Ag Policy Blog

USDA is issuing a notice to consider new rules on how packers and cattle producers use Alternative Marketing Agreements (AMAs), such as formula pricing and forward contracts tied to cash market prices.

USDA made the announcement Tuesday as part of an event at the White House with the group U.S. Farmers and Ranchers in Action (USFRA). USDA released an interim report at the event looking at competition issues in the retail meet industry. The interim report suggests packers, distributors and retailers "appear to be engaging in conduct that may violate" the Packers and Stockyards Act (P&S Act). Some of the conduct includes "the use of unfair business practices and undue preference in pricing structures, fees, marketing decisions, and overall relationships that enhance dominance at the expense of competition on the merits."

The report comes from more than 1,600 comments to USDA and interviews with industry stakeholders. The initial response from the department suggests taking more actions under the P&S Act looking at practices in meat merchandising and examine how to "more vigorously enforce the P&S Act" in that area.

The full report can be found at https://www.ams.usda.gov/…

AMA COMPLAINTS

Looking at Alternative Marketing Agreements (AMAs), USDA stated the department has fielded complaints from producers around beef packers using reported regional cash or spot prices as base prices for fed cattle formula pricing agreements. USDA is issuing an Advanced Notice of Proposed Rulemaking (ANPR) to seek comments on several possible interventions to develop new benchmarks as AMA base prices and approaches to trading when using benchmarks. USDA is looking options that would put some limits on how packers use AMAs and how prices are set. For instance, USDA is looking at a 50% cap on the use of regional cash negotiated benchmark for AMAs unless certain regulatory standards are met.

The ANPR is essentially a way to comment on the issue ahead of USDA officially drafting a rule. As of Tuesday, the ANPR has not been published in the Federal Register.

For more details, see, https://www.ams.usda.gov/…

AMAs have been under scrutiny in some form since debates around the 2002 farm bill. That led to a 2007 study by then-Grain Inspection, Packers and Stockyards Administration (GIPSA). GIPSA also followed up with another study in 2014 on the issue of AMAs.

Following the pandemic, members of the U.S. Senate Agriculture Committee in 2021-22 drafted bills seeking to curb AMAs' from relying on a thinly traded negotiated cash market for pricing. A bipartisan group of senators wanted large packers to buy at least half their cattle from cash markets instead of AMAs.

ANOTHER PROPOSED RULE

USDA already has a proposed rule out, the "Fair and Competitive Livestock and Poultry Markets rule," that generated more than 4,750 comment from an extended comment period that ended in September. That proposed rule would address how USD and federal courts consider anti-competitive practices and harm to competition.

For more details, see https://www.regulations.gov/…

The ANPR and the Fair and Competitive Livestock and Poultry Markets rule are both running up against time with the Biden administration expected to leave office in January. The next administration, depending on who wins, will decide whether to proceed with either rule.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on social platform X @ChrisClaytonDTN

(c) Copyright 2024 DTN, LLC. All rights reserved.