February 22, 2007

 

Alternative marketing arrangements benefit livestock producers

 

 

Alternative marketing arrangements in the livestock and meat industries provide benefits to meat consumers and livestock producers, according to a report by researchers at RTI International.

 

The latter is a North Carolina-based non-profit research organisation.

 

The study, which was conducted for the USDA's Grain Inspection, Packers and Stockyards Administration or GIPSA, was mandated by Congress in 2003.

 

The study shows alternative marketing arrangements (AMAs) such as forward contracts, production contracts, packer ownership or custom feeding have provided benefits to some producers without harming the competitiveness of the marketplace.

 

The study was designed to assess the effects on the market of packer ownership or control of livestock more than 14 days in advance of slaughter and to examine alternative marketing arrangements that govern procurement and transfer of livestock from farm to retail.

 

The GIPSA Livestock and Meat Marketing Study found that economic benefits are distributed to meat consumers as well as to livestock producers and meat packers who use alternative arrangements.

 

The findings indicate that use of AMAs in the livestock and meat industries provides higher and more consistent meat quality, reduces costs of production for meat, reduces price risk and allows for market access, pointed out Mary Muth, director of RTI's Food and Agricultural Policy Research Programme.

 

The study concluded that reducing or eliminating the use of AMAs would result in economic losses for both cattle producers and beef consumers.

 

GIPSA contracted with RTI International to conduct an extensive study of the economic effects of AMAs on beef, pork and lamb marketing channels.

 

An interim report, released in August 2005, identified and classified AMAs and described their terms, availability and reasons for use in beef, pork and lamb market channels from production to consumption.

 

The most common marketing arrangements for livestock that are made 14 days before slaughter include lot-by-lot contracts or forward contracts, marketing agreements that are contracts for multiple lots, and equity investments by packers in feeding animals referred to as "packer ownership."

 

In December 2006, the report was sent to economic academics across the country for peer review. Their comments have been incorporated into the report.