USDA's Grain Inspection, Packers and Stockyards Administration (GIPSA) released its latest effort to gauge the competitive situation in U.S. livestock and meat markets this week. The report, entitled GIPSA Livestock and Meat Marketing Study, can be found at www.gipsa.usda.gov/GIPSA/webapp?area=home&subject=lmp&topic=ir-mms.
The study was the result of a 2003 Congressional allocation of about $5 million to investigate the effects of "alternative marketing arrangements" (AMAs) on markets for cattle, hogs, sheep, beef, pork and lamb. An interim report was released in 2005 that provided descriptive information for each species, its marketing system and the AMAs commonly used in those systems. This most recent publication includes economic analysis that attempts to measure the impacts, both positive and negative, that AMAs have on these markets.
There is some important history that should be considered here. It mainly impacts the selection of the investigators on this report. Congress funded a similar study of the livestock sectors in 1993. The reason was a suspicion on the part of some farm state legislators that packer consolidation was causing high levels of market power that, in turn, was driving producer prices down and, possibly, consumer prices up.
The Packers and Stockyards Administration (PSA, back before it was merged with the Grains Inspection Service) assembled a team of primarily land-grant university economists who had worked for many years in these industries. PSA separated the project along species and product lines and placed each part in the hands of economists who knew those industries. I know virtually all of the people who worked on the 1993 project, and I believe them to all be very objective researchers who easily set aside their personal biases if data and results indicate those biases are wrong. In addition, many of these economists shared Congress' suspicions about market power and, I think, expected the project to confirm those suspicions.
It did not. There was very little evidence of economically significant impacts on producer or consumer prices. Needless to say, the Senators and Congressmen were not happy that the research did not arrive at the "right" answers and they discredited the results even before they were officially published in 1996.
Fast-forward to 2003. GIPSA decided that they must use researchers this time who weren't "biased" by packer influences. Many of the land-grant university economists who have worked in livestock marketing were basically disqualified from this project. To GIPSA's credit, it chose Research Triangle Institute International (RTI) of North Carolina to manage the project. RTI did include some knowledgeable agricultural economists on each species team, but their roles were smaller than they were in the 1993 project. The lead economists on the beef section were from the Wharton School of Business at the University of Pennsylvania: definitely not a land-grant university and not agricultural economists.
None of that means this is a bad piece of research. It does illustrate, though, that there are some serious political influences when government agencies do these kinds of projects and that economics and politics are still strange bedfellows.
Pork Sector Highlights
Regardless of the history, the results for the hogs and pork section contain something confirming about every viewpoint of the pork market. A few highlights: