity Market 

Structure,’’ Dec. 9, 2013, available at https://

www.sec.gov/newsroom/speeches-statements/2013- 

spch12013msp. 

77 Jonathan Levin and Paul Milgrom, ‘‘Online 

Advertising: Heterogeneity and Conflation in 

Market Design,’’ American Economic Review vol. 

100(2), May 2010, p. 603, available at https://

web.stanford.edu/∼jdlevin/Papers/OnlineAds.pdf 

last accessed 7/18/2024. 

thus in turn how they affect the cash 

negotiated market. The question, then, 

is whether the incentive structure can 

be appropriately shifted such that 

formula pricing arrangements facilitate 

rather than restrict price discovery and 

fair competition. 

In financial and commodity trading 

markets, increasing attention has been 

paid in recent years to the regulation of 

benchmarks to ensure reliability and 

prevent manipulation of the benchmark 

or other forms of unfair or deceptive 

trading in relation to the benchmark.72

The extraordinary manipulation of the 

London Interbank Offer Rate (LIBOR), 

which was the reference price for 

interest rates cases from 2015 and 

affected trillions of dollars of financial 

instruments, drove widespread interest 

in regulating benchmarks.73 Among the 

reforms adopted by various regulators 

include changing which benchmarks are 

available for use in contracts.74 Another 

tool deployed by financial regulators 

has been enhanced transparency in the 

underlying benchmark market, which in 

turn has enhanced the opportunity for 

standardization and improved price 

discovery in certain previously-thought 

bespoke and difficult to regulate 

markets. The most notable of these is 

the bond market, where the Financial 

Industry Regulatory Association 

(FINRA)’s Trade Reporting and 

Compliance Engine (TRACE) system 

immediately reports a handful of key 

characteristics for bond transactions, 

which allows investors and market 

participants to normalize pricing across 

diverse bond trading and, in effect, 

compare apples to oranges. In doing so, 

it dramatically reduced the fees that 

dealer banks could charge through 

opaque pricing, and improved trading 

efficiency and fairness for investors.75

FINRA also confidentially reports 

scorecards to broker-dealers providing 

them information about their 

performance relative to peers, which has 

reduced markups that investors pay. 

Regulators have also long paid attention 

to trading incentives, pricing 

differences, and fairness concerns that 

may arise from the transparency 

differences between ‘‘lit’’ (reported) and 

‘‘dark’’ (unreported) markets.76

Other industries have developed 

solutions to address complex pricing 

challenges, some of which may have the 

potential to inform development of new 

market price information and reporting 

products that would provide additional 

options and could be adopted as 

alternative benchmarks in the cattle 

industry. Levin and Milgrom (2010) 

discuss several ways in which concepts 

of ‘‘standardization’’ and ‘‘conflation’’ 

have been applied in the context of 

pricing a variety of diverse goods that 

include wheat, diamonds, radio 

spectrum, and internet advertising.77

In light of identified concerns about 

existing cattle industry benchmarks, 

application of ideas from other 

industries could prove useful. USDA, 

through a range of programs, regularly 

provides a wide array of useful market 

information and could continue to 

explore possibilities for developing 

additional price reports that provide 

valuable price discovery information to 

the industry. Expanded price discovery 

information from newly developed 

reports could create additional options 

that market participants could 

potentially use as benchmarks that 

improve price discovery and make the 

market more transparent. Other 

possibilities might include the 

production of reports that could 

function more similarly to the TRACE 

system, which immediately reports a 

handful of specific identified 

characteristics for every transaction on a 

national, anonymous basis. 

This ANPR focuses on which 

benchmarks are appropriate for use as 

base prices in formula agreements, along 

with related trading practices and 

implications arising from the use of 

those benchmarks. As discussed below, 

the purpose of this ANPR is to solicit 

useful information that can be used to 

inform future rulemaking that could 

either change base price choices or 

otherwise regulate packer trading 

connected with the use of base prices. 

III. Potential Options To Remove 

Barriers to Price Discovery and 

Improve the Fair Trading in Relation to 

Cattle Price Benchmarks 

AMS seeks to identify regulatory 

changes for ‘‘covered packers’’ with 

respect to base price formation in 

formula contracts and related trading 

practices, transparency in price 

reporting, and information collection/ 

market monitoring that could ameliorate 

these problems with minimal adverse 

consequences for industry stakeholders. 

‘‘Covered packer,’’ means every packer 

slaughtering fed steers and heifers as 

defined in 7 U.S.C. 191(a) that has 

slaughtered five percent or more of the 

total fed cattle that were slaughtered 

nationally in the past five years. There 

are no covered packers that would be 

defined as small businesses by the 

Small Business Administration because 

all covered packers to which the ANPR 

applies have more than 1,150 

employees. Through this ANPR, AMS 

seeks feedback on whether the following 

proposed interventions could mitigate 

the adverse consequences of AMAs 

without losing their benefits to covered 

packers. 

A. General Regulatory Options 

AMS is first requesting comment on 

several broader-based regulatory options 

that would each regulate covered 

packers’ purchases of fed cattle from fed 

cattle producers. The general regulatory 

options can be considered individually 

or in combination with each other. The 

options may also have associated 

written documentation requirements 

(which are discussed in section III.D.). 

Commenters are invited to comment on 

whether one or more of the options 

would help remove barriers to price 

discovery or market transparency, 

improve the fair-trading environment in 

relation to cattle price benchmarks, or 

otherwise address concerns that 

producers and market participants may 


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82532 Federal Register / Vol. 89, No. 198 / Friday, October 11, 2024 / Proposed Rules 

78A small number of packers account for most fed 

cattle negotiated cash transactions, and spot market 

prices have a significant impact on formula pricing 

agreements. Given these facts, strategic behavior by 

covered packers has the potential to impact fed 

cattle prices for both negotiated cash transactions 

and AMA transactions. 

79TOMP links the price paid under the formula 

contract directly to the highest price paid on a oneto-one basis, which has been shown to create 

adverse market incentives and put downward 

pressure on market prices. See Xia and Sexton, op. 

cit. 

have with respect to fairness, 

preferences, competition, or other 

aspects of the markets, as well as the 

costs and benefits, obstacles, or other 

aspects of these options. 

1. Fair Trading in Relation to a 

Benchmark. AMS is considering two 

options (options 1.a. and 1.b.) to address 

potentially problematic trading 

practices in relation to the use of a 

reported cattle benchmark in a base 

price formula (i.e., when the covered 

packer uses a reported price as a base 

price in an AMA). The first option (1.a.) 

would provide broader, more flexible 

coverage, and enforcement would 

heavily depend upon AMS’s ability to 

identify challenges based on the 

potential documentation requirements 

set forth in section III.D. below. In the 

second option (1.b.) described below, 

AMS would identify more specific 

practices of concern, thus providing less 

flexibility but also potentially 

enhancing enforceability. 

Option 1.a. In the first option, AMS 

would require covered packers that 

utilize a benchmark in their base price 

to design and operate their cattle buying 

operations in such a way that ensures a 

fair-trading environment in spot cattle 

markets affected by the benchmark price 

used in formula pricing agreements. In 

determining whether regulated entities 

are in compliance, the Secretary would 

consider: 

i. The extent to which the markets on 

which a formula pricing agreement is 

based are robustly competitive. 

ii. The reliability of base prices in 

formula pricing agreements to reflect the 

competitive market value of fed cattle, 

their sensitivity to other factors, and the 

risks of manipulation. 

iii. The extent to which the packer has 

identified and mitigated any risks 

stemming from the use of the base price 

in a formula pricing agreement to fair 

trading practices in relevant fed cattle 

markets. 

Option 1.b. In the second option, 

AMS would prohibit covered packers 

from manipulating cattle benchmark 

prices through one of the following 

specifically defined means. AMS notes 

that enforcement of these options 

present significant evidentiary 

challenges, but includes them for the 

purposes of eliciting public comment 

around their value, workability, and 

alternatives: 

i. Targeting its bidding in the cash 

market toward lower-value 

specifications of cattle and avoiding 

higher-value specifications of cattle, as 

a practice and pattern without a 

reasonable business justification. Such a 

practice may be used to distort base 

prices used in formula pricing 

agreements as most purchases in the 

cash market would, likely, be for lowervalue specifications of cattle within the 

given market, leading to lower 

benchmark prices in AMAs than would 

be the case in a fully competitive 

market. Targeting would be identified 

through enhanced monitoring of 

markets, complaints, and investigations. 

ii. Structuring a transaction with the 

purpose of it being included or 

excluded from a benchmark price in an 

AMA, thus preventing that transaction’s 

price from influencing the ordinary 

supply and demand in the benchmark 

market. 

iii. Holding out or failing to purchase 

cattle in specific reporting areas for the 

purpose of reducing or otherwise 

changing a reported benchmark price.78

iv. Using top-of-the-market pricing 

(TOMP) formulas in which a formula 

contract base price in a formula pricing 

agreement is based on the top price 

reported in the negotiated cash 

market.79

v. Manipulating internal records in 

any way that affects a price, standard, or 

threshold referenced in a pricing 

agreement for cattle or beef. 

2. Exclusivity. AMS is considering a 

provision that would discourage a 

covered packer from requiring 

exclusivity of a producer in an AMA 

when it utilizes a spot price cattle 

benchmark. Whether crafted as a 

prohibition, a presumption, or through 

an incentive structure, the packer could 

not threaten to withdraw an AMA or 

otherwise prevent a producer in an 

AMA from selling or seeking to sell a 

substantial amount of cattle to another 

packer outside of the AMA, such as 

through utilizing competitive price 

discovery tools like cattle exchanges or 

auctions. The purpose would be to limit 

both express or implied contractual 

requirements for exclusivity, as well as 

informal exclusivity such as threatening 

or refusing to buy cattle or offering a 

lower price. The approach could 

include a requirement for contractual 

disclosure of the minimum number of 

cattle that the AMA-holding producer 

can, of right, market or sell to another 

packer in the benchmark market. A 

presumption of compliance could also 

encourage certain practices; for 

example, 20 percent for general cash 

negotiated trade or 15 percent if a 

competitive price discovery tool such as 

a cattle exchange or auction were 

selected. The producer would not be 

required to exercise the option, or could 

opt to take a hybrid approach, for 

example, by utilizing exchange trading 

to set a base price but maintaining 

access to a producer’s specialized AMA 

grid with a packer through exchange 

trading options available today. AMS 

notes that producer participation in 

exchange trading could depend upon 

support for the exchange’s costs, such as 

through a market-making fee. 

AMS is also considering other tools to 

reduce exclusivity as a barrier to 

competition between packers bidding 

on cattle. P&S Act non-discrimination 

principles may suggest that any 

producer be offered an AMA or pricing 

available under an AMA when the 

producer is able to meet the AMA’s 

terms and conditions, absent a 

legitimate business justification. Such 

an approach could potentially be paired 

with a compliance presumption where 

the packer engaged in competitive and 

open exchange trading for a certain 

portion of their AMA cattle. 

3. Relative Variation Among Cash and 

Formula Purchases. AMS is considering 

prohibiting covered packers from 

engaging in a pattern of cattle trading in 

the negotiated benchmark market such 

that the percentage variation in week-toweek purchases in the benchmark cash 

market is substantially greater rate than 

the percentage variation in quantity 

purchased week-to-week under the 

formula pricing agreement, absent 

legitimate business justification—for 

example, if the packer certified the lack 

of availability in the benchmark market 

of the cattle at a given quality level or 

specification. Such an approach should 

make AMA contracts bear more of the 

risk of quantity volatility when relying 

on the cash market for price discovery 

purposes. This prohibition could be 

paired with a presumptively permissible 

minimum use of a cattle exchange or 

auction. 

4. Packer Pick-up and Captive 

Supply. AMS is considering a provision 

requiring covered packers to fully 

compensate sellers for all maintenance 

costs of the cattle if they fail to pick up 

cattle purchased in a negotiated 

transaction during the time period 

negotiated with the seller or within 

seven days if not specified in 

negotiations. 


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B. Specific Base Price Regulatory 

Options 

AMS is concerned that competitive 

market conditions within USDA 

reporting regions may cause certain 

regional negotiated cash fed cattle prices 

to be unreliable benchmarks for formula 

contracts, and that the design of certain 

AMS reports are not appropriate for use 

as benchmarks in formula pricing 

arrangements. As noted above in section 

II., some regional cash markets are 

thinly traded with high levels of local 

packer concentration. Additionally, the 

use of benchmarks that do not have 

quality specifications may leave those 

markets vulnerable to gaming or create 

obstacles for producers seeking to sell 

higher quality cattle. To the extent that 

the use of different benchmarks in 

formulas (such as the use of qualityspecific reports) and different 

approaches to trading (such as 

exchanges) can ‘‘thicken’’ the market 

(i.e., make it more competitive and 

comparable across different cattle 

types), the robustness of price discovery 

would be enhanced. 

AMS is requesting comment on 

several options for regulating the use of 

regionally reported prices as base prices 

in formula pricing agreements. Regional 

prices could only account for more than 

50 percent of the value of any formula 

if one of four conditions is met (options 

1, 2, 3, or 4 below). The purpose of the 

provision would be to utilize 

benchmark options that offer 

incrementally greater market thickness 

and resiliency to external shocks which 

could otherwise undermine the 

reliability of using the existing regional 

average negotiated cash prices as a 

benchmark. 

One way that regional price 

information could be incorporated as 

the predominant value in formulas 

would be if new price series or indices 

could be developed which were deemed 

suitable for that purpose. USDA seeks 

comment on the feasibility and value to 

the industry of developing and 

publishing additional market price 

information made available by 

publishing new reports under its 

existing authority. To the extent that 

industry stakeholders would find this 

information useful, and that it would 

mitigate fairness concerns, new price 

reporting could provide additional 

options for industry benchmarks. 

The specific base price interventions 

listed below can be considered 

individually or in combination with 

each other. The interventions may also 

have associated written documentation 

requirements (which are discussed in 

section III.D. below). Commenters are 

invited to comment on the costs and 

benefits, obstacles, or other aspects of 

these options. Note that section III.C. 

below provides a list of benchmarks that 

may mitigate fairness concerns. 

Comment is also requested on the list of 

benchmarks. The following approaches 

could be utilized to offer incremental 

improvements to regional price 

benchmarking: 

1. The regional benchmark could 

reflect all cattle sold on a negotiated 

cash basis in the relevant market as 

standardized to a single quality 

specification. The standardized 

benchmark would represent a ‘‘par lot.’’ 

For example, a benchmark could report 

all fed cattle sales transactions in a 

given regional market adjusted to a par 

lot defined as live weight basis, steers, 

70 percent choice, Yield Grade 3. 

Individual sales would continue to 

transact at whatever value the parties 

agree given the attributes (quality, yield, 

other premiums/discounts, etc.) of the 

particular cattle transacted. Only the 

benchmark would mathematically 

translate those actual prices into prices 

as if the transactions were the par lot, 

for the purposes of thickening the 

market for the standard par lot. Again, 

cattle trade at their own negotiated 

price. Only the reporting adjusts it so 

that there is more robust price discovery 

on an apples-to-apples basis. 

This mathematical adjustment could 

via be a third-party developed reference 

price, a USDA-developed reference 

price, or it could be based on publicly 

available information that the packer 

utilizes to construct its base price 

formula. The development of the 

standardized regional benchmark price 

may require USDA to collect 

information from packers that it does 

not currently collect, and this may 

require changes to USDA information 

collection forms or separate rulemaking. 

AMS acknowledges concerns may still 

exist regarding price discovery and 

manipulation risks and invites comment 

on whether there is a minimum level of 

trade that should serve as a floor in the 

market before the region could be used 

as a benchmark even under this 

approach. 

2. The regional benchmark could be a 

comprehensive fed cattle reported price, 

which if reported would include 

negotiated spot transactions comprised 

of reported negotiated cash live, 

negotiated cash dressed, and negotiated 

grid net transactions. This is not 

currently reported on a regional basis, 

but AMS Market News is currently 

looking into whether it has sufficient 

information to begin reporting regional 

comprehensive reports in the near 

future. AMS recognizes that this 

approach offers less benefits to price 

discovery than option 1. above but seeks 

comment on it given the greater 

feasibility of operationalizing it. 

3. The benchmark could be the fivearea regional average reported by AMS 

Market News at a particular quality 

grade specification, such as within five 

or ten percentage point range for Choice 

grade. AMS recognizes that this 

approach offers less benefits to price 

discovery than option 1. above and that 

packers may retain an ability to place 

downward pressure on the cash market 

given that the five-area regional average 

reflects a composite of local market 

trading practices. However, AMS seeks 

comment on this option given the 

greater feasibility of operationalizing it 

over other options. 

4. Regional cattle prices from a cattle 

exchange or auction would be 

standardized to a particular quality 

grade specification and meet sufficient 

standards of oversight and competitive 

trading. 

C. Presumptively Permissible Base Price 

Options 

Under any of the specific regulatory 

options described in section III.B. above, 

a range of benchmarks would still be 

presumptively permissible to determine 

the predominant value of the base price 

in a formula price agreement. A first set 

of possible alternative benchmarks 

could consist of existing market price 

reports or indices that may be less 

vulnerable to manipulation or strategic 

trading choices that have unintended 

adverse consequences on other 

producers due in part to the ‘‘thickness’’ 

of the markets and/or the specificity of 

the market. These alternative 

benchmarks include super-regional 

USDA-reported negotiated cash prices 

(i.e., the 5-Area Average or National 

Report) that are ‘‘thicker’’ market 

indices because they aggregate reported 

transactions from multiple regions. 

Possible benchmark alternatives could 

also include several proxies for 

negotiated cash prices. Live cattle 

futures contracts are derivatives for 

which fed cattle are the underlying 

asset, and economic research has 

consistently shown a connection and 

flow of information between fed cattle 

prices and live cattle futures. Moreover, 

the live cattle futures contract contains 

specifications relating to the cattle 

which ground the value of trading in the 

contract. AMS acknowledges concerns 

from some producers relating to the 

potential influence of packers in the 

futures market. AMS invites comment 

on whether there are ways to mitigate 

those concerns, such as with a condition 

relating to stricter position limits. AMS 


ddrumheller on DSK120RN23PROD with PROPOSALS1
82534 Federal Register / Vol. 89, No. 198 / Friday, October 11, 2024 / Proposed Rules 

also acknowledges that futures contracts 

are likely to converge with cash prices 

as delivery approaches, and 

accordingly, they could suffer from the 

same substantive manipulation and/or 

pay suppression as formulary contracts. 

AMS invites comment on potential 

solutions to mitigate these concerns. 

Other possible benchmarks include 

indices based on fed cattle input costs 

(e.g., corn or other inputs) or on 

downstream output prices for boxed 

beef. Commenters are invited to 

comment on the costs and benefits, 

unintended consequences, risks of 

manipulation, or other aspects of these 

options. USDA also seeks comment on 

how additional existing publicly 

available market information may also 

be useful for developing reliable and 

robust alternative fed cattle contracting 

benchmarks. 

A covered packer could be permitted 

to use any of the following indices to 

comprise 50% or more of the base price 

in a pricing agreement: 

1. Regional benchmarks reflecting all 

cattle purchases on a negotiated basis 

standardized to a single benchmark 

quality. 

2. AMS Regional Comprehensive fed 

cattle reported price. 

3. 5-Area Average Reported Cattle 

Prices at a particular quality grade 

specification (such as within 5 or 10 

percentage point range for Choice 

grade). 

4. Boxed Beef Prices. 

5. Live Cattle Prices (including live 

cattle futures prices imputed to different 

quality specifications). 

6. Corn or Other Input Prices. 

7. Cattle prices from cattle exchange 

or auction that meet sufficient standards 

of oversight and competitive trading. 

D. Written Documentation Options 

AMS is requesting comment on 

several potential written documentation 

requirements for covered packers to 

allow AMS to determine compliance 

with the above ANPR options. 

Commenters can consider the options 

individually or in combination with 

each other. Commenters are invited to 

comment on the costs and benefits, 

obstacles, or other aspects of these 

options. 

1. Packer Market Fairness, Price 

Discovery, and Access Plan. Covered 

packers could be required to develop, 

maintain, and execute a written plan 

describing their approach to fed cattle 

price discovery and market access for all 

sellers, particularly small and mid-sized 

feeders and producers, in any market 

which serves as a benchmark in a 

pricing agreement of the packer or in 

any market which materially influences 

or is materially affected by price 

discovery in the benchmark market (the 

Covered Markets). The plans for each 

calendar year would be provided 

confidentially to AMS–PSD on an 

annual basis by the end of January of 

that year (e.g., a 2025 plan must be 

submitted by January 31, 2025). Under 

this option, plans would have to include 

written processes for: 

a. Price Discovery. How the covered 

packer structures market participation 

and procurement methods in a manner 

that contributes to price discovery in the 

Covered Markets. In particular, the plan 

should describe how the packer strives 

to facilitate and encourage price 

discovery in markets where benchmark 

prices are determined for fed cattle 

pricing agreements by the packer. The 

packer’s plan for contributing to price 

discovery might also include voluntarily 

reporting of additional market pricing 

information (beyond existing mandatory 

price reporting requirements) that 

contributes to price discovery. Such 

participation could include, but is not 

limited to, cash negotiated trade, 

negotiated grid trade, exchange and 

auction trade, and market-making 

contributions to a relevant institution 

such as a cattle exchange in lieu of price 

discovery. The covered packer would 

have to explain its analysis relating to 

Covered Markets. 

b. Market Access. Describe purchasing 

strategies and actions to be taken by the 

covered packer for the purpose of 

ensuring reasonable market access for 

sellers. This could include plans for 

purchasing fed cattle from small feeders, 

engaging in price discovery mechanisms 

such as exchange trading, or paying 

market making contributions to support 

exchange trading by others. Such 

strategies and actions should be 

reasonably designed to mitigate 

excessive risk of non-placement of cattle 

or sales below full value by market 

participants in the benchmark markets 

used in pricing agreements (i.e., who are 

taking/absorbing the risk/cost of price 

discovery). 

c. Base Prices. For each fed cattle 

pricing agreement involving a reported 

market price or any other reference to a 

value that is expected to change during 

the term of the agreement, report the 

pricing agreement describing how the 

packer will determine final payment for 

cattle. The report should clearly identify 

all prices and values in sufficient detail 

to reproduce the amount paid. 

d. Market Participation. 

i. Describe purchasing strategies and 

actions to be taken by the covered 

packer for the purpose of ensuring 

reasonably consistent and nonmanipulative participation in 

benchmark markets used in the packer’s 

pricing agreements with respect to 

quantity and quality purchased of fed 

cattle. 

ii. Provide a target and range for 

relative coefficients of variation (CV) on 

weekly quantities of fed cattle procured 

using spot and formula methods in the 

benchmark markets of pricing 

agreements as a measure of risk transfer 

(specifics of calculations to follow). If 

those targets were not hit, explain the 

business justification for why not. AMS 

also invites comment on the relative 

value of the CV, and whether other 

metrics would be more appropriate to 

identify changes or differences in 

market access risk. 

e. Fed Cattle Supply and Demand 

Disruptions. Explain how the covered 

packer will maintain adequate price 

discovery and market participation in 

benchmark markets used in pricing 

agreements during periods of significant 

market disruptions in the supply and/or 

demand for fed cattle (would include 

human pandemics, drought, animal 

disease outbreaks, emergent animal 

health issues, lengthy plant shutdowns, 

labor strikes, other beef packing and 

supply disruptions, events that trigger 

force majeure in contracts, etc.). 

f. Pickup Practices. 

i. Covered packers would need to 

describe all policies and procedures for 

circumstances in which pickup or 

delivery of negotiated cattle extends 

beyond seven days or the scheduled 

(negotiated) number of days after the 

cattle are traded. 

ii. The policies and procedures would 

need to include when ownership of the 

cattle will be transferred to the packer 

and how the packer determines timing, 

amount, and payment for assuming all 

expenses of the cattle, including feed, 

yardage, and death loss. 

iii. Policies and procedures would 

need to describe how the packer will 

fully compensate fed cattle sellers when 

pickup exceeds seven days or the time 

period (number of days) that was 

negotiated. This should include separate 

policies and procedures for cattle that 

are sold on a live weight basis or on a 

carcass weight basis. 

2. Packer Compliance Report. 

Covered packers would be required to 

confidentially report on an annual basis 

to AMS: 

a. The actions the covered packer 

undertook to fulfill each component of 

their Packer Market Fairness, Price 

Discovery, and Access Plan. The report 

would be due to AMS by the end of 

January for the previous year (e.g., a 

report on compliance for 2025 must be 

submitted by January 31, 2026). The 

compliance report would be required 


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Federal Register / Vol. 89, No. 198 / Friday, October 11, 2024 / Proposed Rules 82535 

beginning with the calendar year after 

the rule implementing the requirement 

for the plan becomes effective. 

b. Each purchase transaction for 

which cattle were not picked up within 

seven calendar days or the scheduled 

(negotiated) number of days and the 

reason for delayed pickup, measures 

taken to shorten the pickup time, and 

how the packer compensated the seller 

for the delay in pickup. 

3. Internal Review. The covered 

packer’s CEO would need to review and 

certify approval of each annual plan and 

compliance report. 

IV. Request for Public Comments 

AMS seeks comment on the proposals 

discussed in this ANPR. Commenters 

are invited to comment on whether any 

or all of the proposals would address 

concerns about the fair functioning of 

the cattle markets, as well as the costs 

and benefits, obstacles, and other 

options commenters want AMS to 

consider. Commenters may consider 

each section individually or may 

consider the ideas together. In addition 

to inviting general comments, AMS has 

prepared a list of specific questions. 

Commenters may answer all, some, or 

none of these questions as they see fit. 

A. General Regulatory Options 

1. In what ways does the use of 

regional price reports as benchmarks in 

formula contracts influence those 

regional markets, including the manner 

or extent of buyer (packer) participation 

or cattle procurement in the negotiated 

or spot markets within those same 

reporting regions? 

2. Does the use of regional negotiated 

price reports as formula contract 

benchmarks adversely affect buyer 

demand in negotiated markets? If yes, 

how? Are these adverse effects stronger 

for cattle of any particular grade, class, 

type, etc., or in any specific regions? 

What could be preferred alternative 

prices to use as formula contract 

benchmarks? How should AMS 

determine whether prices used as 

benchmarks are competitive or reliable? 

3. To what extent would the general 

regulatory options described in section 

III.A. above—addressing practices 

related to fair trading in relation to a 

benchmark, exclusivity, relative 

variation among cash and formula 

purchases, and packer pickup—be 

useful for clarifying the most 

problematic purchasing activities that 

are known or believed to adversely 

affect fed cattle markets and sellers? 

4. Are there other problematic 

purchasing activities or conduct that are 

known or believed to adversely affect 

fed cattle markets and sellers that are 

not addressed by the regulatory options 

described above? If so, what regulatory 

options are needed to address such 

issues? 

5. Please provide feedback regarding 

the prevalence of practices addressed in 

this ANPR or any other related practices 

as observed by market participants. 

What actions, specifically, would be 

most appropriate and effective for AMS 

to address concerns about potential 

manipulation or distortion of market 

prices? 

6. Please comment on the effect of 

market power and industry 

concentration on producers in regional 

fed cattle markets. What, if any, 

relationship does increasing packer 

concentration have on the use of 

particular fed cattle pricing methods 

and prices paid to packers? How has 

concentration affected the resilience of 

the regional markets and their ability to 

respond to market shocks? 

7. The DOJ Consent Decree expired in 

1981. Were there specific protections or 

prohibitions in the Consent Decree that 

would have particular value in today’s 

market? If so, which ones? 

8. Top of the Market Pricing (TOMP) 

refers to pricing agreements that set a 

formula contract base price based on the 

top price reported in the negotiated cash 

market. Please comment about any 

effects of TOMP on sellers or buyer 

behavior. Should TOMP be prohibited 

as a method of base price 

determination? 

9. Formula agreement AMAs may 

include a wide variety of written, 

verbal, or implied agreements or 

expectations between fed cattle buyers 

and sellers which can differ in the 

degree to which they limit the seller’s 

(feeders or producers) marketing 

options. Please provide comment about 

the extent to which these AMAs 

constrain marketing options for sellers. 

Do these AMAs commonly require 

sellers to deliver all cattle they produce 

to a single packer (exclusivity)? Are 

sellers under these AMAs prevented 

from using other selling methods for 

some cattle, including cattle exchanges, 

auctions, or negotiations with other 

packers? 

10. When cattle are purchased 

through negotiated transactions, there is 

often some agreement between the 

parties regarding the time period 

(number of days) within which the 

buyer will pick up the cattle and/or 

compensate the seller for maintenance 

costs. AMS seeks comment and 

information about the frequency with 

which buyers fail to pick up cattle 

within an agreed-upon time frame. In 

such cases, are buyers adequately 

compensated? What is the extent of the 

problem, and should AMS consider 

additional regulation to address it? 

What would be an appropriate 

requirement for prompt buyer pickup 

and seller reimbursement? 

11. Do large changes in the numbers 

of fed cattle that packers purchase each 

week in the negotiated spot market 

create undue risk for sellers in those 

markets? If yes, what percentage change 

from the previous week do you consider 

large? Does widespread procurement of 

cattle through formula pricing 

agreements cause negotiated markets to 

be more volatile? 

12. What would be an appropriate 

minimum level of use of a cattle 

exchange or auction by a packer buyer 

to qualify for a safe harbor provision in 

a prohibition against relative variation 

in quantity purchased week-to-week in 

the benchmark market changing at a 

substantially greater rate than the 

relative variation in quantity purchased 

week-to-week under the pricing 

agreement? 

13. What motivates sellers to market 

cattle in the negotiated (cash or spot) 

market rather than through a formula 

pricing agreement or other type of 

AMA? 

14. To what extent are formula pricing 

agreements or other AMAs available to 

small and medium-sized feedlot sellers 

and what are their reasons for choosing 

whether or not to use them? What rules 

could AMS develop to ensure nondiscriminatory access? 

15. How do those producer 

motivations differ by relative size and 

region, and to what extent to prices in 

one region follow (or otherwise affect) 

trading the occurs in another region? 

16. How, specifically, do sellers and 

buyers determine the method by which 

base prices are determined for formula 

pricing agreements? To what extent 

does the buyer and the seller influence 

the choice of base price? What base 

price sources (e.g., USDA regional price 

reports, live cattle futures, etc.) do 

sellers and buyers prefer? What specific 

factors and considerations are important 

to sellers and buyers when choosing a 

base price? 

17. Please describe views that AMS 

should consider relating to compliance 

burdens with any of the options 

presented, generally above or 

specifically below. Is the definition of 

‘‘covered packer’’, which limits certain 

interventions to larger packers, an 

appropriate approach to limiting 

compliance burdens on the industry? 

18. To what extent, if at all, would 

these general regulatory options address 

other pervasive avenues for 

manipulation of cattle prices and how 


ddrumheller on DSK120RN23PROD with PROPOSALS1
82536 Federal Register / Vol. 89, No. 198 / Friday, October 11, 2024 / Proposed Rules 

should USDA address any alternative 

forms of manipulation? 

19. Is it necessary and effective for 

AMS to restrict the proportional use of 

formula pricing agreements relative to 

cash trading? If so, under what 

conditions, and what proportion is 

necessary and effective and why? 

Should the level of market 

concentration be considered in this 

determination, and why? 

20. Does the timing of price setting 

(after contract formation but on a future 

price) increases the risk of manipulation 

of cash markets or other harms? 

21. Do specific types of AMAs create 

more problems than others and should 

AMS limit the use of some types of 

contractual provisions in AMAs? 

B. Specific Base Price Regulatory 

Options 

1. Please comment about the use of 

USDA regional price reports (for 

example, weekly negotiated live or 

dressed cash steer price for a particular 

region) as benchmarks (also called base 

prices or reference prices) in fed cattle 

formulas. To what extent do available 

prices accurately reflect competitive 

market conditions in time periods (i.e., 

each week) and in regions? Do buyers or 

sellers have any concerns or evidence 

that low weekly trading volumes (i.e., 

few cattle and/or transactions) or small 

numbers of market participants distort 

benchmarks based on regional price 

reports that are used as base prices in 

formula contracts? If yes, what weekly 

trading volumes (number of transactions 

or number of cattle) and/or number of 

market participants do you consider 

low? 

2. Please comment on the value of 

using USDA prices based on specific 

reporting regions rather than more 

aggregated reports (i.e., 5-Area Average 

or National Report) as the basis for 

formula contract benchmarks. Is a 

prohibition on using more than 50% of 

a regional price for a base price in a 

formula agreement appropriate? If not, 

is there level of partial use that would 

be appropriate? 

3. What problems would buyers and/ 

or sellers encounter if regional prices 

were no longer available for use as 

benchmarks to establish base prices in 

formula contracts? Would no longer 

using regional benchmarks mitigate 

some of the market power dynamics 

between increasingly consolidated 

packers and producers? 

4. Should a contract benchmark be 

based on a reported price for cattle with 

specific characteristics (e.g., steers 65– 

80% choice or 55% prime) or for more 

general categories (e.g., total of all 

classes and all grades)? 

5. AMS has historically published a 

National Weekly Fed Cattle 

Comprehensive report that reports 

composite net prices paid for cattle 

purchased using all purchasing 

methods. Recently, AMS expanded this 

to include a new Regional Weekly 

Comprehensive Purchase Type report 

that provides a composite price for all 

beef type cattle purchased (including 

live and dressed basis, FOB and 

delivered, steers, heifers, and mixed, 

etc.) for negotiated methods only 

(negotiated cash and negotiated grid net) 

and for combined negotiated and 

formula methods. Please comment on 

the value of this additional regional 

market information. Could these 

Comprehensive regional price series 

provide a useful alternative formula 

contract benchmark if currently used 

regional negotiated cash prices were no 

longer available? 

6. Could alternative compensation 

structures restore competition and 

negotiation in cattle payment structures 

while maintaining the benefits of 

AMAs? For example, could negotiated 

grid sales, where the value of the cattle 

is assessed after slaughter and feeder 

compensated based on the actual quality 

of cattle sold, adequately take into 

account certification and grading? 

7. To what extent does benchmarking 

with respect to live cattle futures solve 

the problem of suppressed benchmark 

inputs? How can such a futures 

benchmark be regulated to prevent 

manipulation? For example, should a 

future rulemaking forbid purchasing 

cattle after the close of mandatory 

reporting or the exchange day on Friday 

afternoon, to end the practice of paying 

certain feedlots a higher price without 

contribution to the week’s average price 

or to futures prices to which formula 

and forward contracts are tied? 

8. To what extent does pegging 

benchmarks to inputs (e.g., feed) or 

outputs (e.g., wholesale boxed beef) 

mitigate fairness concerns related to 

packer spread and manipulation of 

benchmarks? 

9. What would be the challenge of 

requiring that all formula contracts 

contain a firm negotiated base price that 

can be equated to a specific dollar 

amount when the contract is entered 

into? How could such a contract 

implement quality adjustments or 

otherwise contain the efficiency benefits 

of AMAs without reliance on spot 

benchmark? 

10. Please comment on how 

information disclosures might address 

the concerns identified herein. 

11. To what extent could 

nondiscrimination principles be applied 

to mitigate exclusivity that obstructed 

price discovery, competition, and 

market access? 

12. Should AMS incentivize exchange 

trading as a mechanism to enhance 

price discovery? If so, how should this 

be done? 

13. Formula cattle selling 

arrangements enable packers to 

effectively secure a ‘‘captive supply’’ of 

cattle by establishing future 

commitments for future delivery and 

thereby reduce the need to purchase 

cattle on the cash market. Please 

comment on whether and how such 

arrangements might harm competition 

or distort fed cattle markets. 

14. To what extent would the policy 

options outlined in this ANPR solve 

problems related to market power and 

lack of sufficient price discovery? If 

there are still gaps, what additional 

reforms would be necessary to ensure a 

fair-trading environment for all cattle 

producers? 

C. Presumptively Permissible Base Price 

Options 

1. Is the potential prohibition of 

regional negotiated cash price 

benchmarks based on the predominant 

use (largest component of value, 

presumptively 50 percent) appropriate? 

If not, what approach would be most 

effective and why? Are there additional 

conditions that would help ensure 

regionally negotiated cash price 

benchmarks are sufficiently thick, based 

on competitive conditions, and not 

prone to packer manipulation? 

2. What criteria, specifically, would 

be appropriate for AMS to consider 

when evaluating whether a fed cattle 

benchmark would serve the needs of 

industry stakeholders and could 

function effectively as a means of 

establishing base prices for formula 

contracts? 

3. What criteria should be applied 

when evaluating whether reported 

prices from, for example, a cattle 

exchange, auction, or negotiated market 

could appropriately be used as formula 

contract benchmarks (i.e., to set base 

prices)? Should it be based on market 

thickness with consideration for 

numbers of cattle or transactions? What 

other factors should be considered? 

4. AMS is seeking comment from 

industry stakeholders about the 

desirability and feasibility of 

undertaking proactive efforts to develop 

new price information and market 

reporting which, if useful to the 

industry, could provide additional 

options for adoption as fed cattle 

benchmark alternatives. These efforts 

would seek to develop robust 

benchmark alternatives that are 

designed with the realities and 


ddrumheller on DSK120RN23PROD with PROPOSALS1
Federal Register / Vol. 89, No. 198 / Friday, October 11, 2024 / Proposed Rules 82537 

80See, e.g., FINRA, ‘‘Firm Summary Scorecard,’’ 

available at https://www.finra.org/compliancetools/report-center/equity/firm-summary-scorecard 

(last accessed Aug. 2024); ‘‘TRACE Quality of 

Market Report Cards—Treasuries,’’ available at 

https://www.finra.org/compliance-tools/reportcenter/trace/quality-of-markets-treasuries (last 

accessed Aug. 2024). 

challenges of thinning markets in mind, 

especially at the regional level. 

Development could use certain 

advanced modeling techniques for 

aggregating and reporting market 

information. Such models may have the 

potential to incorporate valuable 

information related to premiums and 

discounts paid for fed cattle 

characteristics. Or, tailored alternative 

benchmark reports could be designed to 

enable market participants to develop 

their own models based on certain 

consistent widely reported transactionspecific information, as is the case 

under the FINRA’s TRACE System for 

bonds. 

5. What risks might exist during any 

transition away from the use of existing 

benchmarks, and in what ways could 

they be mitigated? Are certain external 

regulatory regimes valuable for USDA to 

learn from in this regard, such as how 

financial regulators handled the 

transition away from LIBOR, how 

FINRA implemented the TRACE 

System, or other models from financial 

or commodity trading markets? 

D. Written Documentation Options 

1. Should AMS require covered 

packers to submit annual 

documentation to AMS describing how 

the packer plans to conduct market 

activities in a fair manner, participate in 

price discovery for fed cattle, and 

ensure market access for small and 

medium-sized feeders? 

2. Please comment on how packers 

should plan to structure market 

participation and procurement methods 

to contribute to market price discovery. 

Provide specific details about actions 

packers should take to achieve these 

goals and any market information or 

data that could be provided to the 

industry on a voluntary basis to improve 

market transparency. 

3. What role should exchange trading 

play in considerations of price 

discovery? For example, for a covered 

packer to count as contributing to price 

discovery, would it be useful to 

establish a presumptive requirement 

that no less than a certain percentage 

(e.g., 15% or 30%) of cattle be either 

exchanged or auction purchased or paid 

as a market-making fee to the exchange 

or auction to cover the risks and costs 

of other producers in those transparent, 

competitive pricing venues? 

4. Please discuss specific problems 

that feedlot sellers experience with 

market access and actions that packers 

could take to improve market access, 

especially for small and medium-sized 

producers. For example, would 

enhanced access to exchange trading be 

effective in supporting market access, 

and could a market-making fee system 

that supported smaller producers be 

helpful—for example, from packers that 

chose to make contributing to such fee 

one part of their contribution to price 

discovery under their plan? 

5. Please comment about specific 

concerns related to packer purchasing 

behavior during periods of supply and 

demand disruption (i.e., pandemics, 

disease outbreaks, production 

disruptions, etc.). What are the 

important elements of packer plans for 

maintaining adequate price discovery 

and market participation during these 

times? 

6. Were AMS to require packers to 

report to PSD all pricing agreements that 

describe how base prices are determined 

for all cattle procured by the packer, 

describe any specific information or 

data that should be required for this 

documentation or otherwise associated 

to make this documentation more useful 

for AMS to monitor the market. Should 

AMS consider any other appropriate 

documentation requirements of covered 

packers? 

7. In what ways could it be 

appropriate and useful for AMS to make 

aspects of the information from these 

documentation reports available to the 

public, subject to confidentiality 

protections? Which ones and why? 

Would a firm-specific approach, as 

opposed to an aggregated approach, ever 

be appropriate for public disclosure? 

8. Would it be appropriate and useful 

for AMS to score or rank covered 

packers based on their contribution to 

price discovery, potentially similarly to 

how FINRA scores broker-dealers on 

certain metrics? 80 If so, what metrics 

would be appropriate for the scoring: 

cash trade and exchange trading 

purchases, purchases from smaller 

producers, or other factors? Should any 

deductions be taken, such as the use of 

TOMP contracts or delayed packer 

pickup? Should scoring be dynamic, 

such that improvements from year to 

year are recognized? Would any scoring 

or ranking be most appropriate and 

useful if provided confidentially to 

covered packers, or should any ranking 

be made available publicly? 

V. Conclusions and Next Steps 

Given the background, key regulatory 

challenges, and options for 

consideration outlined in this ANPR, 

AMS is seeking comment on potential 

and preferred paths forward. Comments 

received in response to this ANPR will 

inform AMS’s approach to regulating 

the Nation’s fed cattle markets. 

Substantive, well-reasoned, constructive 

comments, including comments that 

provide data to support views (for 

example, are based on industry 

surveys), will assist in identifying if 

there are unforeseen challenges or 

viable alternatives before the Agency 

moves forward. Comments generally in 

support or opposition to options 

identified in this ANPR will assist AMS 

in identifying the acceptability of the 

presented options in the absence of 

other alternatives. 

Erin Morris, 

Associate Administrator, Agricultural 

Marketing Service. 

[FR Doc. 2024–23528 Filed 10–10–24; 8:45 am] 

BILLING CODE P 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Parts 303 and 337 

RIN 3064–AF99 

Unsafe and Unsound Banking 

Practices: Brokered Deposits 

Restrictions; Extension of Comment 

Period 

AGENCY: Federal Deposit Insurance 

Corporation (FDIC). 

ACTION: Notice of proposed rulemaking; 

extension of comment period. 

SUMMARY: On August 23, 2024, the FDIC 

published in the Federal Register a 

proposed rule that would make 

revisions to its regulations relating to 

the brokered deposit restrictions that 

apply to less than well-capitalized 

insured depository institutions. The 

proposed rule provided for a 60-day 

comment period, which closes on 

October 22, 2024. The FDIC has 

determined that an extension of the 

comment period until November 21, 

2024, is appropriate. This action will 

allow interested parties additional time 

to analyze the proposal and prepare 

comments. 

DATES: The comment period for the 

document that published at 89 FR 68244 

(August 23, 2024) is extended. 

Comments must be received on or 

before November 21, 2024. 

ADDRESSES: You may submit comments 

on this document using any of the 

following methods: 

• Agency Website: https://

www.fdic.gov/resources/regulations/ 


ddrumheller on DSK120RN23PROD with PROPOSALS1