Increased concentration in the cattle industry had little overall effect on prices from 2013 to 2016

OMAHA (DTN) -- Increased concentration in the cattle industry had little overall effect on prices from 2013 to 2016, a new Government Accountability Office report found, instead pointing to drought and the price of feed as reasons for price fluctuations.In particular, cattle prices dropped by about 40% from late 2014 through 2016, sparking calls for federal investigations into possible market manipulation. The GAO said USDA needs to provide better transparency in pricing and sharing of price information among USDA agencies.Responding to that point, USDA stated that the Livestock Mandatory Reporting (LRM) Act of 1999 actually prohibits USDA's Agricultural Marketing Service from sharing the reported pricing information with regulators who oversee enforcement of the Packers & Stockyards Act. USDA stated that routine sharing of data "could jeopardize the public's trust in USDA's administration of the LRM program."The study was conducted at the request of U.S. Sens. Charles Grassley, R-Iowa; Mike Lee, R-Utah; and Patrick Leahy, D-Vt., all who have pressed for changes in federal law to combat what they believe are anti-competitive practices in the industry.The U.S. cattle industry generated 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," the GAO said on Tuesday."Our results suggest that when there is a more concentrated market of buyers (packers), those packers will have more negotiating and market power, and therefore, with other factors held constant, these packers will be able to purchase fed cattle at lower prices from feeders," the GAO said in its report.The GAO examined USDA National Agricultural Statistics Service data from the mid-1990s through 2016. The GAO found the number of cattle fed at large lots increased while the number of cattle fed at smaller feedlots decreased.The study said there was an expansion in the number of individual larger feedlots -- those with a capacity of 50,000 or more head of cattle -- in terms of both number and percentage of total feedlots.The GAO said the number of feedlots with a capacity of more than 50,000 head increased from 45 in 1996 to 73 in 2016."Since the late 2000s, larger feedlots generally have been contributing an increasing portion of fed cattle to overall slaughter numbers, with medium-sized feedlots (those with a capacity of 16,000 to 49,000 head of cattle) generally contributing fewer," the GAO said."However, to better align futures contracts with the actual fed cattle market, CFTC (Commodity Futures Trading Commission) reviewed changes to contract terms and will continue to monitor those changes."GAO RECOMMENDATIONSThe GAO recommends a USDA review of the extent the price reporting group can share daily transaction data with Packers and Stockyards Program. If the law does not allow sharing price data, the GAO said it recommends Congress take action to allow it. In a USDA response included in the GAO report, the department said the Livestock Mandatory Reporting Act of 1999 does not allow for such sharing.