The U.S. Department of Agriculture is announcing multiple steps to deliver on President Biden’s Executive Order on Promoting Competition in the American Economy to promote fair and competitive markets for American farmers and ranchers, as well as lower food prices for American families.

The following actions were announced by Agriculture Secretary Tom Vilsack during a Farmers and Ranchers in Action event hosted by the White House:

• USDA has published an interim report that assesses competitive conditions in the meat retail industry. The report draws on over 1,600 comments received from the public in response to USDA requests for information, interviews with small, medium and large meatpackers, distributors, retailers, academics, and farmer or advocacy organizations. The interim report identifies hidden fees and unjust/anticompetitive pricing strategies present in the beef market as a case study.
• USDA has announced the next steps in a new rulemaking effort under the Packers and Stockyards Act of 1921 to enhance price discovery and fairness in cattle markets. For years, USDA has fielded complaints from producers around beef packers using reported regional cash or spot prices as base prices for fed cattle formula pricing agreements, commonly known as alternative marketing agreements. USDA is issuing an Advanced Notice of Proposed Rulemaking to seek comment on several possible interventions to develop new benchmarks as AMA base prices and approaches to trading when using benchmarks.

“Over these last four years, the Biden-Harris Administration has made historic investments in agriculture to help farmers, small businesses, and rural communities get a fair shake,” said Vilsack. “Our work on competition is about opening up new markets for farmers and delivering fairer, more competitive choices. Today’s actions will help to deliver on ... more choice and lower food costs for consumers, and a fairer marketplace for ranchers.”

“With today’s announcements, the Biden-Harris Administration is taking action to lower food prices for working families by enabling small businesses and family farms to compete fairly,” said National Economic Advisor Lael Brainard. “For too long, consolidation in the agriculture industry has been swallowing up family farms, lowering incomes and choices for farmers, and raising prices at the grocery store. Today’s announcements build on our work to restore fair competition in farming and food markets and to lower grocery prices for working families.”

“USDA is taking smart, strategic steps to open up pathways for ... new retail choices for small businesses and working family consumers alike, and fairer, more competitive trading in America’s world-leading cattle market,” said USDA’s Senior Advisor for Fair and Competitive Markets Andy Green. “These represent the first steps into these markets in a long time, and so we’re both listening to all while we’re doing so but we’re putting the relevant industries on notice that in the coming months, the USDA alongside its Federal partners will be amping up our scrutiny of these markets closely to protect fair, open, and honest competition.”

Retail report

USDA’s interim report “Competition and Fair Practices in Meat Merchandising” uses beef markets as a case study to better understand access to retail dynamics for producers and processors. USDA’s Agricultural Marketing Service conducted an investigative study, took public comment and supported academic examination of the topic.

This interim report has identified a trend of increasing market concentration nationally and regionally, particularly among the top four packers, distributors and retailers. The report also highlights the views of commenters and interviewees, including farmers and small to midsize or independent packers and retailers, who describe their concerns with problematic practices by intermediaries.

As next steps, USDA will be continuing the investigative study already commenced, including through subpoenas. USDA is also announcing that the Agricultural Marketing Service will be commencing an Advanced Notice of Proposed Rulemaking in the coming months to seek public input around potential next steps.

Together, these efforts aim to protect free and fair competition on the merits for businesses operating in the retail channel; ensure that small, midsize or independent businesses can continue to raise and process livestock; and help these businesses distribute and sell meat to the families and local communities that they serve.

Cattle price discovery

The Competition Executive Order directed USDA to address the unfair treatment of farmers and improve conditions of competition in the markets for their products through rulemaking actions under the Packers and Stockyards Act. USDA was also directed to identify measures to enhance price discovery, increase transparency and improve the functioning of the cattle and other livestock markets.

Upon publication in the Federal Register, AMS’s Packers and Stockyards Division will be seeking comment on a range of targeted options to improve price discovery and fair and competitive trading in fed cattle markets. The options presented in the ANPR focus on ways to ensure that the base prices in fed cattle purchasing agreements, commonly known as alternative marketing arrangements, are representative of relevant market conditions and are not vulnerable to distortion or strategic behavior that could cause prices to shift for reasons other than changes in supply and demand.

These options are intended to mitigate the concern that AMAs have negative price effects on the spot market and otherwise distort the trading of fed cattle, which are complaints that AMS has received over the years. Cattle plays an important role in the economic health of many rural communities, and so fairness to cattle producers is vitally important.

Source: USDA