Packers and Stockyards Administration

At the turn of the century, a handful of firms dominated the U.S. meat-packing industry, which was characterized by anticompetitive and other unfair business practices. In response, Congress created the Packers and Stockyards Administration (PSA)--an Agriculture Department agency responsible for overseeing industry operations--and concentration in the meat-packing industry diminished. Mergers and acquisitions in recent decades have made the industry more concentrated than ever before, however, and four firms today account for about 70 percent of the steer and heifer slaughter. This situation underscores the need for effective monitoring of livestock markets to ensure that anticompetitive practices are not being used to cut prices paid to producers to below the level that would be set in a competitive market. Yet PSA monitoring practices have not kept pace with industry changes. PSA has not defined regional livestock procurement markets, which hinders its ability to monitor those markets for anticompetitive behavior. Although PSA collects data on individual firms to develop national concentration statistics and to conduct special studies and investigations, such an approach is no longer sufficient for monitoring competitiveness. Because livestock procurement is a regional activity, and not a national one, local concentration could be higher than PSA national concentration data indicate. As part of its efforts to prevent unfair practices in the marketing of livestock, PSA also enforces certain trade practice regulations. The agency agrees that it needs to evaluate the adequacy of all its implementing regulations, and it plans to initiate such a project.

GAO found that: (1) the percentage of the total number of livestock slaughtered by the largest meat packing firms has increased and there are fewer packing plants, but existing plants are larger; (2) the number of livestock producers has decreased and packers now purchase the majority of their livestock directly from sellers without the services of large centralized stockyards; (3) current PSA monitoring methods include responding to complaints and initiating its own investigations, and do not provide the agency with sufficient information to effectively determine the existence or extent of anticompetitive behavior by packers in procuring livestock; (4) PSA devotes a majority of investigative resources to ensuring prompt and accurate payment to livestock sellers; and (5) PSA also enforces trade practice regulations, but industry representatives believe that the regulations have become outdated due to changes in livestock marketing.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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