USDA's Grain Inspection, Packers and Stockyards Administration (GIPSA) released the “GIPSA Livestock and Meat Marketing Study” on the use and impacts of alternative marketing arrangements (AMAs) in the livestock and meat industries. The report says AMAs increase the economic efficiency of the cattle, hog and lamb markets, and the economic benefits are distributed to consumers, as well as to producers and packers.

The study's general conclusions are:

  • Use of AMAs during the October 2002 to March 2005 period, including packer ownership, is estimated at 38% of the fed-beef volume, 89% of the finish-hog volume, and 44% of the fed-lamb volume sold to packers.

  • Packer-owned livestock accounted for a small percentage of transactions for beef and lamb (5% or less), even when the small percentage of partial ownership arrangements is included, but accounted for a large percentage of transactions for pork (20-30% depending upon assumptions).

  • Given the current environment and recent trends, moderate increases in use of AMAs are expected in the lamb industry, but little or no increase in beef and pork.

  • Cash-market transactions serve an important purpose in the industry, particularly for small producers and packers. In addition, reported cash prices are frequently used as the base for formula pricing for cash market and AMA purchases of livestock and meat.

  • The use of AMAs is associated with lower cash-market prices, with a much larger effect occurring for finished hogs than for fed cattle.

  • Many meat packers and livestock producers obtain benefits through the use of AMAs, including management of costs and risk (market access and price risk), and assurance and consistency of quality.

The study concludes: “In aggregate, restrictions on the use of AMAs for sale of livestock to meat packers would have negative economic effects on livestock producers, meat packers and consumers.”

The study was authorized by Congress in 2003 to assess the effects on the market of packer ownership of livestock more than 14 days in advance of slaughter and examine AMAs. The study was conducted by RTI International. See the report at: www.gipsa.usda.gov.