At this point, they move to feedlots, which produce fed cattle. Cattle Market Oversight Roles and Responsibilities of USDA and CFTC

Within USDA, AMS’s P&SP and price reporting group play specific roles  in the cattle market. A Variety of Supply and Demand Factors Affected Fed Cattle Price Changes from 2013 through 2016

Our review identified several supply and demand factors—such as a  prolonged drought that affected the price of cattle feed and the availability  of relatively less expensive protein substitutes such as pork—that  affected changes in fed cattle prices from 2013 through 2016. Competition Levels among Packers Did Not Appear to Affect National Price Changes in the Fed Cattle Market but May Have Contributed to Price Variations in Different Areas of the Country

Competition levels among packers varied in different areas of the country. CFTC Did Not Find Evidence of Trading Irregularities in the Futures Market for Fed Cattle in 2015, and Is Overseeing Changes to Address Contract Concerns

CFTC’s regular monitoring efforts and its analysis of trading patterns,  including of particularly volatile trading days, did not find evidence of  irregularities in the futures market for fed cattle in 2015. First,  USDA’s view of its legal authority does not allow P&SP routine access to  the data from AMS’s price reporting group on daily transactions between  packers and cattle feeders. Because USDA eliminated the Grain Inspection, Packers & Stockyards  Administration and reorganized P&SP under AMS in November 2017, the  reorganization provides an opportunity for USDA to review the extent to  which price reporting data could be shared with P&SP under the act— now that both P&SP and the price reporting group are within the same  agency. However, USDA officials told us in November 2017 that it was  too early in the reorganization process to determine whether AMS  leadership would view routine sharing of these data any differently. In reviewing its authority  to share these data, determining whether it is necessary or advisable to  request additional exceptions from the current information disclosure  restrictions from Congress would position USDA to strengthen its  oversight of that market. Amid  concerns about the drop in fed cattle prices beginning in late 2015 and  ongoing questions about anticompetitive behavior in the fed cattle market,  P&SP’s role in overseeing this market is paramount. Recommendations for Executive Action

We are making the following two recommendations to USDA:  The Secretary of Agriculture should review the extent to which, under the  Livestock Mandatory Reporting Act of 1999, the price reporting group can  share daily transaction data with P&SP to allow P&SP to strengthen the  effectiveness of its oversight. After reviewing that authority, if the  Secretary determines that the statute does not permit the price reporting  group to share data with P&SP for routine monitoring purposes, and that  routine sharing is advisable in light of the purposes behind the statutory  disclosure restrictions, the Secretary should submit to Congress a  proposal to allow such sharing. Appendix I: Objectives, Scope, and Methodology

This report (1) describes key factors that affected fed cattle price changes  from 2013 through 2016; (2) describes what CFTC found about possible  trading irregularities in the futures market for fed cattle in 2015 and any  changes to the futures contract for fed cattle since 2015; and (3)  examines factors that may affect the U.S. Department of Agriculture’s  (USDA) routine monitoring to ensure against discriminatory or  anticompetitive practices in the fed cattle market. We also collected USDA transaction data on beef packer (packer)  purchases of fed cattle from 2013 through 2015 and we analyzed these  data using a variety of methods, including econometric analysis. To analyze the packing market, we obtained transaction data  from the Agricultural Marketing Service’s Packers and Stockyards  Program (P&SP) within the U.S. Department of Agriculture (USDA). was an error term.
Why GAO Did This Study

The U.S. cattle industry accounted for about $64 billion in receipts in 2016, according to USDA. The price of fed cattle has fluctuated widely from 2013 through 2016 and experienced a sharp downturn beginning in late 2015, raising concerns about the market and questions about USDA's oversight.
GAO was asked to review issues related to the U.S. cattle market. This report (1) describes key factors that affected changes in fed cattle prices from 2013 through 2016; (2) describes what CFTC found about possible trading irregularities in the futures market for fed cattle in 2015 and any changes to the futures contract for fed cattle since 2015; and (3) examines factors that may affect USDA's routine monitoring to ensure against discriminatory or anticompetitive practices in the fed cattle market. GAO reviewed economic data and USDA and CFTC documentation; analyzed transaction data on beef packer purchases from 2013 through 2015; and interviewed recognized experts, cattle industry stakeholders such as feedlot operators and packers, and agency officials.

What GAO Found

Supply and demand factors , such as a drought that affected the price of cattle feed, affected changes in prices of fed cattle—those ready for slaughter from 2013 through 2016. According to industry experts and GAO's analysis, a drought from late 2010 to early 2013 led the cattle inventory to fall and rise and, in turn, fed cattle prices to fluctuate (see figure). GAO's analysis of cattle market data from the U.S. Department of Agriculture (USDA) also indicated that competition levels among packers that slaughter and process fed cattle did not appear to affect the national price changes in the fed cattle market in 2015 but that areas of the country with less competition among packers had lower cattle prices.
The Commodity Futures Trading Commission (CFTC)—an agency that regulates cattle futures markets where participants buy and sell standardized agreements for cattle at an agreed-upon price at a specified date in the future—did not find evidence of trading irregularities in the cattle futures market in 2015. However, to better align futures contracts with the actual fed cattle market, CFTC reviewed changes to contract terms and will continue to monitor those changes.
The Packers & Stockyards Program (P&SP), which oversees the cattle industry within USDA's Agricultural Marketing Service (AMS), does not have routine access to daily data for transactions between feedlot operators, which produce fed cattle, and packers. Those data are collected by AMS's price reporting group, which does not routinely share them with P&SP because officials said it is prohibited by statute from doing so. The Livestock Mandatory Reporting Act of 1999 specifies that the Secretary of Agriculture may authorize the sharing of these data for enforcement purposes, which USDA interprets as an ongoing investigation, not market monitoring. In November 2017, USDA reorganized P&SP under AMS and officials said it was too early in the reorganization to determine whether AMS would view routine sharing of these data any differently. Reviewing the extent to which these data can be shared with P&SP provides an opportunity to enhance P&SP's oversight of the fed cattle market. Determining whether it is advisable to request additional exceptions from information disclosure restrictions from Congress would help USDA strengthen its oversight.

What GAO Recommends

GAO is making two recommendations, including that USDA review the extent to which, under statute, the price reporting group can share daily transaction data with P&SP, and if USDA determines the statute does not permit such sharing and it is advisable, submit to Congress a proposal to allow such sharing. USDA agreed and subsequently determined that the act does not allow for such sharing and it would not be advisable citing concerns about the public's trust in the program.