Group Claims USDA Sheep Market Report Misses the Mark



Billings, Mont. - On Friday the U.S. Department of Agriculture (USDA) Grain Inspection, Packers and Stockyards Administration (GIPSA) issued  the report on its investigation of the U.S. sheep market to determine if concentrated meatpackers had manipulated the U.S. lamb market.

 

The scant 14-page investigative report concludes that meatpackers did not manipulate the lamb market. Instead, it concluded that other factors led both to the increase in lamb prices that occurred throughout 2010 and up until mid-2011 and the long-term decrease in lamb prices from mid-2011 throughout all of 2012.  

 

The reports states that "many market factors interacted to cause the sharp increase and subsequent decrease in lamb prices . . . [and] [t]he cost of imported lamb was likely the most important factor."  

 

The report also states: "Roughly half of the lamb consumed in the United States has been imported in recent years. Australia is the largest supplier of imported lamb and New Zealand supplies most of the rest."

 

R-CALF USA Sheep Committee Chair Bill Kluck said his group was already well aware that unlimited imports were causing severe damage to the United States' commercial sheep industry, but is deeply disappointed that USDA failed to acknowledge ongoing problems in the sheep market caused by meatpacker market power.  

 

Kluck said that like many of GIPSA's previous reports, this one also overlooks important elements of the competitive process in the sheep packing industry. Referencing the report's claim that the price packers pay for lambs sold under a formula contract is a more "representative measure of fed lamb prices than negotiated prices," Kluck said GIPSA has completely missed the mark.

 

"GIPSA ignores the fact that the sheep industry's shrinking cash market is the industry's only competition-based price discovery market. It also ignores the fact that meatpackers are causing that price discovery market to shrink by shifting more lambs into their non-competitive formula arrangements and by increasing their inventories of packer-owned lambs," Kluck said.

 

"GIPSA's report is absolutely silent on the price impacts caused by the meatpackers' ongoing efforts to shrink our price discovery market," he added.

"GIPSA's preference for using formula prices that are only indirectly tied to a competitive market price demonstrates that GIPSA has little interest in protecting competitive markets for independent sheep producers and is far more interested in defending its meatpacker allies," Kluck commented.

 

Kluck said that another serious problem with the report is that GIPSA apparently relies only on statements by meatpackers to conclude that retailers were having difficulty selling lamb when lamb prices were increasing prior to mid-2011.

 

"Another key reason why GIPSA could not find evidence of manipulation was based on price reactions by retailers, yet the report indicates that not a single retailer was interviewed during the investigation," Kluck concluded.


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