The act established a livestock marketing  information program to (1) provide producers, packers and other industry  participants with market information that can be readily understood; (2)  improve USDA price and supply reporting services; and (3) encourage  more competition in these markets. Market News was responsible for collecting and generating  market news reports from information supplied by packers. When ARC found packers that  were reporting incorrectly, ARC notified the Market News reporters, who  were responsible for notifying and following up with packers until the  packers reported correctly. However, we found that while AMS had made progress, its  livestock market news program fell short of ensuring reliability because  AMS reporting was not fully transparent, and AMS audits of packers  revealed some problems with the quality of packers’ transaction data. Our  analysis shows that from April through June 2005, when livestock prices  were declining somewhat, AMS reporters excluded about 9 percent of the  cattle transactions that packers had reported to AMS, about 3 percent of  the reported beef transactions, and 0.2 percent of the reported hog  transactions. AMS guidance for its reporters on eliminating transactions is limited,  lacking clarity and precision. Given that AMS reporters’ decisions to exclude transactions modified the  prices they reported, AMS has not well-explained this practice to readers of  AMS livestock market news. Detailed information was available for 844 of these audits conducted over  the 36 months ending in April 2005. AMS  officials also said that its audit results should be considered in the context  of the volume of transactions that AMS reports—compared to the hundreds  of thousands of pieces of transaction data that packers reported daily, the  errors identified by AMS audits were relatively few. However, some packers, including three of the largest packers, did not  promptly correct reporting problems that AMS identified. In  addition, twice AMS levied fines on packers of $10,000, although these fines  were suspended provided these packers went a year without additional  violations of the Livestock Mandatory Reporting Act. As of September  2005, AMS had continuing issues with 2 of 11 the packers that received  AMS warning letters. While AMS audit reports identified many problems in packers’ reporting of  transactions, there are two reasons why the reports do not provide a clear  basis for assessing the overall accuracy of packers’ data which underlie  AMS livestock mandatory market news reports. GIPSA and AMS Coordination Has Been Limited

GIPSA and AMS coordination has been limited, primarily due to the legal  authority within which each operates. AMS implemented and enforced the Livestock Mandatory Reporting  Act. However, GIPSA identified instances in which the  packer’s reports of negotiated livestock purchases met the documentation  standards of the Packers and Stockyards Act, but may not have met the  standards of the Livestock Mandatory Reporting Act. GIPSA officials said that individual packer transaction data held by AMS  would be useful for monitoring competitive behavior in livestock markets. This monitoring effort  is limited because AMS reports do not include the company-specific  transaction data that might reveal anti-competitive behavior. Among other things, USDA stated that AMS would (1)  prepare publicly available reports on the volume of transactions excluded  by reporters and their effect on reported prices, and take steps to increase  public awareness of reporting methods and processes; (2) clarify AMS  reporters’ instructions while following federal and departmental statistical  and information reporting guidance; (3) post quarterly audit information to  its website and identify additional audit information to add in the future;  (4) develop auditing methods to allow conclusions to be drawn about  overall data accuracy; (5) review its auditing methods to increase the  overall effectiveness of the compliance program; and (6) conduct further  inquiry into the issues raised during one of GIPSA’s investigations. Key contributors to this report are listed in appendix V.

Objectives, Scope, and Methodology

Our objectives were to review the extent to which (1) the U.S. Department  of Agriculture’s (USDA) Agricultural Marketing Service (AMS) takes  sufficient steps to ensure the quality of its livestock mandatory market  news reports, and (2) AMS and the Grain Inspection, Packers and  Stockyards Administration (GIPSA) coordinate efforts to encourage  competition in livestock markets.
Why GAO Did This Study

Livestock producers, with gross income of $63 billion in 2004, depend on USDA's daily, weekly, and monthly livestock market news reports. These reports provide them and others in the industry with livestock and meat prices and volumes, which are helpful as they negotiate sales of cattle, hogs, lamb and meat products. Packers also use the average prices in these reports as a basis for paying some producers with whom the packers have contracts. In 1999, the Livestock Mandatory Reporting Act was passed to substantially increase the volume of industry sales transactions covered by USDA's market news reports and thereby encourage competition in the industry. In the context of ongoing discussions about the renewal of this act, GAO reviewed (1) USDA's efforts to ensure the quality of its livestock market news reports and (2) the coordination between two USDA agencies that are responsible for promoting competition in livestock markets.

What GAO Found

While the U.S. Department of Agriculture (USDA) took important actions to produce quality livestock market news reports, GAO found that USDA could improve the reports' transparency. Although packers with large plants must report all of their livestock transactions to USDA, GAO found that USDA market news reporters regularly excluded some transactions as they prepared USDA's reports. For example, GAO's analysis showed that from April through June 2005, USDA reporters excluded about 9 percent of the cattle transactions that packers had reported. When USDA excluded transactions, this sometimes changed the low, high, and average prices that USDA would have otherwise reported. However, USDA has not informed its readers of the extent of this practice. Moreover, USDA's instructions for guiding its market news reporters as they prepared their reports lacked clarity and precision, leading to inconsistency in their reporting decisions. In addition, GAO found the accuracy of USDA's livestock market news reports is not fully assured. About 64 percent of 844 USDA audits of packers--conducted over 36 months ending in April 2005--identified packers' transactions that were inaccurately reported, unsupported by documentation, or omitted from packers' reports. Moreover, some packers have not promptly corrected problems. Since 2002, USDA has sent 11 packers 21 letters urging the packers to correct longstanding problems and warning them of the consequences of delay. Twice USDA has levied $10,000 fines on packers, but suspended the fines when these packers agreed to comply. As of September 2005, USDA had continuing issues with 2 of the 11 packers. USDA officials noted that packers' errors are relatively few compared to the large volumes of data that packers report daily. However, USDA has not (1) assessed the overall quality of packers' data, (2) used its audit results to help focus future audit efforts, and (3) ensured that follow-up promptly resolves problems. Two USDA agencies have addressed competition in livestock markets--the Agricultural Marketing Service (AMS) and the Grain Inspection, Packers and Stockyards Administration (GIPSA). GAO found the coordination between these agencies to be limited, primarily due to the legal authority within which each operates. AMS has implemented the Livestock Mandatory Reporting Act. That act did not provide authority for AMS to share individual packer transaction data within USDA except for enforcement purposes. In two investigations, AMS provided packers' data to GIPSA. On the other hand, GIPSA enforces the Packers and Stockyards Act and is responsible for addressing unfair and anti-competitive practices in the marketing of livestock. Furthermore, GAO found that GIPSA monitors cattle and hog markets by analyzing publicly available livestock market news reports--an approach that has limitations because it lacks the company-specific information that would be useful for detecting anti-competitive behavior.