LegiStorm

Summary:

Changes in the structure and business methods of livestock and meat production and marketing—sometimes referred to as consolidation, concentration and/or vertical integration—have long generated interest and controversy in Congress. The top four firms slaughtered 69% of all U.S. cattle in 2006. In 1985, the then-top four packers accounted for 39% of all cattle slaughter, according to industry and USDA statistics. Since 2007, however, some approved and planned acquisitions in the beef packing sector could further alter these statistics. In the beef sector, one company now accounts for a large and growing share of the market and may push the four-firm concentration ratio in this sector to as much as 75%. Live hog production has seen sweeping changes over the past 25 years. Four firms slaughtered 64% of all U.S. hogs in 2006, compared with 32% in 1985. The number of U.S. farms with hogs has declined sharply, and those remaining have become much larger and less diversified. Many hogs today are sold through production contracts, where a pork processor might provide the pigs and other inputs, and a contracting producer (farmer) provides facilities and labor. Debate has revolved around the impacts of such changes on farm prices, consumers, global competitiveness, and the traditional U.S. system of independent farms and ranches. Inherent in these questions is the role government should play in monitoring and regulating agricultural markets. Some groups believe that federal officials have not enforced existing laws designed to prevent anti-competitive behavior, and/or that the laws themselves should be strengthened to better address today's market realities. Others assert that present competition and antitrust policies remain adequate and effective. They believe that the sector's structural changes are a desirable outgrowth of other factors such as technological and managerial improvements, changing consumer demand, and more international competition. Concerns about the growing market power of large corporations in general, and of meat packers in particular, date back to the late 1800s and culminated, by the early 1900s, in the passage of several major antitrust laws, including the Sherman and Clayton Acts and other general antitrust laws. Laws such as the Packers and Stockyards (P&S) Act of 1921 were enacted specifically to address concerns in the livestock and poultry sectors. Other laws, such as the 1967 Agricultural Fair Practices Act (AFPA), were enacted to provide protection to producers from buyers of their products. Congress has also continued to introduce legislation intended to address various perceived problems in livestock markets, which sponsors often broadly refer to as "competition issues." The 2008 omnibus farm bill (Food, Conservation, and Energy Act of 2008, P.L. 110-246) contains a number of animal-related provisions as part of its new Livestock title (Title XI) that may affect how USDA is to regulate livestock and poultry markets. These include provisions that change AFPA definitions of associations and handlers and require USDA to issue rules and specify requirements regarding breach of contract and the venue for any litigation. The farm bill also requires USDA to issue an annual report detailing investigations into possible violations under the P&S Act. The 2008 farm bill, however, did not include other provisions that were part of the Senate-passed version of the farm bill, such as provisions prohibiting ownership among large meat packers, provisions strengthening enforcement authorities over live poultry dealers, and certain changes to the Mandatory Livestock Price Reporting Program. These types of competition and marketing issues could continue to be of interest to some Members of Congress, and may likely resurface during the 111th Congress. This report will be updated as warranted.