Assessment of the Cattle and Hog Industries Calendar Year 2000

On many occasions, the public has expressed its belief that USDA may restrict
meatpackers’ behavior, without specific evidence of competitive harm. P&SP must
prove any allegation of a prohibited anti-competitive practice in a litigated case by
proving through a preponderance of the evidence that some measurable harm has
occurred or is likely to occur. Most issues regarding competition and potentially anticompetitive
practices are complex and interrelated. They often do not yield to easy
answers. Extensive data collection and sophisticated economic analyses are required to
fully understand the reasons for and implications of the practices.
Packers Acting in Concert to Restrict Competition–Members of the industry,
especially producers, express concerns about possible concerted action by meatpackers.
In some cases, concerns are expressed about wide-ranging impacts cutting across broad
industry segments, such as allegations of packer behavior leading to low hog prices
during December 1998-January 1999. In other cases, concerns address specific
circumstances involving narrow industry segments, such as why few packers bid on cattle
at a particular feedlot. These concerns do not necessarily suggest firms are engaging in
unlawful practices and instead may be attributable to normal supply and demand forces,
competitive bidding processes, or personal relationships that have developed over time
between packers and livestock sellers. The P&S Act prohibits unlawful conspiracies,
combinations, or agreements that result in certain anti-competitive activity. 96 Past
analyses by P&SP of packers’ livestock procurement patterns have not revealed such
activity among packers.
Short Trading Window–A specific practice that raises concerns is the allegation that
there is a short window during which trading of fed cattle occurs. Some cattle producers
and market observers contend that virtually all spot-market cattle transactions occur
during a relatively short period each week, often described as a 15- or 30-minute window.
During its 1996 Texas Panhandle Fed Cattle investigation, P&SP found that the highest
volumes of cattle were purchased on Wednesdays, but spot-market transactions occurred
on every business day of the week. As discussed previously, the bidding process for fed
cattle normally begins early on Monday mornings when packer buyers visit feedlots to
view cattle for sale. The price discovery process continues during the week as buyers and
sellers presumably assess market conditions, followed by rapid consummation of many
transactions once market participants believe the market price has been discovered.
Shared Agents–It is a common practice for one buyer to represent more than one packer
at an auction sale, especially in sales involving cull livestock. Auction market owners
and livestock sellers have raised concerns that the use of common buyers, or shared
agents, reduces the number of competing buyers. This practice has the potential for
reducing competition. However, the issue is complicated by a general lack of buyers at
many auctions. Sharing a buyer may result in packers purchasing livestock at auctions
where the packers otherwise would not be active. P&SP continues to investigate
complaints about shared agents at livestock markets.
96 7 U.S.C. 192
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