[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]





 HEARING TO REVIEW REAUTHORIZATION OF THE LIVESTOCK MANDATORY REPORTING
                                  ACT

=======================================================================

                                HEARING

                               BEFORE THE

           SUBCOMMITTEE ON LIVESTOCK AND FOREIGN AGRICULTURE

                                 OF THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 22, 2015

                               __________

                           Serial No. 114-12

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



          Printed for the use of the Committee on Agriculture
                         agriculture.house.gov




                                   ______

                         U.S. GOVERNMENT PUBLISHING OFFICE 

94-372 PDF                     WASHINGTON : 2015 
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Publishing 
  Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
                          Washington, DC 20402-0001
                          













                        COMMITTEE ON AGRICULTURE

                  K. MICHAEL CONAWAY, Texas, Chairman

RANDY NEUGEBAUER, Texas,             COLLIN C. PETERSON, Minnesota, 
    Vice Chairman                    Ranking Minority Member
BOB GOODLATTE, Virginia              DAVID SCOTT, Georgia
FRANK D. LUCAS, Oklahoma             JIM COSTA, California
STEVE KING, Iowa                     TIMOTHY J. WALZ, Minnesota
MIKE ROGERS, Alabama                 MARCIA L. FUDGE, Ohio
GLENN THOMPSON, Pennsylvania         JAMES P. McGOVERN, Massachusetts
BOB GIBBS, Ohio                      SUZAN K. DelBENE, Washington
AUSTIN SCOTT, Georgia                FILEMON VELA, Texas
ERIC A. ``RICK'' CRAWFORD, Arkansas  MICHELLE LUJAN GRISHAM, New Mexico
SCOTT DesJARLAIS, Tennessee          ANN M. KUSTER, New Hampshire
CHRISTOPHER P. GIBSON, New York      RICHARD M. NOLAN, Minnesota
VICKY HARTZLER, Missouri             CHERI BUSTOS, Illinois
DAN BENISHEK, Michigan               SEAN PATRICK MALONEY, New York
JEFF DENHAM, California              ANN KIRKPATRICK, Arizona
DOUG LaMALFA, California             PETE AGUILAR, California
RODNEY DAVIS, Illinois               STACEY E. PLASKETT, Virgin Islands
TED S. YOHO, Florida                 ALMA S. ADAMS, North Carolina
JACKIE WALORSKI, Indiana             GWEN GRAHAM, Florida
RICK W. ALLEN, Georgia               BRAD ASHFORD, Nebraska
MIKE BOST, Illinois
DAVID ROUZER, North Carolina
RALPH LEE ABRAHAM, Louisiana
TOM EMMER, Minnesota
JOHN R. MOOLENAAR, Michigan
DAN NEWHOUSE, Washington

                                 ______

                    Scott C. Graves, Staff Director

                Robert L. Larew, Minority Staff Director

                                 ______

           Subcommittee on Livestock and Foreign Agriculture

                 DAVID ROUZER, North Carolina, Chairman

BOB GOODLATTE, Virginia              JIM COSTA, California, Ranking 
STEVE KING, Iowa                     Minority Member
SCOTT DesJARLAIS, Tennessee          STACEY E. PLASKETT, Virgin Islands
VICKY HARTZLER, Missouri             FILEMON VELA, Texas
TED S. YOHO, Florida                 RICHARD M. NOLAN, Minnesota
TOM EMMER, Minnesota                 CHERI BUSTOS, Illinois
DAN NEWHOUSE, Washington

                                  (ii)
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Costa, Hon. Jim, a Representative in Congress from California, 
  opening statement..............................................     3
Rouzer, Hon. David, a Representative in Congress from North 
  Carolina, opening statement....................................     1
    Prepared statement...........................................     2
    H.R. 2051, Mandatory Price Reporting Act of 2015.............    41

                               Witnesses

Dopp, Mark, Senior Vice President, Regulatory Affairs and 
  Scientific Affairs/General Counsel, North American Meat 
  Institute, Washington, D.C.....................................     4
    Prepared statement...........................................     5
Heimerl, James R., Owner and Manager, Heimerl Farms Ltd.; 
  Director, National Pork Producers Council, Johnstown, OH.......     5
    Prepared statement...........................................     7
Pfliger, Burton, President, American Sheep Industry Association, 
  Centennial, CO.................................................    10
    Prepared statement...........................................    11
Greiman, Edward C., Chairman, Cattle Marketing and International 
  Trade Committee, National Cattlemen's Beef Association, Garner, 
  IA.............................................................    31
    Prepared statement...........................................    32

 
 HEARING TO REVIEW REAUTHORIZATION OF THE LIVESTOCK MANDATORY REPORTING
                                  ACT

                              ----------                              


                       WEDNESDAY, APRIL 22, 2015

                  House of Representatives,
         Subcommittee on Livestock and Foreign Agriculture,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 2:39 p.m., in 
Room 1300 of the Longworth House Office Building, Hon. David 
Rouzer [Chairman of the Subcommittee] presiding.
    Members present: Representatives Rouzer, Hartzler, 
Newhouse, and Costa.
    Staff present: Caleb Crosswhite, Carly Reedholm, Haley 
Graves, John Goldberg, Mollie Wilken, Patricia Straughn, Ted 
Monoson, Mary Knigge, and Nicole Scott.

  OPENING STATEMENT OF HON. DAVID ROUZER, A REPRESENTATIVE IN 
                  CONGRESS FROM NORTH CAROLINA

    The Chairman. This hearing of the Subcommittee on Livestock 
and Foreign Agriculture to review reauthorization of the 
Livestock Mandatory Reporting Act, will come to order. I would 
like to welcome our witnesses to this hearing regarding 
reauthorization of the Livestock Mandatory Reporting Act. First 
enacted in 1999, the Act was developed in response to changing 
markets, with an increasing number of animals being sold by 
marketing agreements under which prices were not publicly 
disclosed. As these structural changes continued, livestock 
producers requested that the then-voluntary price reporting 
mechanism be made mandatory. Thus, the resulting Act mandated 
price reporting for live cattle, boxed beef, and live swine, 
and it allowed USDA to establish mandatory price reporting for 
lamb sales as well.
    Development of the Act, and each subsequent 
reauthorization, has ultimately involved and required consensus 
between producers and packers for implementation to work as 
smoothly as possible. As we approach the expiration of the 
current law, we have once again asked producers and packers to 
work towards consensus regarding any request in modifications 
to the underlying statute. We are aware that discussions have 
been ongoing, and that, while we are very close to a final 
package of requests, some further discussion may be necessary 
prior to announcing a markup of the reauthorization bill. 
Proposals have been shared between and among the various 
stakeholder groups, and those proposals have been forwarded to 
the Committee for review. As consensus is reached, the 
Committee will prepare draft bill text to be circulated among 
Members, with the intent to post that legislation for public 
review later this week, or early next week.
    Today we have invited representatives of the affected 
livestock organizations, as well as a representative of the 
packers' trade association, NAMI, to share their proposals, 
identify areas of consensus, and to identify areas of concern. 
I would note that a representative of the USDA Agricultural 
Marketing Service, the agency which administers mandatory price 
supporting, was originally invited to testify today. We have 
been in discussions with the Secretary's office, and it was the 
preference of the Department to focus its effort on more 
detailed briefings and technical assistance on the legislative 
draft, as opposed to testifying on today's witness panel. That 
said, I am pleased that Dr. Craig Morris, Deputy Administrator 
of the Agricultural Marketing Service, with direct 
responsibility for the livestock, poultry, and seed program is 
here today, and is prepared to answer any questions that 
Members may have.
    Again, I would like to thank our witnesses for their 
attendance.
    [The prepared statement of Mr. Rouzer follows:]

 Prepared Statement of Hon. David Rouzer, a Representative in Congress 
                          from North Carolina
    Good afternoon.
    I would like to welcome our witnesses to this discussion regarding 
reauthorization of the Livestock Mandatory Reporting Act.
    First enacted in 1999, the Act was developed in response to 
changing markets with an increasing number of animals being sold via 
marketing arrangements under which prices were not publicly disclosed. 
As these structural changes continued, livestock producers requested 
that the then-voluntary price reporting mechanism be made mandatory. 
Thus, the resulting Act mandated price reporting for live cattle, boxed 
beef, and live swine, and it allowed USDA to establish mandatory price 
reporting for lamb sales as well.
    Development of the Act and each subsequent reauthorization has 
ultimately involved and required consensus between producers and 
packers for implementation to work as smoothly as possible. As we 
approach the expiration of the current law, we have once again asked 
producers and packers to work towards consensus regarding any requested 
modifications to the underlying statute.
    We are aware that discussions have been ongoing and that while we 
are very close to a final package of requests, some further discussion 
may be necessary prior to announcing a markup of a reauthorization 
bill. Proposals have been shared between and among the various 
stakeholder groups and those proposals have been forwarded to the 
Committee for review. As consensus is reached, the Committee will 
prepare draft bill text to be circulated among Members with the intent 
to post that legislation for public review later this week or early 
next week.
    Today, we have invited representatives of the affected livestock 
organizations, as well as a representative of the packers' trade 
association, NAMI, to share their proposals, identify areas of 
consensus, and to identify areas of concern.
    I would note that a representative of the USDA Agricultural 
Marketing Service, the agency which administers mandatory price 
reporting, was originally invited to testify today. We have been in 
discussions with the Secretary's office and it was the preference of 
the Department to focus its effort on more detailed briefings and 
technical assistance on the legislative draft as opposed to testifying 
on today's witness panel. Additionally, I'm pleased that Dr. Craig 
Morris, Deputy Administrator of the Agricultural Marketing Service with 
direct responsibility for the Livestock, Poultry and Seed Program is 
here today and is prepared to answer any questions that Members may 
have.
    Again, I would like to thank all of our witnesses for their 
attendance and now yield to the Ranking Member, Mr. Costa, for his 
opening statement.

    The Chairman. I now yield to Ranking Member, Mr. Costa, for 
his opening statement.

   OPENING STATEMENT OF HON. JIM COSTA, A REPRESENTATIVE IN 
                    CONGRESS FROM CALIFORNIA

    Mr. Costa. Thank you very much, Mr. Chairman. I think it is 
important that the Subcommittee do its due diligence in this 
matter that is very important to America's livestock industry, 
and to the cattle producers throughout our nation. I have a 
very significant cattle producing effort that takes place in 
California. I have three packing operations that are within my 
district, and I work closely with all of them, including the 
cattle producers of California, to ensure that they can remain 
competitive and thriving, because these are some of the hardest 
working people you will ever meet. They are tenacious, and they 
deal with the ups and downs in what sometimes is a volatile 
market. Yet they not only produce the finest products of beef 
anywhere in the country, but they also export a significant 
portion of their product.
    The price reporting for livestock and meat was made 
mandatory some 15 years ago, and the goal of providing buyers 
and sellers with accurate and objective information is always 
the goal to ensure for a competitive market; whether we are 
talking about cattle, or hogs, or sheep, or wholesale meat 
products. And, obviously, in different regions of the country 
these livestock producers make up significant parts of the 
economy in those regions.
    Despite the initial opposition, this has become a tool, and 
American agriculture, agriculturalists, farmers, cattle 
operators, dairymen, and the rest of the gamut of the--we say 
the barnyard coalition--needs all the tools that they can have 
available to them, not only in this country, but to compete in 
what is becoming more and more a global market. Since livestock 
mandatory price reporting has become a tool, these reports have 
had, and continue to have, significant impacts because 
contracts are negotiated between buyers and sellers. They are 
based on prices that are reported by the livestock mandatory 
reporting to the Agricultural Marketing Service. And, 
obviously, these markets are critical to the viability of an 
important ability to keep their game. And also there are 
futures markets that have ramifications as well.
    We saw this during the October 2013 shutdown, as the 
program was not deemed essential during one of the government 
shutdowns. There was a loss of price data that caused major 
headaches, at least my folks told me they had major headaches, 
in the market throughout the country. These sort of disruptions 
can be prevented by not shutting down government, but in the 
event it happens, clearly we need to make sure that the flow of 
information remains uninterrupted.
    It is my hope that we can build on these bipartisan efforts 
that the industry has come to expect with regards to mandatory 
price reporting reauthorizations. I am looking forward to 
hearing the testimony from each of you who represent various 
segments of the industry, and I will listen very carefully back 
home, because, as a colleague of ours once said, ``Mr. 
Chairman, all politics are local.'' I am going to want to know 
what my local folks think as it relates to both packing 
operations, as well as the feedlot operations, as well as the 
producers who literally, and figuratively, put the meat on the 
table.
    So, with that, I yield back the balance of my time, and I 
look forward to the testimony of our witnesses.
    The Chairman. Thank you very much. The chair would request 
that other Members, when they arrive, submit their opening 
statements for the record so the witnesses may begin their 
testimony, and to ensure there is ample time for questions. The 
chair would like to remind everyone--Members in particular--
they will be recognized for questioning in the order of 
seniority for Members who were present at the start of the 
hearing. Well, that is going to be easy for me. After that, 
Members will be recognized in order of their arrival, and I 
certainly appreciate Members' understanding on that front. 
Witnesses are asked to limit their oral presentations to 5 
minutes. All written statements will be included in the record.
    And now I want to introduce our panel of witnesses, and 
certainly welcome you to the table, and I appreciate your 
willingness to come before the Committee today. First I want to 
introduce Mr. Mark Dopp, Senior Vice President, Regulatory 
Affairs and Scientific Affairs, as well as General Counsel for 
the North American Meat Institute here in Washington. Mr. James 
Heimerl, and forgive me if I mispronounce the name. You can 
correct me at the appropriate time. But he is here on behalf of 
the National Pork Producers Council. I also would like to 
introduce Mr. Burton Pfliger, President of the American Sheep 
Industry Association from Colorado. Mr. Ed Greiman, Chairman of 
the Cattle Marketing and International Trade Committee, 
National Cattlemen's Beef Association, from Garner, Iowa. And 
then, as I mentioned, Dr. Craig Morris is here. He is not part 
of the panel, but is here for questions, if Members have any, 
and is Deputy Administrator, Livestock, Poultry, and Seed 
Program, Agricultural Marketing Service of the U.S. Department 
of Agriculture.
    With that, Mr. Dopp, you may proceed.

         STATEMENT OF MARK DOPP, SENIOR VICE PRESIDENT,
  REGULATORY AFFAIRS AND SCIENTIFIC AFFAIRS/GENERAL COUNSEL, 
                 NORTH AMERICAN MEAT INSTITUTE,
                        WASHINGTON, D.C.

    Mr. Dopp. Thank you, Mr. Chairman. Good afternoon, Mr. 
Chairman, Ranking Member Costa, and other Members of the 
Committee. My name is Mark Dopp, and I am the Senior Vice 
President and General Counsel of the North American Meat 
Institute. The Meat Institute, as we now brand ourselves, which 
came into being on January 1 of this year, and is the result of 
a merger of the American Meat Institute and the North American 
Meat Association. Collectively, our organization, and its 
predecessors, have been representing the nation's meat and 
poultry industries for more than 100 years.
    The Meat Institute's members include 376 of the nation's 
largest and smallest meat and poultry food manufacturers. 
Collectively, my members produce 95 percent of the beef, pork, 
veal, and lamb products, and 75 percent of the turkey products 
produced in the United States. Among the Meat Institute's 
member companies, more than 80 percent are small family owned 
businesses employing fewer than 300 people. These companies 
operate, compete, sometimes struggle, and mostly thrive in what 
has become one of the toughest, most competitive, and most 
scrutinized sectors of our economy, meat packing and 
processing.
    Meat Institute member companies worked closely with the 
livestock producing community, the Agricultural Marketing 
Service, and other interested stakeholders when this reporting 
program first came into being. And we have worked similarly on 
every reauthorization since then. This iteration of the 
reauthorization should be no different. In that regard, the 
Meat Institute has been working with its membership, and with 
the livestock producer community, to find consensus on 
reauthorizing the Livestock Mandatory Reporting Act, and I hope 
that we can continue this partnership in moving this 
legislation forward free of controversy, and I believe we can. 
Although there is work yet to be done to reach consensus, I am 
confident we can achieve this goal in a manner that makes the 
program more effective, more efficient, and without increasing 
the costs or regulatory burdens.
    I appreciate the opportunity to participate in this 
hearing, and I look forward to answering any questions that you 
might have. Thank you.
    [The prepared statement of Mr. Dopp follows:]

   Prepared Statement of Mark Dopp, Senior Vice President, Regulatory
  Affairs and Scientific Affairs/General Counsel, North American Meat
                      Institute, Washington, D.C.
    Good afternoon Mr. Chairman, Ranking Member Costa, and Members of 
the Committee. My name is Mark Dopp and I am Senior Vice President and 
General Counsel of the North American Meat Institute. The Meat 
Institute, which came into being on January 1 of this year as a result 
of the merger of the American Meat Institute and the North American 
Meat Association, has been representing the nation's meat and poultry 
industries for more than 100 years.
    The Meat Institute's members include 376 of the nation's largest 
and smallest meat and poultry food manufacturers. Collectively, they 
produce 95 percent of the beef, pork, veal and lamb products and 75 
percent of the turkey products in the U.S. Among the Meat Institute's 
member companies, 80 percent are small, family-owned businesses 
employing fewer than 300 people. These companies operate, compete, 
sometimes struggle and mostly thrive in what has become one of the 
toughest, most competitive and the most scrutinized sectors of our 
economy: meat packing and processing.
    Meat Institute member companies worked closely with the livestock 
producer community, the Agricultural Marketing Service, and other 
interested stakeholders when this reporting program first came into 
being and on every reauthorization effort since. This iteration of 
reauthorization must be no different. In that regard, the Meat 
Institute has been working with its membership and with livestock 
producer groups, to find consensus on reauthorizing the Livestock 
Mandatory Reporting Act and I hope we continue this partnership to move 
this legislation forward, free of controversy.
    Although there is work yet to be done to reach consensus, I am 
confident we can achieve this goal in a manner that makes the program 
more effective and efficient without increasing costs or regulatory 
burdens.
    Thank you for the opportunity to participate in this hearing. I 
would be happy to answer questions.

    The Chairman. Thank you, Mr. Dopp. Mr. Heimerl?

STATEMENT OF JAMES R. HEIMERL, OWNER AND MANAGER, HEIMERL FARMS 
                 LTD.; DIRECTOR, NATIONAL PORK
                PRODUCERS COUNCIL, JOHNSTOWN, OH

    Mr. Heimerl. Thank you, Chairman Rouzer, Ranking Member 
Costa, and Members of the Subcommittee for inviting me to 
testify on the Livestock Mandatory Reporting Act. I am Jim 
Heimerl, a hog farmer from Ohio, and a Member of the Board of 
Directors for the National Pork Producers Council here 
testifying on behalf of the NPPC, and America's 68,000 pork 
producers. The mandatory price reporting system for hogs and 
pork is one of the most important services the U.S. Government 
provides to the U.S. pork industry, providing essential 
marketing information used every day by pork producers, 
packers, and users of pork to price the products they buy and 
sell.
    As you know, the Livestock Mandatory Reporting Act expires 
September 30 this year. Before that date, pork producers would 
like Congress to approve legislation reauthorizing the law for 
5 years. Pork producers also would like three important 
additions or changes to the mandatory price reporting system. 
First, create a category for negotiated formula pricings to 
better reflect the total number of hogs negotiated each day, 
regardless of how buyers and sellers arrive at the prices. The 
original reporting specified four types of purchases for hogs, 
negotiated swine, or pork market formula, other market formula, 
and other purchase agreements.
    USDA established criteria for each category. They have 
stayed fairly consistent, providing a known set of rules for 
industry participants. The market, however, has changed 
dramatically over the past 15 years, with the most notable 
changes being the decline in proportion of hog sales conducted 
through negotiated trades. Today less than four percent of the 
hogs are sold in negotiated or cash markets, and the numbers 
sold under some alternative marketing agreements continues to 
increase.
    The mandatory pricing system has adapted to those changes, 
with one exception, that hogs that are not committed to any 
pack or on a long term basis, and whose prices are determined 
by a formula negotiated on a lot by lot basis. USDA doesn't 
consider such sales in negotiated trades. They are included in 
a swine or pork market formula category. NPPC believes that the 
market would be better reflected by placing those animals in a 
separate category that reflects the true number of hogs, and 
the price of those hogs sold through negotiations each day, 
whether or not these negotiations result in a numerical price, 
or an agreement on how such a price will be established at 
delivery. NPPC doesn't know exactly how many hogs would fall in 
this new category, but feedback from market participants 
suggest it would be two to four percent of the total. This is 
not a lot, but it would represent a 50 to a 100 percent 
increase in the number of negotiated hogs.
    The second change is to give USDA authority to include late 
day hog purchase in the following day's morning and afternoon 
reports to better represent the subsequent day's market 
conditions. One problem of the diminishing number of hogs sold 
through negotiated trade is the USDA's confidentiality 
conditions for publishing information. That is, that the 
sellers and the buyers not be able to be identified are now 
often not met for morning and afternoon purchased swine 
reports. But when that data isn't published, producers and 
packers don't know what is going on in the marketplace beyond 
their own actions and trades, so have no frame of reference for 
market conditions.
    NPPC believes that hogs and purchases after the 1:00 p.m. 
reporting deadline are, in almost every instance, delivered the 
following day, and thus affect the next day's market, but those 
animals are not included in the next day's morning or afternoon 
report. Including them would reflect the current day's markets 
more clearly, and add to the number of trades and total volume 
of trades that are submitted to the USDA for reports. This 
would reduce the probability of violating the USDA's 
confidentiality conditions and increase the likelihood that 
USDA would publish complete reports.
    The third change would be to recognize that mandatory price 
reporting system is an absolute essential to the U.S. pork 
industry, and ensure reports are published during any 
government shutdown. The price reporting system has established 
USDA as the authority on daily pricing and supply of hogs. The 
agency price reports, which have been published now for 15 
years, are the essential information source for the U.S. pork 
industry. While they survived the October 2013 government 
shutdown, when the USDA stopped publishing price reports, pork 
producers did so very uncomfortably, with a lot of uncertainty.
    The uncertainty about supplies and price has nearly caused 
significant disagreements over the values of pork products and 
hogs. Had the shutdown continued, NPPC believes there would 
have been major disruptions in commerce, and lingering legal 
challenges to actions taken by packers and producers during the 
information void. To avoid that, NPPC requests language to be 
included in reauthorization legislation deeming mandatory price 
reporting an essential service, or that the Committee take 
other action to ensure price reports are published during a 
shutdown, or a lapse in appropriation.
    Finally, the NPPC opposes any new legislation or 
regulations that would restrict marketing opportunities for 
pork producers, and opposes any government intervention into 
hog markets, unless such action addresses a clear, unequivocal 
instance of market failure, or abuse of market power. Thank you 
again for the opportunity to discuss mandatory pricing and the 
reporting system. Thanks.
    [The prepared statement of Mr. Heimerl follows:]

  Prepared Statement of James R. Heimerl, Owner and Manager, Heimerl 
  Farms Ltd.; Director, National Pork Producers Council, Johnstown, OH
Introduction
    The National Pork Producers Council (NPPC) is an association of 43 
state pork producer organizations that serves as the voice in 
Washington, D.C., for the nation's pork producers. The U.S. pork 
industry represents a significant value-added activity in the 
agriculture economy and the overall U.S. economy. Nationwide, more than 
68,000 pork producers marketed more than 112 million hogs in 2013, and 
those animals provided total gross receipts of $23.4 billion. Overall, 
an estimated $22.3 billion of personal income and $39 billion of gross 
national product are supported by the U.S. hog industry. Economists 
Daniel Otto, Lee Schulz and Mark Imerman at Iowa State University 
estimate that the U.S. pork industry is directly responsible for the 
creation of more than 37,000 full-time equivalent pork producing jobs 
and generates about 128,000 jobs in the rest of agriculture. It is 
responsible for approximately 102,000 jobs in the manufacturing sector, 
mostly in the packing industry, and 65,000 jobs in professional 
services such as veterinarians, real estate agents and bankers. All 
told, the U.S. pork industry is responsible for nearly 550,000 mostly 
rural jobs in the United States. The U.S. pork industry today provides 
23 billion pounds of safe, wholesome and nutritious meat protein to 
consumers worldwide.
Importance of the System and Timely Reauthorization
    The mandatory price reporting (MPR) system for hogs and pork is one 
of, if not the singularly, most important service the U.S. government 
provides to the U.S. industry. The system made possible by the 
Livestock Mandatory Reporting Act of 1999 (LMRA) is the cornerstone of 
the marketing information used by pork producers, packers and users of 
pork products every day to price the products they buy and sell.
    The system provides the information upon which the industry runs. 
Pork producers continue to need a transparent, accurate and timely 
national market reporting system to make knowledge-based business 
decisions about selling their hogs. Packers depend on the information 
as well, and packers and buyers of pork are now quite dependent on the 
data provided by the mandatory price reporting system for wholesale 
pork cuts, which was added the last time the act was reauthorized.
    Timely and accurate information is important for a competitive 
market to function effectively. The MPR system is the primary source of 
such information for the U.S. pork industry.
    The timely reauthorization of MPR before it expires on Sept. 30, 
2015, is of critical importance to the pork industry. The U.S. 
Department of Agriculture's authority to gather and publish price 
information under the LMRA was allowed to expire in September 2004 when 
key lawmakers blocked action on reauthorization amid concerns about how 
the system was operated in its early years. The pork industry escaped 
serious harm during that hiatus when pork packers agreed to continue 
providing the required information to USDA even though the law was not 
in effect.
    A far more serious disruption of the system occurred in October 
2013 when the budget-induced government shutdown prevented USDA from 
gathering information or publishing reports for 2 weeks. The pork 
industry continued to function based on prices known immediately prior 
to the shutdown, but it was reaching a critical level of uncertainty 
about the true value of hogs and pork just as the budget standoff ended 
and USDA price reporters went back to work. Little long-term damage was 
done, but no one wants a repeat of that unfortunate experience.
    LMRA needs to be reauthorized well before the Sept. 30, 2015, 
deadline to preclude any uncertainty for buyers and sellers of hogs 
from entering into contractual relationships. NPPC supports another 5 
year reauthorization of LMRA.
Requested Changes to the LMRA and MPR System
    Pork producers are requesting three substantive changes to the 
Livestock Mandatory Reporting Act in this year's reauthorization 
legislation. The section below explains the circumstances that are 
driving the requested changes.
Add a Purchase Category for Negotiated Formula Sales/Purchases
    The original LMRA specified four types of purchase for hogs: 
Negotiated, Swine or Pork Market Formula, Other Market Formula and 
Other Purchase Arrangements. USDA established criteria for each of the 
categories that, though changed slightly through the program's life, 
have stayed generally constant, providing a known set of rules for 
industry participants.The market, however, has changed dramatically 
over the past 15 years. The most notable change has been the long-term 
decline in the proportion of total hog sales that are conducted through 
Negotiated trades. Today less than four percent of hogs are sold in the 
negotiated, or cash, market, and the number sold under some sort of 
alternative marketing arrangement continues to increase.
    The decline in the number of hogs traded through Negotiated trades 
is not, in NPPC's opinion, the fault of the mandatory price reporting 
system. Any good reporting system should serve as a mirror that 
reflects the state of a market and any changes that are occurring. The 
system has done so with only one exception: hogs that are not committed 
to any packer on a long-term basis and whose price is determined by a 
formula negotiated on a lot-by-lot basis. USDA has always applied a 
rule that if a sold lot does not have a numerical price and a delivery 
date established, it is not a Negotiated trade. At present, any hogs 
that don't meet the price and delivery date criteria must fall in 
another category. Hogs for which a price formula is negotiated and 
agreed to on a lot-by-lot basis currently are included in the Swine or 
Pork Market Formula category.
    NPPC believes the true market will be better reflected under the 
MPR system by placing these animals in a separate category that will 
reflect the true number of hogs and prices of those hogs that are sold 
through negotiations each day, whether or not those negotiations result 
in a hard and fast numerical price or an agreement on how such a price 
will be established on the hogs' delivery. No change is free of cost, 
but NPPC believes this one involves relatively minor programming 
changes at both the packer and USDA levels. NPPC does not know exactly 
how many hogs will fall into this new category, but anecdotal feedback 
from market participants suggests it would be two to four percent of 
the total. That is not a lot, but it would represent a 50 to 100 
percent increase in the number of ``negotiated'' hogs.
Add a Provision to Include Late-Day Purchases in Subsequent Day 
        Purchased Swine Reports
    One problem that has arisen from the diminishing number of hogs 
sold through Negotiated trades is that USDA's confidentiality 
conditions for publishing information are now often not met for the 
morning Purchased Swine reports (LM-HG 202, 209, 205 and 211) and 
sometimes not met for the afternoon Purchased Swine reports (LM-HG 203, 
210, 206 and 212). When data are not published in these reports, 
producers and packers do not know what is going on in the marketplace 
beyond their own actions and trades and thus have no frame of reference 
for market conditions.
    Producers believe that hogs purchased after the 1 p.m. afternoon 
reporting deadline are, in almost every instance, delivered the 
following day and thus affect the next day's market. At present, those 
animals are not included in the next day's morning or afternoon 
reports. Including them would: (a) reflect the current day's market 
more clearly; and (b) add to the number of trades and the total volume 
of trades that are submitted to USDA for those reports, thus reducing 
the probability of violating USDA's confidentiality conditions and 
increasing the probability of USDA publishing complete reports.
Recognize That the MPR System is Essential to the Pork Industry
    Finally, pork producers believe strongly that the Livestock 
Mandatory Reporting Act and the mandatory price reporting system 
clearly have established USDA as the authority on daily prices and 
supplies of pigs. Filling that role for the past 15 years has further 
established USDA's mandatory price reports as an indispensable 
information source for the pork industry. The addition of wholesale 
pork cuts to the system has only enhanced that position.
    The MPR system is now essential to the smooth operation of the U.S. 
pork industry and to protecting and enhancing the economic positions of 
all participants. The industry survived the October 2013 government 
shutdown, but it did so uncomfortably and was beginning to face 
substantial uncertainty when the budget standoff was resolved and 
USDA's market reporters were called back to their important work. That 
uncertainty about market supplies and prices was on the verge of 
causing significant disagreements over the values of pork products and 
pigs. Had the shutdown continued, NPPC believes there would have been 
major disruptions to commerce and lingering legal challenges to actions 
taken by packers and producers during the information void. The fact 
that little harm came from the 2013 situation is not as important as 
what might have happened and how easily the situation can be prevented 
in the future by deeming MPR an essential service--because it is indeed 
essential to the U.S. pork industry.
Summary
    NPPC appreciates Congress's foresight in establishing the MPR 
system in 1999 and in maintaining it since that time. The organization 
urges timely reauthorization of the system, with just three changes. 
First, create a category for Negotiated Formula purchases to better 
reflect the total number of hogs for which value is negotiated each day 
regardless of how buyers and sellers arrived at those prices. Second, 
give USDA the authority and direction to include late-day hog purchases 
in the following day's morning and afternoon reports to better 
represent that subsequent day's market conditions and to reduce the 
chance of information not being published because of the failure to 
meet USDA's confidentiality criteria. Finally, recognize that the MPR 
system is absolutely essential to the U.S. pork industry and ensure 
that it does not ``go dark'' during any future government shutdowns.
    While NPPC recognizes and appreciate MPR's positive role in the 
pork industry, it opposes any new legislation or regulations that 
restrict marketing opportunities for producers. Further, NPPC opposes 
any further government interventions into hog markets unless such 
actions address a clear, unequivocal instance of market failure or 
abuse of market power. NPPC does not believe any industry conditions 
rise to that level of importance at the present time and urge Congress 
to limit any actions to the ones requested in this testimony.

    The Chairman. Thank you very much. Mr. Pfliger?

STATEMENT OF BURTON PFLIGER, PRESIDENT, AMERICAN SHEEP INDUSTRY 
                  ASSOCIATION, CENTENNIAL, CO

    Mr. Pfliger. Thank you, Mr. Chairman and Ranking Member, 
for the opportunity to speak to you today. I am Burton Pfliger, 
a sheep producer from North Dakota, and President of the 
American Sheep Industry Association, the oldest national 
livestock association in America, dating back to 1865, and 
celebrating our 150th year representing farmers and ranchers of 
America.
    Livestock mandatory reporting is very important to our 
industry, and we strongly urge Congress to reauthorize the LMR 
Act before September 30, 2015. The sheep industry has 
experienced consolidation, and the processing sector has become 
more concentrated. One dynamic that is different in our 
industry, compared to beef and pork, is that imported lamb 
makes up fully \1/2\ of what is available to the U.S. consumer 
today. This fact alone makes LMR data critically important to 
our industry.
    Another difference is the statutory authority regarding 
lamb in the LMR Act is only one sentence long, and provides 
USDA with much discretion in providing price reporting 
information. ASI commissioned a study of LMR for lamb to find 
out what was working, what needed to be improved. In December 
2012 the Livestock Marketing Information Center delivered a 
report to us. I am submitting a copy for the record. We are 
also submitting the final set of recommendations we provided to 
USDA-AMS. Many of these issues raised in the report are very 
important to ASI, and we are optimistically confident that USDA 
will include these changes in the final regulations. In the 
interest of maintaining USDA's broad discretionary authority to 
implement mandatory price reporting for the lamb, we are not 
requesting statutory authority requiring USDA to implement 
these many changes, however, there are a few that provide 
direction to USDA, either statutorily, or in report language, 
would be most helpful.
    Briefly, at the top of our list of enhancements that are 
needed for LMR reporting for lamb are, first, lower the 
reporting threshold for imported and domestic lamb. As I 
mentioned earlier, \1/2\ of the lamb sold in America is 
imported, and with the current reporting thresholds, we do not 
have a reasonable market test of many of the cuts of imported 
lamb.
    Second, revise the confidentiality rules that are in place, 
and/or provide some alternative methods for reporting prices as 
the processing sector becomes more concentrated. One of the 
cases where LMR reporting on lamb was not available was due to 
one firm not voluntarily agreeing to report data during a lapse 
in statutory authority reauthorization, with the 3/70/20 rule 
being applied. This incident demonstrated to us how close our 
industry operates with the 3/70/20 rule. Surely there must be 
ways to protect confidentiality, yet provide the full intent of 
LMR, as we look ahead to how business and market dynamics may 
change now and into the future.
    Third, revise the definition of packer owned, and build 
some flexibility into the regulation that will provide for 
price reporting as marketing arrangements change within the 
industry. Today about 30 percent of the U.S. lambs are 
processed by one cooperative, and because of the intricacies of 
their business model, USDA will not allow LMR on these lambs, 
even though they are recorded transactions, and the cooperative 
wants to report. And finally, to ensure that USDA has the 
ability to issue reports even during times of lapse in 
appropriations, such as an emergency furlough.
    In summary, Mr. Chairman, we urge reauthorization of the 
LMR Act prior to September 30 so that there will not be a lapse 
in price reporting. And I would be happy to answer any 
questions you may have.
    [The prepared statement of Mr. Pfliger follows:]

    Prepared Statement of Burton Pfliger, President, American Sheep 
                  Industry Association, Centennial, CO
    Mr. Chairman and Members of the Subcommittee, thank you for the 
opportunity to speak with you today. I'm Burton Pfliger, a sheep 
producer from North Dakota and President of the American Sheep Industry 
Association (ASI). ASI is the national trade association for the U.S. 
sheep industry representing the 80,000 farm and ranch families who 
raise sheep.
    Our association celebrates its 150th anniversary this year. ASI and 
our predecessor, the National Wool Growers Association, have 
continuously advocated for sheep ranchers since 1865, meaning we are 
among the oldest national livestock organizations in America.
    The sheep industry of the United States produces lamb and wool in 
every part of the country. The industry provides nearly a billion 
dollars in farm and ranch gate sales to the American economy, and is a 
mainstay of the many rural communities in which sheep ranchers and 
farmers are foundational members.
    Livestock Mandatory Reporting (LMR) is very important to our 
industry and we strongly urge Congress to reauthorize the LMR Act 
before September 30, 2015. There is unity across the various sectors 
(production, feeding, processing) of the U.S. sheep industry that LMR 
is essential for timely and transparent marketing and pricing 
information. USDA does a good job with the voluntary reporting program 
conducted by the Ag Marketing Service/Market News Division that is 
complimentary to LMR but history has proved that voluntary reporting is 
not sufficient in today's marketing environment without LMR. I remember 
that as USDA was in the process crossing the hurdles of implementing 
LMR originally in 2001 and when reauthorization lapsed twice since, 
timely market information was not available to the sheep industry trade 
and irrational price volatility occurred that can easily be correlated 
to the lack of market information during those periods.
    As with the hog and cattle sectors, the sheep industry has 
experienced consolidation and the processing sector has become more 
concentrated. One dynamic that is different for our industry compared 
to beef and pork is that imported lamb makes up half of what is 
available to U.S. consumers today. This fact alone makes LMR data 
critically important to our industry.
    As you know, the statutory authority regarding lamb in the LMR Act 
is only one sentence long and provides USDA with much discretion in 
providing price-reporting information. Thus, all of the lamb price 
reporting requirements have been done by regulation. The regulation for 
lamb reporting has been amended once over the years (2008). As we have 
watched industry dynamics change and as all sectors of the sheep 
industry have become more dependent upon LMR information, ASI decided 
to commission a study of LMR for lamb--what is working, what needs 
improving, etc. In December of 2012 the Livestock Marketing Information 
Center delivered a report to us (I'm submitting a copy for the record.) 
and we began an 18 month process of meeting weekly at times with USDA's 
Ag Marketing Service to work through the issues raised in the report. 
We believe this was a very helpful exercise for our industry and I 
believe it also served to bring some needed attention to the LMR 
regulations for lamb by AMS. In mid-2014 ASI, in consultation with 
LMIC, sent final recommendations to USDA/AMS (I'm submitting a copy of 
this document also for the record.) While we were hopeful that a 
proposed amendment to the LMR regulation for lamb would be published, 
we understand now that this process will be considered once the statute 
is reauthorized.
    Many of the issues raised in the report are very important to ASI 
and we are optimistic/confident that USDA will include these changes in 
the final regulations. In the interest of maintaining USDA's broad 
discretionary authority to implement mandatory price reporting for 
lamb, we are not requesting statutory authority requiring USDA to 
implement many of these changes. However, there are a few that 
direction to USDA (either statutorily or in report language) would be 
most helpful. Briefly, at the top of our list of enhancements that are 
needed for LMR reporting for lamb are:
    Lower the reporting thresholds for imported and domestic lamb meat. 
As I mentioned earlier, half of the lamb sold in the U.S. is imported 
and with the current reporting threshold we don't have a reasonable 
market test of many cuts of imported lamb. With domestic reporting, the 
larger processors are getting larger and there are several mid-size 
processors going into business. We believe the addition of the mid-size 
processors will add valuable price information. With both imported and 
domestic thresholds, we believe it is important to look prospectively 
at industry trends rather than only historic size levels.
    Revise the confidentiality rules that are in place and/or provide 
for some alternative methods for reporting prices as the processing 
sector becomes more concentrated. One of the cases when LMR reporting 
on lamb was not available was due to one firm not voluntarily agreeing 
to report during a lapse in statutory reauthorization with the 3/70/20 
rule being applied. This incident demonstrates how close to the line 
our industry is using the 3/70/20 rule. Surely there must be ways to 
protect confidentiality yet provide for the full intent of LMR as we 
look ahead to how businesses and market dynamics may change.
    Revise the definition of ``packer-owned'' and build some 
flexibility in the regulation that will provide for price reporting as 
marketing arrangements change within the industry. The U.S. sheep 
industry is not necessarily unique in that the marketing continuum is 
not as linear as it once was. Processors and their suppliers and even 
their customers are engaging in marketing arrangements that are 
different than they were 50, 25 or even 15 years ago when LMR was 
authorized. Today about 30 percent of the U.S. lambs are processed by 
one cooperative and because of the intricacies of their business model, 
USDA will not allow LMR on their lambs even though there are recorded 
transactions and the coop wants to report!
    Ensure that USDA has the ability to issue reports even during times 
of a lapse in appropriations (aka an emergency furlough). During the 
last shutdown of USDA when there was a lapse of appropriations, the 
Secretary determined that LMR was not an essential function. Therefore 
even though reporting is required under the LMR Act, no reports were 
issued which caused great consternation in the industry. Although we 
believe that current statutory authority is sufficient to allow the 
Secretary to continue reporting during such times, we support efforts 
to ensure that this situation does not reoccur--either statutory 
language or otherwise as the Committee determines most appropriate.
    In summary, Mr. Chairman, we urge reauthorization of the LMR Act 
prior to September 30th so that there is not a lapse in price 
reporting. In addition, although not raised in previous discussions on 
reauthorization of LMR, given the market changes that are occurring in 
the sheep industry I believe that it would be prudent for the Committee 
to consider requiring USDA to conduct a study and issue a report that 
would be due 1 year prior to the next reauthorization date. The report 
should require USDA to consult with the livestock industry and make 
recommendations on how to better and more inclusively accomplish price 
reporting in the current industry and market environment.
    Thank you again for the opportunity to speak and I'll be happy to 
answer any questions.
                              Attachment 1
Analysis of Mandatory Price Reporting System for Lamb
By: Livestock Marketing Information Center
For: American Sheep Industry Association
Submitted: December 20, 2012

    The U.S. sheep and lamb industry has been evolving for several 
decades; recently it has become more concentrated at all levels of the 
production system, especially beyond the farm gate. Livestock Mandatory 
Price Reporting (LMR) was implemented by the Unites States Department 
of Agriculture (USDA) in 2001, with data collection focused on the 
processing level. Due to LMR rules and regulations, as the industry has 
consolidated an increasing amount of lamb market data cannot be 
reported by USDA's Agriculture Marketing Service (AMS) and/or is at 
risk of not being reported if the industry continues to consolidate. 
This has reduced the amount of market information available to sheep 
and lamb producers and decreased market transparency compared to the 
early years of LMR.
    In response, American Sheep Industry Association requested an 
analysis of the current LMR system for Lamb. In particular, this 
analysis addresses four key areas focusing on current LMR guidelines. 
These items are:

  (1)  What is the appropriate tonnage threshold for reporting imported 
            lamb cuts?

  (2)  What variation of confidentiality rules (3/70/20 or other 
            system) will assure continued weekly reporting?

  (3)  What system of pelt price reporting will assure reporting of 
            pelt prices?

  (4)  Are the data categories and reports currently reported under 
            lamb LMR appropriate for the future; are there categories 
            that should be modified or added?

    This analysis provides a review of current lamb marketing data that 
are frequently unavailable and discusses some potential remedies to 
help correct the issues in an effort to improve lamb reporting under 
LMR. In addition, other comments, suggestions and recommendations are 
provided based on discussions with USDA-AMS staff, industry 
participants, and university Extension Specialists. These proposals 
include updating regulatory guidelines to better reflect the current 
industry structure, changing report categories and descriptors to 
represent current marketing practices in effort to provide more 
accurate and usable market information, and consolidating reports and/
or sections of reports (internal and external) to ensure market data 
can be reported.
    In highly concentrated sectors such as the lamb and processing 
sheep industry, it is apparent periodic action needs to be taken to 
ensure useful market related data (i.e., volume, price) are reported 
under LMR. This analysis may also offer some insight into issues that 
may arise under LMR as other livestock and meat industries become more 
consolidated. Examples are already being seen in LMR reporting of hog 
market data, particularly for sows and the reporting of regional barrow 
and gilt markets.
Background on Mandatory Price Reporting
    The Livestock Mandatory Reporting Act (LMR) of 1999 was established 
to provide timely, accurate, and reliable market information on the 
marketing of cattle, swine, lambs and related products (i.e., meat). It 
was apparent that markets were transitioning and the traditional 
voluntary approach to price reporting had become difficult and that 
negotiated cash transactions were being replaced by alternative 
marketing arrangements such as formula and contract-based pricing. LMR 
was intended to improve the price and supply reporting services of USDA 
and encourage competition in the marketplace for livestock and related 
products.\1\ Since the act did not specify the requirements for lamb 
price reporting, AMS staff established the mandatory lamb price 
reporting program based on their knowledge of the industry and markets. 
During the development of LMR for lamb, many definitions, guidelines, 
regulations, etc. established for beef served as a base for LMR of 
lamb.\2\ The program was implemented by USDA-AMS in 2001. The act is 
reauthorized every 5 years, at which time industry can propose changes 
and modifications to the program. These changes are designed to enhance 
the transparency of market information and price discovery.
---------------------------------------------------------------------------
    \1\ USDA-AMS. Livestock Mandatory Price Reporting General 
Information, Background. USDA-AMS. http://www.ams.usda.gov/AMSv1.0/
ams.fetchTemplateData.do?template= 
TemplateN&navID=LSMNMainRN2L2&rightNav1=LSMNMainRN2L2&topNav=&leftNav= 
MarketNewsAndTransportationData&page=MPRinfo&resultType=&acct=lsmn. 
Updated September 2009.
    \2\ Per discussions with USDA-AMS market reporting staff. November 
2011.
---------------------------------------------------------------------------
    According to LMR regulations, a lamb packer whose Federally 
Inspected (FI) plant slaughters or processes an average of at least the 
equivalent of 75,000 lambs each year for the prior 5 calendar years is 
required to report under LMR. A lamb importer required to report under 
LMR is defined as an entity that imports an average of 2,500 metric 
tons of lamb meat products per year during the preceding 5 calendar 
years. Those firms meeting these guidelines are mandated to report the 
required market data under LMR.\3\
---------------------------------------------------------------------------
    \3\ Refer to USDA-AMS Livestock Mandatory Price Reporting General 
Information, Livestock Mandatory Reporting Act of 1999. USDA-AMS. 
http://www.ams.usda.gov/AMSv1.0/ams.fetchTemplateData.do?template= 
TemplateN&navID=LSMNMainRN2L2&rightNav1=LSMNMainRN2L2&topNav=&leftNav= 
MarketNewsAndTransportationData&page=MPRinfo&resultType=&acct=lsmn. 
Updated April 2012.
---------------------------------------------------------------------------
    The Act requires USDA to publish mandatory data on livestock and 
meat price trends, contracting arrangements, and supply and demand 
conditions in a manner that protects the identity of reporting entities 
and preserves the confidentiality of propriety transactions.\4\ A key 
aspect of this requirement is the 3/70/20 confidentiality guideline 
which requires the following:
---------------------------------------------------------------------------
    \4\ USDA-AMS. Livestock Mandatory Price Reporting General 
Information, Background. USDA-AMS. http://www.ams.usda.gov/AMSv1.0/
ams.fetchTemplateData.do?template= 
TemplateN&navID=LSMNMainRN2L2&rightNav1=LSMNMainRN2L2&topNav=&leftNav= 
MarketNewsAndTransportationData&page=MPRinfo&resultType=&acct=lsmn. 
Updated September 2009.

  (1)  At least three reporting entities need to provide data at least 
---------------------------------------------------------------------------
            50% of the time over the most recent 60 day period.

  (2)  No single reporting entity may provide more than 70% of the data 
            for a report over the most recent 60 day period.

  (3)  No single reporting entity may be the sole reporting entity for 
            an individual report more than 20% of the time over the 
            most recent 60 day time period.\5\
---------------------------------------------------------------------------
    \5\ USDA-AMS. Livestock Mandatory Price Reporting General 
Information, Confidentiality Guidelines. USDA-AMS. http://
www.ams.usda.gov/AMSv1.0/ams.fetchTemplateData.do?
template=TemplateN 
&navID=LSMNMainRN2L2&rightNav1=LSMNMainRN2L2&topNav=& 
leftNav=MarketNewsAndTransportationData&page=MPRinfo&resultType=&acct=ls
mn. Updated April 2012.

    When the 3/70/20 guideline is not met for a particular commodity, 
that data cannot be reported by AMS. Often times, this occurs for a 
specific category such as a market transaction type (i.e., formula live 
basis) or product item (i.e., New Zealand Rack, Frenched, Cap-off, 12 
oz./down) and the report is issued excluding that particular data. 
However, in some instances the 3/70/20 confidentiality guideline can 
apply to the entire report and AMS cannot issue a report until the 
confidentiality guideline is met. This has become increasingly the 
primary issue with lamb LMR in recent years. Therefore, there are major 
two LMR regulatory issues impacting lamb price reporting: (1) the 
guidelines determining who is and who is not eligible to report under 
LMR; and (2) confidentiality regulations pertaining to how those 
parties' data are reported.
    The following reports are reported under mandatory lamb price 
reporting by AMS (weekly unless stated otherwise):

  (1)  LM_LM302 National Daily Lamb Report (Negotiated and Formula 
            Purchases)--Domestic Only.

  (2)  LM_LM304 Western Daily Lamb Report (Negotiated and Formula 
            Purchases)--Domestic Only.

  (3)  LM_LM350 Weekly Premium and Discount Report.

  (4)  LM_LM351 National Direct Lamb Report.

  (5)  LM_LM352 National Slaughter Sheep Review.

  (6)  LM_LM353 Western Slaughter Sheep Review.

  (7)  LM_LM354 Western Weekly Premium and Discount Report.

  (8)  LM_LM355 Western Direct Lamb Report.

  (9)  LM_XL500 National 5 Day Rolling Average Boxed Lamb Cuts--
            Negotiated Sales.

    (a.)  An internal monthly report is generated and provided at 
            request.

  (10) LM_XL501 National Daily Lamb Carcass Report.

  (11) LM_XL502 USDA Estimated National Lamb Carcass Cutout (5 Day 
            Rolling Average).

    (a.)  An internal monthly report is generated and provided at 
            request.

  (12) LM_XL552 National Lamb Carcass and Lamb Cuts--Imported Product.

  (13) LM_XL555 National Comprehensive Lamb Carcass Report.

    In addition, AMS continues to provide a number of feeder and 
slaughter lamb reports under voluntary price reporting. These are 
typically state based auction data and generally not the subject of 
this analysis. However, one such report is included in this analysis. 
That report is the NW_LS443 Weekly Lamb Pelts Price Report, Free on 
Board (FOB) Major Production Points. Although voluntary, its importance 
to the industry (e.g., role in USDA livestock risk protection program) 
has prompted industry support to include pelt reporting under LMR for 
lamb.
Sheep and Lamb Industry Overview and Implications for LMR
Structural Change
    The U.S. sheep and lamb industry has seen a decline in the national 
flock over several decades. The decrease in numbers is due to a variety 
of factors, the most significant being increasing production costs, 
predator losses, and demand changes. Although modest flock expansion 
efforts and improved lambing efficiencies have occurred, these gains 
have not been enough to offset the decline. As a result, the lamb and 
sheep industry has evolved into a highly concentrated industry in 
regards to the feeding and packing/processing sectors. At the same 
time, the U.S. sheep and lamb sector has become more focused on 
specialty products when compared to traditional commodity sectors such 
as cattle/beef and hogs/pork.
    On January 1, 2012, USDA's National Agricultural Statistics Service 
(NASS) reported the total sheep and lamb inventory at 5.35 million 
head. That was down 2% from 2011 and the smallest flock on record. 
Since the introduction of LMR in 2001, the U.S. sheep and lamb 
inventory has declined 23% or 1.56 million head. As a result, the 
available supply of slaughter lambs and lamb in the U.S. has been on 
the decline as well. In 2001, FI lamb slaughter totaled 3.1 million 
head; by 2011 this number had fallen to two million, a 35% decline over 
10 years. In terms of lamb production, supplies have dropped more than 
34% over the 2001-2011 period. In 2011, FI lamb slaughter posted the 
largest yearly decline in over 3 decades, down 12%. For 2012, LMIC 
forecasts for FI lamb slaughter is to be down 1% to 2% with slightly 
larger year-over-year declines (2-4%) projected in 2013 and 2014. The 
U.S. sheep and lamb industry continues to face the challenges of 
changing markets and of shrinking inventory numbers.
    As the U.S. sheep and lamb flock has contracted, the industry 
overall has become more consolidated. This is most visible in the 
packing stage. The majority of lambs are processed by a smaller number 
of large entities under the FI system. These larger companies are those 
that are eligible to report under LMR. According to USDA's Grain 
Inspection, Packers & Stockyards Administration (GIPSA), the market 
share of the four largest lamb packers has been in the 65 to 70 percent 
range over the last 10 years.\6\ The sheep and lamb industry has seen 
an increase in the number of smaller, commercial packing entities in 
response to local, niche and non-traditional market demand. This is 
evidenced in a slight decline in the relationship between FI and 
Commercial sheep and lamb slaughter. However, in 2011 around 93% of 
lambs were processed in a FI plant and subject to reporting under LMR. 
Since the implementation of LMR, three lamb packing/processing 
companies are no longer in operation, while one company was sold to 
another larger party.
---------------------------------------------------------------------------
    \6\ USDA-GIPSA. 2011 P&SP Annual Report. USDA-GIPSA. http://
www.gipsa.usda.gov/Publications/pub_psp.html. March 2012.
---------------------------------------------------------------------------
    Recent market structure changes in the sheep and lamb industry have 
occurred in response to declining supplies, increased production costs 
(i.e., feedstuff prices, predator loss), and greater market volatility. 
In a longer term context, packing plant economies of size continue to 
be important. These changes have mostly been in the purchasing methods 
and types of lambs. Slaughter lambs are transacted between producers 
and packers under a negotiated purchase, formula marketing arrangement, 
or a forward contract (LMR transaction types). These marketing 
arrangements can be either on a live weight or carcass weight basis. 
For example, in April 2009, the volume of lambs sold under a formula 
live basis was not large enough to satisfy LMR confidentiality 
guidelines and therefore AMS could not report market data for this type 
of transaction. The decline in the volume of lambs sold as formula live 
has continued with this type of transaction essentially non-reportable 
due to lack of use by the industry. Similarly, the use of forward 
contract market agreements is limited due to LMR definition. When used 
in reference to live lambs, the term ``forward contract'' means an 
agreement for the purchase of lambs, executed in advance of slaughter, 
under which the base price is established by publicly available 
prices.\7\ The limitation on these types of transactions is that there 
are not many publicly available prices for lamb compared to other 
commodities which have the option to utilize Chicago Mercantile 
Exchange futures prices.
---------------------------------------------------------------------------
    \7\ USDA-AMS. 2008 Livestock Mandatory Price Reporting Final Rule. 
USDA-AMS. http://www.ams.usda.gov/AMSv1.0/
ams.fetchTemplateData.do?template=TemplateN&navID= 
LSMNMainRN2L2&rightNav1=LSMNMainRN2L2&topNav=&leftNav= 
MarketNewsAndTransportationData&page=MPRinfo&resultType=&acct=lsmn. May 
2008.
---------------------------------------------------------------------------
    Similar changes in market structure and marketing practices between 
packers and meat buyers are also evidenced in the wholesale lamb 
market. At the wholesale level, lamb is sold as a carcass or as boxed 
lamb. LMR for lamb is the only commodity that reports a wholesale 
carcass value price. The meat industry has seen a trend over the last 
10 years of moving rather quickly away from selling meat carcasses to 
boxed product (i.e., primal cuts). In more recent years, this trend has 
grown to include the marketing of case ready products. The reasons 
behind this trend include factors such as lower costs (e.g., 
transportation) and buyer preferences. In the lamb sector, some trading 
of lamb carcasses continues, which is why it is reported under LMR. 
Many of these carcass transactions are directed toward smaller retail 
outlets, niche marketing programs, or custom breakers/processors. 
However, as the meat industry continues to evolve and the costs of meat 
processing rise, it is expected the number of parties and volume of 
lamb carcass transactions will decline as more lamb product is sold in 
boxed form.
    In an effort to provide a supply that meets U.S. market demand, 
lamb meat is imported to supplement U.S. production. The U.S. is a net 
importer of lamb (i.e., imports exceed exports) with Australia and New 
Zealand accounting for nearly all of total U.S. lamb imports. Lamb 
imports are greatest in the spring (i.e., Easter) and again in the fall 
quarter (i.e., Christmas). Imports of lamb tend to consist mostly of 
lamb racks, shoulders, legs, and loins and have a tendency to be priced 
at a premium relative to domestic lamb. Imported lamb is also viewed as 
a different product (i.e., grass fed, consistent product size, etc.). 
In the last few years, import tonnage has decreased compared to prior 
years. This decline is due to several factors including: (1) 
contraction in Australian and New Zealand sheep flocks; (2) emergence 
of competing export markets (i.e., Middle East, Asia); and (3) exchange 
rates. Over the last decade (2001-2011), the Australian flock has 
declined more than 30%, while New Zealand's sheep inventory has seen a 
15% decline since 2006.\8\-\9\ Since the implementation of 
LMR in 2001, lamb imports have increased about 20%, however in the last 
5 years (2007-2011), imports have fallen nearly 20%.\10\ As of this 
analysis, year-to-date lamb imports (through September) for 2012 were 
down over 4%. Further, declines in world sheep numbers, continued 
growth in export markets such as the Middle East and Asia, and changing 
currency exchange rates will continue to impact the available supply of 
lamb to be imported from Australia and New Zealand.
---------------------------------------------------------------------------
    \8\ Australian Bureau of Agricultural and Resource Economics and 
Sciences. Ag Commodities Statistics 2011. Department of Agriculture, 
Fisheries, and Forestry. http://www.daff.gov.au/abares/
publications_remote_content/
sewarch?sq_content_src=+dXJsPWh0dHAlM0ElMkYlMkYx 
NDMuMTg4LjE3LjIwJTJGYW5yZGwlM kZEQUZGU2VydmljZSUyRmRpc3Bs YXkucGhwJTNGZ 
mlkJTN EcGVfYWdjc3RkOWFiY2M wMDIyMDExMjFkLnhtbCZhbGw9MQ==. December 
2011.
    \9\ Beef + Lamb New Zealand Economic Service. New Zealand Sheep 
Trend. Beef + Lamb New Zealand. 2001. http://www.beeflambnz.com/
information/on-farm-data-and-industry-production/industry-production-
trends/.
    \10\ USDA-ERS. Livestock & Meat International Trade Data. USDA-ERS. 
http://www.ers.usda.gov/data-products/livestock-meat-international-
trade-data.aspx. December 2012.
---------------------------------------------------------------------------
Additional Challenges of 2011-12
    Market conditions in 2011 and in 2012 were more challenging 
compared to prior years. In the latter part of 2011, customer 
resistance to soaring wholesale and retail lamb meat prices pressured 
feeding and packing margins and filtered down the production chain, 
resulting in an adjustment of slaughter lamb market prices downward. In 
addition, mild winter weather supported lamb performance in feedlots. 
As a result, slaughter lamb marketings slowed and supplies increased, 
creating a backlog of lambs. At the same time, higher and more volatile 
input costs (i.e., corn, fuel, hay) combined with the 2011 and 2012 
droughts resulted in much higher production costs for producers.
    Lambs on feed for a longer number of days can be a challenge to the 
industry as: (1) increased weights add to tonnage on the market as 
slaughter lambs are typically marketed as yearlings or younger; and (2) 
carcass quality declines. The negative impact on lamb quality from the 
mismanagement of slaughter lamb supplies over the last year damaged 
product demand. This in turn caused prices to decline even further into 
2012. The situation was prolonged into the fall of 2012, longer than 
the industry expected and resulted in record average lamb weights and 
an increase in the available supply of lamb product.
    In addition, the pelt the market experienced a ``stand-still'' due 
to larger supplies of low quality pelts, soft demand from weakening 
domestic and global (e.g., European Union, China) economic conditions, 
and lackluster demand for pelt products during the mild winter. There 
remains quite a bit of uncertainty within the lamb market regarding the 
upcoming marketing year as the impacts of the worst drought in 50 years 
and ongoing volatile domestic and international economic conditions 
continue.
    As of this analysis, the industry has become more current in the 
supply of slaughter lambs as average dressed weights have declined. 
Market prices have stabilized and should improve in 2013. Slaughter 
lamb supplies and dressed weights are expected to further decline in 
2013. However, the impacts on consumer demand and the speed at which 
the industry can recover will determine how high slaughter lamb prices 
will move over the next couple of years.
    An understanding of the prevailing market conditions in 2011-2012 
is important because it highlighted the need for LMR review. 
``Mismanagement'' of lambs in 2011-2012 prompted the need for certain 
types of lamb market data that were either prohibited due to 
confidentiality reasons or simply not included, for example (lambs 
committed, heavy lamb weight categories) under current LMR regulations. 
Lambs already committed to a packer for sale and prices for heavy lamb 
weight categories are two examples of LMR deficiencies that became 
apparent in the 2011-2012 market. It is important not to misconstrue 
the term ``mismanagement.'' The term, in this context does not imply 
wrong doing, but simply that individuals, in the lamb feeding and 
packing sectors, acting in their own economic best interest, responding 
to market incentives led to market conditions that were detrimental to 
the broader lamb market.
Implications for LMR
    The sheep and lamb industry has changed drastically in the decade 
since the introduction of LMR and does not easily fit within the 
established regulatory guidelines. Still, farmers require unbiased and 
publicly available market reports. As a result, current LMR 
confidentiality guidelines for price reporting do not allow AMS to 
publish some market data. This situation has not changed as of this 
analysis. Consequently, the amount of market information and data 
reported under LMR has declined with many LMR reports providing limited 
market data. Further consolidation in the number of packers and 
processors has a number of implications for the availability of LMR 
lamb data reporting.
    As noted above, the lamb packing industry has become more 
concentrated since the implementation of LMR. Since 2001, three packing 
plants have exited the lamb packing/processing sector--Chiappetti 
(Chicago, Illinois), Rancher's Lamb of Texas (San Angelo, Texas), and 
Strube Packing Company, (Ballinger, Texas). Structural change resulting 
in increased consolidation of the meat packing sector was rather abrupt 
in 2010, when Superior Farms purchased Iowa Lamb Corporation and closed 
their Iowa facility the following year. This has reduced the number of 
parties eligible to report under LMR regulations. In addition as these 
smaller, commercial packing/processing operations grow in number, 
current LMR regulations will not capture those lambs marketed and 
processed by these companies. Most of these are small multi-species 
plants that process a rather small number of lambs. These small meat 
packing entities do not fall under current LMR reporting guidelines.
    According to LMR regulations, a lamb packer is required to report 
under LMR if the company plant slaughters or processes an average of at 
least the equivalent of 75,000 lambs each year for the prior 5 calendar 
years. As discussed in the industry overview section, the sheep and 
lamb industry as seen a 35% decline in the number of available 
slaughter lambs over the last decade. This has also been reflected in 
the number of lambs processed by firms reporting under LMR Lamb. 
According to AMS staff, there are currently less than five parties 
reporting live slaughter lamb data under LMR. Those less than five 
entities are processing anywhere from 100,000 to 700,000 lambs on an 
annual basis. Current LMR threshold levels need to be adjusted to 
reflect the current status of the industry and likely trends. 
Currently, any LMR reports containing data on the purchase or selling 
of live slaughter lambs is at risk (i.e., LM_LM302, LM_LM351, LM_LM352) 
if one of these companies were to exit the industry and/or there were 
no others identified to replace and/or include under LMR.
    As the industry continues to reduce slaughter numbers and firms opt 
to either consolidate or exit the industry, those LMR reports regarding 
slaughter lamb market data (i.e., LM_LM302, LM_LM351, LM_LM352) will be 
more than likely prohibited under current LMR confidentiality 
guidelines. In order to prevent this from happening, both the 3/70/20 
guideline and threshold levels need to be reevaluated and adjusted to 
accommodate smaller industries with a higher degree of concentration. 
If the threshold level is modified lower in terms of both average 
number slaughtered or processed as well as the number of calendar 
years, it could provide an opportunity for some additional lamb packing 
entities to report under LMR. These potential lamb packing/processing 
companies once considered small at the beginning of LMR are now more 
reflective of the current lamb packing/processing sector in terms of 
slaughter capacity.
    If the FI packer slaughter and/or processing thresholds were 
adjusted downward to a range of 35,000 to 55,000 lambs it would be in-
line with the current status of the industry. It would also allow for 
some continued decline in sheep inventory or stabilization in numbers 
when market and environmental conditions improve.
    There are a growing number of smaller local and regional lamb 
packers and processors. The number of lambs processed by these entities 
can range anywhere from 5,000 to the suggested 35,000 range minimum per 
year. It would be ideal to have these smaller packing/processing 
companies captured under LMR. However, the cost for reporting under LMR 
may be a burden to these smaller parties and would need to be assessed 
by AMS as required under the Regulatory Flexibility Act (RFA). Reducing 
the number of prior calendar years to a possible 2 or 3 years would 
also allow for LMR guidelines to be more reflective of current market 
structure and allow for the potential of additional lamb packers/
processors to be included under LMR. These changes seem feasible given 
the decline in number of lambs processed since the implementation of 
LMR and the projected numbers going forward under LMR.
    Current LMR slaughter/processor and importer thresholds were 
determined in accordance with the RFA. This Act requires government 
agencies to consider the economic impact of a proposed regulatory rule 
on small business entities, to analyze effective alternatives that 
minimize impacts on small entity, and to make their analyses available 
for public comment. The Office of Management and Budget (OMB) oversees 
this Act as well as reviews all proposed regulatory rules to guarantee 
there is minimal burden to small businesses and society.\11\ A 
potential alternative to ease the impact on these smaller parties is to 
amend the LMR reporting requirements. In the 2008 LMR reauthorization, 
AMS amended the packer/processor threshold level lower in effort to 
capture more sow slaughter/processing companies under LMR for swine. 
These firms were smaller entities relative to those at the higher 
threshold level. To help minimize the additional cost burden, AMS 
reduced the LMR reporting requirement from having to report three times 
a day to once a day. With respect to LMR for lamb, reducing threshold 
levels from a daily to weekly basis many need to be considered in an 
effort to ease the burden on smaller parties.\12\
---------------------------------------------------------------------------
    \11\ USDA-AMS. 2008 Livestock Mandatory Price Reporting Final Rule. 
USDA-AMS. http://www.ams.usda.gov/AMSv1.0/
ams.fetchTemplateData.do?template=TemplateN&navID= 
LSMNMainRN2L2&rightNav1=LSMNMainRN2L2&topNav=&leftNav= 
MarketNewsAndTransportationData&page=MPRinfo&resultType=&acct=lsmn. May 
2008.
    \12\ USDA-AMS. 2008 Livestock Mandatory Price Reporting Final Rule. 
USDA-AMS. http://www.ams.usda.gov/AMSv1.0/
ams.fetchTemplateData.do?template=TemplateN&navID= 
LSMNMainRN2L2&rightNav1=LSMNMainRN2L2&topNav=&leftNav= 
MarketNewsAndTransportationData&page=MPRinfo&resultType=&acct=lsmn. May 
2008.
---------------------------------------------------------------------------
    There is a growing number lambs in today's lamb industry that are 
being processed on a custom basis. These lambs are not captured in LMR 
data for live slaughter lamb market transactions or lamb carcass sales 
but are accounted for in those data for boxed lamb product sales. Under 
LMR regulations, the term ``packer'' means ``any person engaged in the 
business of buying lambs in commerce for purposes of slaughter, of 
manufacturing or preparing meats or meat food products from lamb for 
sale or shipment in commerce, or of marketing meats or meat food 
products from lamb in an unmanufactured form acting as a wholesale 
broker, dealer, or distributor in commerce.'' For any calendar year, 
the term includes only a FI lamb processing plant which slaughtered or 
processed the equivalent of an average of 75,000 head of lambs per year 
during the immediately preceding 5 calendar years. Additionally, the 
term includes a lamb processing plant that ``did not slaughter or 
process an average of 75,000 lambs during the immediately preceding 5 
calendar years if the Secretary determines that the processing plant 
should be considered a packer after considering its capacity.'' \13\
---------------------------------------------------------------------------
    \13\ Refer to USDA-AMS Livestock Mandatory Price Reporting General 
Information, Livestock Mandatory Reporting Act of 1999. USDA-AMS. 
http://www.ams.usda.gov/AMSv1.0/
ams.fetchTemplateData.do?template=TemplateN&navID= 
LSMNMainRN2L2&rightNav1=LSMNMainRN2L2&topNav=&leftNav= 
MarketNewsAndTransportationData&page=MPRinfo&resultType=&acct=lsmn. 
Updated April 2012.
---------------------------------------------------------------------------
    AMS does not have a definition for custom slaughtered livestock. 
However, in the 2000 final rule for LMR there was a question pertaining 
to the definition of type of purchase which addressed custom 
processing. The question was ''One commenter expressed concern 
regarding the definition of the term `type of purchase'. The commenter 
included as an example a packer who serves only as a `custom' processor 
of a producer's swine and does not take ownership of the swine. The 
commenter wondered how such arrangements would be reported and how 
other new and innovative methods would be reported.'' AMS's response 
was ``As defined, `type of purchase' refers only to those purchases of 
swine by a packer from a producer. In the commenter's example, the 
packer never `purchases' the swine from the producer and therefore 
would not be required to report that as a transaction. AMS does not 
believe this suggestion merits a change in the definition of the term 
`type of purchase' nor does AMS believe that reporting custom slaughter 
costs was contemplated by the Act.'' \14\ Although this refers to LMR 
for swine, AMS does apply the same rules, regulations, and reason to 
all LMR livestock reporting. Thus this would apply to LMR for lamb. 
Since an increasing number of lambs are being processed under a custom 
slaughter arrangement, a review of the accounting for custom livestock 
processing under LMR definition for `type of purchase' or other 
transaction type should be considered.
---------------------------------------------------------------------------
    \14\ USDA-AMS. Livestock Mandatory Reporting, Final Rule. Federal 
Register. https://www.federalregister.gov/articles/2000/12/01/00-29987/
livestock-and-grain-market-news-branch-livestock-mandatory-reporting#h-
104. December 2000.
---------------------------------------------------------------------------
    The types of, and changes in, slaughter lamb marketing practices 
and transactions are a result of the structural changes that have 
occurred in the industry since 2001. These changes are expected to 
continue as the industry becomes more concentrated over time. A more 
concentrated industry impacts what types of market data can be reported 
and how those data will be pertinent to the industry under LMR.
    For example, the data reported in the LM_LM351 National Weekly 
Direct Lamb Report the ``Prior Week Slaughter Head Count, Domestic, 
Forward Contract'' category has become, essentially, nonexistent. This 
also applies to the ``Prior Week Slaughter Head Count, Imported Forward 
Contract'' and ``Prior Week Slaughter Head Count, Imported, Formula 
Arrangements'' categories. Since 2001, in LM_LM352 National Weekly 
Slaughter Sheep Review the number of slaughter lamb transactions 
between producers and packers on a Formula Price, Live Basis has 
declined. Based on discussions with AMS staff lambs sold on a formula 
live basis (as defined under LMR) has decreased significantly and, on 
average, may represent about 1% to 2% of the total number of slaughter 
lamb transactions reported under LMR. This category as of mid-November 
2012 is now being reported as ``No reportable trades'' revealing the 
lack of use by the industry. Likewise, other categories such as 
``Negotiated Dressed Sales'' and ``Imported'' categories for both 
Negotiated and Formula purchase lambs have seen data essentially cease 
due to a lack of reportable trades.
    One reason for the lack of data reporting is that the LMR forward 
contract definition does not allow for the reporting of these types of 
transactions for slaughter lambs. As defined, when used in reference to 
live lambs, the term ``forward contract'' means an agreement for the 
purchase of lambs, executed in advance of slaughter, under which the 
base price is established by publicly available prices.\15\ Because the 
issue is the lack of publicly available prices for lamb, it would serve 
the sheep and lamb industry better for the LMR definition of a forward 
contract to be either amended or replaced with another transaction 
definition. For comparison, the cattle and hog industries have publicly 
available prices, like the CME futures prices, on which to base a 
forward contract. The lack of a publicly available price in the lamb 
industry means that the standard forward contract definition is 
ineffective for the lamb market.
---------------------------------------------------------------------------
    \15\ USDA-AMS. 2008 Livestock Mandatory Price Reporting Final Rule. 
USDA-AMS. http://www.ams.usda.gov/AMSv1.0/
ams.fetchTemplateData.do?template=TemplateN&navID= 
LSMNMainRN2L2&rightNav1=LSMNMainRN2L2&topNav=&leftNav= 
MarketNewsAndTransportationData&page=MPRinfo&resultType=&acct=lsmn. May 
2008.
---------------------------------------------------------------------------
    In regards to the absence of data on imported live slaughter lambs 
over time, most imports are in carcass or box (i.e., lamb cut) form. 
This has been an ongoing trend for the past decade and one that will 
continue as the industry becomes more cost effective and efficient in 
meeting lamb demand. The sheep and lamb industry does not import live 
slaughter lambs, as is common practice in the cattle and hog 
industries, and is common in price reporting for those commodities.
    In the 2008 reauthorization, AMS deleted the definitions for the 
terms ``lambs committed'' in an effort to reduce the reporting burden 
on lamb packers.\16\ However, given the industry supply and market 
related issues of 2011 and 2012 (i.e., back-up of slaughter lambs) a 
possible replacement definition may be needed. As defined for cattle 
under LMR, the term ``cattle committed'' means cattle that are 
scheduled to be delivered to a packer within the 7 day period beginning 
on the date of an agreement to sell the cattle. Thus, for lambs, the 
term ``lambs forward priced'' would mean lambs that are scheduled to be 
delivered to a packer within the 7 day period beginning on the date of 
an agreement to sell the lambs. This term, or definition, would better 
reflect current marketing transactions of slaughter lambs and provide 
the industry with information on the number of forward priced lambs for 
delivery at a future point in time. Since USDA-NASS does not report a 
monthly Lambs on Feed report as it does for cattle, reporting the 
number of lambs forward priced would provide some insight into this 
important sector of the sheep and lamb industry. It is possible that 
the 7 day period as it is applied to cattle committed may not be 
appropriate for slaughter lambs. The time period would need to be 
evaluated with a possible committed period of 14 day or 21 days more 
reflective of current marketing practices.
---------------------------------------------------------------------------
    \16\ Refer to USDA-AMS Livestock Mandatory Price Reporting General 
Information, Livestock Mandatory Reporting Act of 1999. USDA-AMS. 
http://www.ams.usda.gov/AMSv1.0/
ams.fetchTemplateData.do?template=TemplateN&navID= 
LSMNMainRN2L2&rightNav1=LSMNMainRN2L2&topNav=&leftNav= 
MarketNewsAndTransportationData&page=MPRinfo&resultType=&acct=lsmn. 
Updated April 2012.
---------------------------------------------------------------------------
    The emergence of the non-traditional and the natural, organic, 
local, and other niche markets has created a greater demand for light 
weight carcasses that may not be fully included in the current weight 
category data for slaughter lambs. Likewise, there is a continued 
demand for heavier weight lambs for markets that demand a specific lamb 
cut size (i.e., minimum loin eyes sizes), while improvements in sheep 
genetics have allowed for heavy weight lambs with high yielding 
caresses.
    The events of 2012 market supply issues resulted in a much heavier 
slaughter lamb carcass weights that were beyond the reporting range on 
the LMR reporting forms. The effects of these market changes and events 
in terms of lighter and heavier lamb/carcass weights and their impacts 
on slaughter and lamb meat prices are probably not being fully captured 
in current LMR lamb reporting. These slaughter lamb and carcass weight 
trends are expected to continue.
    There are concerns regarding the usefulness of the carcass data 
reported (LM_XL501 National Daily Lamb Carcass Report and LM_XL555 
National Weekly Comprehensive Lamb Carcass Report). AMS expects parties 
to report data as required by LMR rules and guidelines as designated on 
the reporting form categories. Based on individual company business 
practices, the data received by AMS spans from very detailed i.e., 
specific yield grade and carcass weight category to rather broad i.e., 
lot basis where ``lot'' refers to a large number of lambs averaged 
together, two or three weight categories. When the data received varies 
greatly so that some data is too wide-ranging then AMS must adjust the 
data avoid the complete loss of the information. For example, when a 
packer submits LMR data for carcass lots covering multiple weight 
ranges, AMS proportionately divides the volume into applicable weight 
categories. As a result, the data is not as representative of the 
market because the actual sale data does not fit in the reporting 
categories established under LMR. The reported prices for each carcass 
category and the differences between each carcass weight categories may 
be more or less than currently reported. This influences the amount of 
or lack thereof of the price volatility of lamb carcass prices and may 
be an issue as the industry moves towards value based pricing of 
slaughter lambs.
    As the industry has consolidated, selling lamb in the box as a 
primal, or case ready cut, rather than a whole carcass has become a 
more widely employed practice. The need for carcass price, or value, 
reporting may not be as important as when LMR was implemented. As the 
industry moves to a more boxed market and case ready market, AMS review 
of the calculations (i.e., industry cutting yields, etc.) used to 
determine the estimated carcass cutout (LM_XL502 USDA Estimated 
National Lamb Carcass Cutout) may be needed more often to reflect those 
changes taking place in the lamb packing sector. Whether or not these 
reviews result in any adjustments, review is needed because factors 
used to estimate the lamb cutout have not been updated for some time 
despite industry changes in terms of carcass size.
    In conjunction with the trend to more boxed and case ready product, 
the growth in company or program type branded products continues in the 
meat and lamb industry. Currently, LMR reports data for carcass sales 
identified as ``Certified Fresh American Lamb'' (LM_XL555 National 
Weekly Comprehensive Lamb Carcass Report). Since the report was 
introduced, there has been a decline in the number of carcass sale data 
for this product category, with essentially no data reported since 
2008. Given the lack of and/or incomplete data, this category may no 
longer be needed and/or not representative of current industry 
practices. However, the industry continues to work on marketing 
strategies for U.S. lamb and ``Certified Fresh American Lamb'' could be 
a strategy that may be reintroduced or further developed. Whether or 
not this is a branding strategy that is expected to grow in popularity 
long-term may determine the importance of this category to the industry 
and if it should continue to be reported under LMR Lamb.
    Imported lamb data (LM_XL552 National Weekly Lamb Carcass and Lamb 
Cuts--Imported Product) show the number of firms currently eligible to 
report under LMR has been rather consistent in terms of meeting or not 
meeting the confidentiality guidelines in terms of number of parties, 
threshold levels, and average years. For the most part, these 
guidelines are frequently met and data reported mostly with respect to 
Australian product data. But, this is not the case with New Zealand 
import data which, for the majority of data received, is currently 
being limited due to 3/70/20 LMR confidentiality guidelines. Looking 
ahead, if any importing company currently under LMR were to cease 
operations, import less than the current import volume threshold, and/
or import volumes continue to decline, as seen since in the past 5 
years, reporting of import data could be in jeopardy.
    According to discussions with AMS staff, there is one entity that 
is providing all or most of the data for the majority of the time for 
New Zealand lamb imported into the U.S. As a result, the 3/70/20 
guideline prohibits specific import product data (e.g., New Zealand 
Rack, Frenched, Cap-off, 12 oz./down) from being reported. Because of 
the seasonal aspects of lamb demand and production, at times, data can 
be reported under the current confidentiality guidelines when there are 
more parties importing specific New Zealand lamb cuts (e.g., Easter). 
This issue also applies to Australian product at times as well. As a 
result, the data is often disjointed due to the inability to report on 
a weekly basis. Total imported volume (fresh and frozen) reported is 
not an issue because it includes both Australia and New Zealand 
product.
    There are, in essence two primary issues prohibiting imported lamb 
product data from being reported. The first is the average import 
amount threshold and the second is the 5 year time threshold. Lowering 
the imported average amount threshold should be considered. Another 
option is to change the guideline from the past 5 years to 2 or 3 years 
to better reflect current and future import volumes. Although, lowering 
the import threshold or average number of years will not eliminate the 
problem of only one firm importing a particular product (i.e., rack or 
leg) and/or the primary source of the product (i.e., Australia or New 
Zealand). It will, however, reflect current declines in import tonnage 
and preempt any future impacts of continued reductions as these two 
countries focus on other emerging export markets. AMS's practice of 
providing detailed market data may not be ideal for imported lamb 
product. In this instance the report may be too narrow in the type and 
amount of data to be reported, contributing to the inability to report 
data. Thus, a possible solution would be to make the report more broad 
in an effort to meet the confidentiality guidelines and provide more 
data, making it a more valuable report.
LMR Lamb Market Reporting Analysis and Discussion
    The number of entities eligible to report under LMR guidelines 
continues to decline. As a result the amount of market information and 
data reported under LMR has been reduced and may not be reportable if 
further consolidation in the number of packers and processors 
continues. In some instances data for specific categories cannot be 
reported, while in other cases, for some reports, confidentiality 
guidelines prohibit the publication of an entire report.

    1. Those reports for which confidentiality of data prohibits the 
publication of an entire report are as follows:

  a.  LM_LM302 National Daily Lamb Report (Negotiated and Formula 
            Purchases)--Domestic Only

    The National Daily Lamb Report (LM_LM302) is subject to not having 
enough trades slaughter lamb trades on a given day to meet LMR 
confidentiality guidelines. Thus, the report varies on a daily basis in 
terms of when the 3/70/20 rule is met. In adjusting the threshold 
levels of the number of lambs slaughtered and the average time period, 
there is the possibility of identifying more parties that would be 
eligible to report under LMR. This should help in satisfying the 
confidentiality guidelines by including more parties and trades, and 
therefore reporting of data. However, because it is a daily report, as 
the industry continues to consolidate the issue of not enough trades to 
meet the LMR confidentiality guidelines could continue. To avoid this 
possibility, this report could be modified into a weekly report, in 
which the data is compiled over a 5 day period versus daily. This would 
be considered a ``whole report'' and under current LMR regulations, if 
a weekly report existed it would meet current confidentiality 
guidelines. Therefore, for the short term, a weekly report would 
eliminate the issue of not meeting guidelines and allow data to be 
reported. Long term, changing this to a weekly report and adjusting LMR 
eligibility regulations downward to increase the number of parties and 
trades, would help ensure the data can continue to be reported.

  b.  LM_LM304 Western Daily Lamb Report (Negotiated and Formula 
            Purchases) Domestic Only

  c.  LM_LM353 Western Weekly Slaughter Sheep Review

  d.  LM_LM355 Weekly Western Direct Lamb Report

    For the three reports listed above, the confidentiality issue arose 
when in 2010 Superior Farms purchased Iowa Lamb Corporation and closed 
the Iowa slaughter facility in 2011. This left two parties reporting 
data and prohibited publication under the 3/70/20 guideline. Reporting 
ceased in mid-November 2010 for the three reports identified above as 
b, c, and d. At this time, given the number of slaughter entities and 
ongoing industry consolidation, any possibility of the three reports 
above being able to meet current confidentiality guidelines is highly 
unlikely. The ability to meet the confidentiality rules for the daily 
report (LM_LM304) is even more improbable. Any changes to the entity 
threshold level in either the number of lambs slaughtered or average 
time period may help to identify other potential firms that purchase 
lambs in the western region. However, if no other parties are 
identified, these three reports will be prohibited because there are 
only two companies eligible to report data in the western U.S.

    2. The reports for which confidentiality of data prohibits the 
publication of specific categories or items is as follows:

  a.  LM_XL552 National Weekly Lamb Carcass and Lamb Cuts--Imported 
            Product

    According to discussions with AMS staff, there is one entity 
providing all or most of the data for the majority of the time for New 
Zealand lamb imported into the U.S. As a result, the 3/70/20 guideline 
prohibits specific import product data, for example New Zealand Rack, 
Frenched, Cap-off, 12 oz./down from being reported. In 2009 (report 
began in mid-2008), 20 different product items out of a total of 41 New 
Zealand products listed were reported (0-21 days category). Of that 
total, four were fresh items, with the remaining 16 items frozen. No 
item was reported consecutively during the year. In 2011, there were a 
total of 18 product items reported for New Zealand, with frozen items 
again accounting for 16 of the total and none being reported for every 
week in the given year.
    The approach by AMS has been to provide detailed market data. 
However, this approach is more than likely constraining this report 
because it may be too narrow in the type and amount of data of product 
categories reported. A possible and rather reasonable solution would be 
to make the report more wide-ranging in an attempt to meet the 
confidentiality guidelines and provide more data, making it a more 
functional report. The options for a more broad based report that may 
improve the amount of data reported include:

  (1)  Discontinue the separation of Australia and New Zealand 
            combining the two countries into one regional category 
            called Oceana. The combination would help to eliminate the 
            current issues of only one reporting party for any country 
            and/or product items. Analysis by AMS staff shows that even 
            when the two countries are combined, there are times when 
            there is still one party importing the majority of a 
            product and prohibited under the 3/70/20 rule.

  (2)  Continue the separation of Australia and New Zealand, but 
            combine fresh and frozen product. Again, the issue of one 
            party being the major importer continues to arise for some 
            products and times of the year.

  (3)  Combine Australia and New Zealand into one category (Option No. 
            1) and combine fresh and frozen product. Based on AMS staff 
            analysis this does help in meeting LMR guidelines and 
            allowing for some more data to be reported.

  (4)  Reevaluate the current product categories for (a) current import 
            product descriptors and (b) reduce the number of product 
            item categories that pertain to one meat cut such as racks. 
            Currently there are 13 different meat item categories for 
            Australian racks and 11 for racks imported from New 
            Zealand. There are also 44 different product categories for 
            Australian items and 41 for New Zealand. Making the 
            categories more wide-ranging could result in more data 
            reported.

  (5)  Combine Option No. 3 and Option No. 4.

    In regards to the options listed above, data prohibition due to the 
3/70/20 rule will continue under Options No. 1 and No. 2, and less 
often under Option No. 5. Analysis of Option No. 5 which combines 
countries, fresh and frozen product, and reduces the number of product 
categories indicates that it would help in meeting the 3/70/20 
guideline. However, for some product items it still remains rather 
close due to one party still dominating the import volumes for 
particular product items.

    3. Current reports for which data is not being reported due to 
changes in market structure and/or irrelevance to the sheep and lamb 
industry are as listed below with further explanation and discussion 
pertaining to each report.

  a.  LM_LM302 National Daily Lamb Report (Negotiated and Formula 
            Purchases)--Domestic Only

    A recommendation for this report is to expand the number of live 
and carcass weight ranges reported. According to AMS staff, a 170 pound 
and heavier category for slaughter lambs sold as a ``Negotiated 
Purchase, Live Basis'' is already in process. However, for ``Formula 
Purchases, Carcass Basis'', nothing has been addressed. It is suggested 
an additional formula purchased weight category of ``95 pounds and 
over'' be added. This would require changing the current weight 
category of ``over 85 pounds'' to ``85-95 pounds.'' This would provide 
data for very heavy weight carcasses that are being directed to markets 
demanding a minimum product size, genetics that allow for heavier 
weight, and higher yielding lambs, and for those lambs whose carcass 
quality and yield are often times discounted. This change would allow 
for more pricing data according to lamb weights as the industry 
potentially moves towards value based pricing of slaughter lambs. Based 
on discussions with AMS staff, the burden of such a change on both lamb 
packers/processors and AMS staff is rather minimal.

  b.  LM_LM351 National Weekly Direct Lamb Report

    As discussed above regarding LM_LM302 National Daily Lamb Report 
(Negotiated and Formula Purchases)--Domestic Only, recommendations 
regarding the addition of a heavier formula carcass weight category 
would also apply to the National Weekly Direct Lamb Report. Another 
category change for consideration is the ``Prior Week Slaughter Head 
Count, Domestic, Forward Contract.'' The last time data was reported 
for this category was in May 2004, with the only year to have weekly 
consecutive data being 2002. This also applies to the ``Prior Week 
Slaughter Head Count, Imported Forward Contract'' and ``Prior Week 
Slaughter Head Count, Imported, Formula Arrangements'' categories. Data 
for imported forward contracts were only reported four times; all 
occurring during 2001 and 2002, since then nothing has been reported. 
For imported formula arrangements, the last time data was reported was 
in December 2003, with weekly consecutive data only reported from 2001 
through May 2003. Since data, largely, has not been reported in the 
last 10 years it would suggest these categories may no longer reflect 
current marketing practices and are not as beneficial to the industry 
compared to when LMR began.

  c.  LM_LM352 National Weekly Slaughter Sheep Review

    Because it is a weekly report, LM_LM352 continues to meet LMR 
confidentiality guidelines. However, further industry concentration in 
the number of lamb packers/processors, as well as continued declines in 
inventory levels, will put LM_LM352 at risk. At this time, the concerns 
are in regards to categories that may no longer reflect current 
marketing transactions and may not be needed.
    Based on discussions with AMS staff, lambs sold on a formula live 
basis have declined significantly and, on average, may represent only 
1% to 2% of the total number of slaughter lamb transactions reported 
under LMR. In 2009, the number reported had fallen so low that data on 
these types of transactions could not be reported. Consistently, since 
the beginning in April 2009, no transactions have been reported for 
formula live slaughter lambs due to lack of compliance with 3/70/20 
guidelines. This category, as of mid-November 2012 is not being 
reported as ``No reportable trades'' reflecting the lack of use by the 
industry.
    The ``Negotiated Dressed Sales'' category has been reported as ``No 
sales reported'' since August 2008 with data reported inconsistently 
since the beginning of LMR. Weekly data was reported steadily from 
2001-2003, but since has declined. Data was reported in 2004, for 1 
week in 2005, 8 weeks in both 2006 and 2007. Negotiated dressed sales 
were last reported in 2008. The lack of data in recent years implies 
negotiated dressed sales are no longer being utilized by the sheep and 
lamb industry by any significant amount current LMR guidelines and/or 
in general practice. Therefore, this category may not be needed. If 
threshold levels were adjusted lower, it may still not have a large 
enough number of reportable trades. This type of marketing transaction 
may not be used much and eliminating it may better represent current 
industry marketing practices.
    Data for the ``Imported Negotiated Purchase'' category essentially 
stopped late May 2003. However, in mid-April 2011 data was reported for 
2 consecutive weeks. This was the first time in 7 years and data has 
not been reported since due to insufficient trades. ``Imported Formula 
Purchase'' data was reported during the first few years of LMR but 
ceased in June 2003 due to no reportable trades. As discussed in prior 
sections these categories may no longer be necessary given the lack of 
reportable data and the absence of importing significant numbers of 
slaughter lambs.

  d.  LM_XL501 National Daily Lamb Carcass Report

    This report continues to meet LMR confidentiality guidelines. As a 
daily report, continued industry consolidation may eventually lead to a 
lack of enough trades to meet the LMR confidentiality guidelines. The 
corresponding weekly report (LM_XL555) would likely continue to meet 
the confidentiality guidelines (a ``whole report'' being weekly vs. 
daily). However, for the long term, changing structure of the sheep and 
lamb sector, adjusting LMR regulations to include more firms or the 
confidentiality rule would help in data continuing to be reported.
    The data received by AMS for this report ranges from very detailed 
in specific yield grade and carcass weight to rather general by lot 
basis only and two or three weight categories. The report provides 
carcass sales data based for six carcass weights, in 10 pound 
increments (i.e., 45-down, 45-55 pounds, etc.). But, if one party 
submits carcass sales data only for 65 pound-down and 65-up, in order 
to report the data in 10 pound increments the data has to be modified 
by AMS. When data that is too wide-ranging is received AMS 
proportionately divides the volume into applicable weight categories to 
avoid the complete loss of the information. As a result, the data is 
not as representative of the market because the actual sale data is not 
in accordance with the reporting categories established under LMR. The 
reported prices for each carcass category and the changes between each 
carcass weight categories may be more or less than currently reported.

  e.  LM_XL502 Estimated National Lamb Carcass Cutout

    The last time AMS reviewed and updated the calculations used to 
determine the estimated carcass cutout was in April 2006. Likewise, in 
April 2006 was the last time a reassessment of the process/packaging 
per hundredweight cost used to approximate a net carcass value to 
depict current industry practices. An earlier process cost assessment 
was performed in January 2002 following the introduction of the report 
under LMR in October 2001. Whether or not this reassessment results in 
any changes, a timelier evaluation (such as every 2 or 3 years) appears 
to be needed given the rate of changes taking place in the lamb packing 
sector.

  f.  LM_XL555 National Weekly Comprehensive Lamb Carcass Report

    This report is based on the LM_XL501 report and, the same issues 
apply. If reporting entities (current and future) were to provide more 
detailed data (i.e., 10 pound weight incremental data) or AMS was to be 
more stringent in reporting requirements accuracy and reliability of 
the data would improve. Similarly, as the industry consolidates, the 
practice of selling lamb in the box as a primal or cut and as case 
ready instead of as a whole carcass becomes a more generally employed 
practice, this report will probably be at risk of not meeting LMR 
guidelines. More than likely, report loss will be the result of fewer 
companies eligible to report. Adjusting the threshold will help to 
identify more eligible reporting parties under LMR and help to avoid 
prohibition of reporting due to the 3/70/20 guideline.
    Discussions with AMS staff indicated that since the report was 
introduced, there has been a decline in the number of carcass sale data 
submitted as ``Certified Fresh American Lamb.'' The report started in 
August 2006 with only the number of head being reported. The last time 
data was reported was in July 2008. Thus for this category only 2 years 
of limited data has been reported. Given the lack of and/or incomplete 
data, this category may no longer be necessary.

  g.  LM_LM350 National Weekly Carcass Premiums and Discounts for 
            Slaughter Lambs

    This report is currently not available on the AMS website as AMS 
staff have determined this report of little value given the amount of 
data reported, the current grading system for lamb, and the lack of 
data that can be reported. The majority of lamb carcasses grade as 
Choice and Prime, Yield Grade 1-4. At this time, the industry has not 
adopted value based pricing on a large scale. Industry participants 
have added value based pricing are either below the LMR threshold 
levels or are providing small amounts of data. Based on a report run 
from October 1 through mid-November 2012, the only data that was or 
could be reported over that 45 day period were two quality discounts 
and one yield discount. All three items reported had the same value. 
This report in terms of data reported is reflective of past reports. 
Also, these discounts reflected the issues of the past year in terms of 
heavy weight, over finished lambs, old crop lambs. In this case, the 
recommendation is to readdress this report once the industry reexamines 
the lamb carcass grading system and/or adopts value based marketing on 
an industry wide basis.
    Following the market collapse of 2012 the industry has renewed 
interest in value based marketing and other changes to try to prevent a 
re-occurrence of 2012 market conditions. This report provides the 
mechanism to report premiums and discounts should industry changes 
occur. It is possible that this report could become more important in 
the future.

  h.  Other Items

    Under the 2008 reauthorization of LMR, the industry requested and 
AMS approved requiring packers to submit information on their carcass 
purchases.\17\ This information is intended to capture data for firms 
that only purchase lamb carcasses, for example breakers or custom 
slaughter agreements for which the only data captured previously under 
LMR for these types of entities is on wholesale lamb cuts volume and 
prices. The intent was to create a report to accompany the LM_XL501 
National Daily Lamb Carcass Report and LM_XL555 National Weekly 
Comprehensive Lamb Carcass Report. However, after a review of the 
additional data collected, AMS staff determined the report was not 
providing any new or additional information. Several reasons were cited 
including: (1) low volume of data reported; (2) those reporting 
entities cannot determine and/or agree upon a FOB price; (3) very 
little difference and redundancy in the data collected compared to that 
already reported in the LM_XL501 and LM_XL555 reports; and (4) not 
providing any additional new information. In an effort to improve upon 
LMR for lamb and minimize any issues that may arise from either 
reporting parties and/or AMS if there are future changes in the type of 
data or collection process that may arise in the next reauthorization 
it is suggested that the collection of this data be discontinued.
---------------------------------------------------------------------------
    \17\ Refer to USDA-AMS Livestock Mandatory Price Reporting General 
Information, Livestock Mandatory Reporting Act of 1999. USDA-AMS. 
http://www.ams.usda.gov/AMSv1.0/
ams.fetchTemplateData.do?template=TemplateN&navID= 
LSMNMainRN2L2&rightNav1=LSMNMainRN2L2&topNav=&leftNav= 
MarketNewsAndTransportationData&page=MPRinfo&resultType=&acct=lsmn. 
Updated April 2012.
---------------------------------------------------------------------------
Lamb Pelt Market Price Reporting
    Similar to the lamb market, the pelt market and pelt marketing 
practices have changed over the past decade. Lamb pelt prices are 
reported by AMS under the voluntary market reporting program. In recent 
years, changes in the method lamb pelts are traded have been a factor 
in reported prices becoming increasingly static. In the spring of 2012, 
pelt prices were not reported for several consecutive weeks. Non-
reporting was due to a number of factors, one being a relatively small 
number of firms trading in the wholesale pelt market. Because pelt 
prices are under the voluntary market reporting program, data is not 
subject to any confidentiality or regulatory guidelines.
Background: Lamb Pelt Market
    Pelt value determinants have and continue to change as the world 
market for wool-on pelts and lamb leather continues to evolve and adapt 
to changes in technology and consumer demand. Like wool, pelts are not 
very perishable and can be stored at various levels of processing for 
at least several months. However, pelt processors try to manage 
supplies as fashion trends change rapidly and late-product processes 
tend to limit flexibility in finished products, while large supplies 
damper prices. Pelt quality is negatively impacted by factors related 
to pelt size. Pelt size is affected by heavy weight lambs. The majority 
of U.S. pelts and finished pelt products are exported to cold climate 
markets as U.S. pelts are best suited for cold climate apparel. Current 
industry descriptors for lamb pelt prices vary and industry transaction 
practices may not be captured in current pelt reporting by AMS.
    Currently, under voluntary price reporting method, pelt prices are 
those reported between packer and pelt processor/wholesaler. On a 
weekly basis, AMS reporters contact industry pelt packers/sellers and 
processors/buyers for their transactions prices. Consolidation in the 
industry has reduced the number of companies available and willing to 
report to AMS. This presents a challenge in that those pelt processors/
wholesales may not be accessible to provide data to AMS in a timely 
manner for the weekly report or may opt not to provide data if they 
know they may be the only party reporting data. Because this is a 
voluntary report the LMR confidentiality regulations do not apply.
Pelt Price Reporting: Analysis and Discussion
    There are many issues surrounding the current AMS reporting of lamb 
pelt prices. Those issues include (1) increasingly small number of data 
source entities, (2) outdated pelt category descriptors, (3) 
variability of pelt classifications among industry, and (4) quality of 
data. These issues are ongoing challenges for AMS and the industry 
regarding pelt price reporting.
    The pelt price reflects the price paid by pelt processors/
wholesalers to the lamb packer. There are a relatively small number of 
pelt processors/wholesalers in the U.S. It is likely that the number of 
processors with decline as the industry becomes more concentrated. The 
prices reported to AMS vary across reporting parties as some are based 
on quality, some are an average lot price, while others are a contract 
price which may span a rather long period of time from 6 months to a 
year. These differences can impact reported pelt prices causing prices 
to be higher or lower than the market is actively trading resulting in 
rather wide price ranges. In conjunction, as the pelt market has 
evolved, quality grading and pelt transaction methods have changed and 
they vary among all market parties. For example, the use of ``pelt 
credits'' has increased. However, the definition of what is a ``pelt 
credit'' varies between individual parties, the industry, and AMS. In 
regards to contract prices, AMS does not include nor expects to include 
those prices as current pelt reporting is for spot market transactions. 
This further complicates matters in regards to reporting a pelt price 
that best reflects today's pelt market.
    Under current LMR guidelines, lamb packers are required to report 
the pelt type on lambs purchased under a negotiated purchase, formula 
marketing arrangement, or forward contract (AMS reporting form LS-121). 
Given the issues surrounding the current pelt reporting process a 
plausible solution is to change from collecting pelt prices between 
packer and pelt processor/wholesaler to reporting the estimated value 
paid for pelts by packers on slaughter lambs purchased on a negotiated, 
formula, or contract basis. Since lambs are purchased on either a live 
and carcass basis as well as on an individual and lot basis, an 
estimated average pelt value would be reported to AMS. This would 
enable AMS to report an average pelt value (all grades/types) as well 
as a low to high pelt value range. This should eliminate many of the 
issues discussed above, including differences in pelt grading 
descriptors and the types of purchase transactions utilized across 
parties. This would also remove the need to update the current pelt 
grading system to better align with current market practices. Such an 
undertaking would be costly and require financial support from the 
industry. According to AMS staff this would require a minimal code 
change to the current reporting form submitted by packers to AMS, 
reducing the burden on lamb packers/processors as well as AMS.
    During discussions with AMS staff regarding pelt prices it was 
noted that there has been an increasing number of hair-sheep pelts 
being reported. These pelts are valued differently than wool-sheep 
pelts across markets, reporting a separate wool-type and hair-type 
estimated average pelt value may be an item for the industry to 
consider. This would also be a nominal code change to existing forms, 
reducing the burden on both packers and AMS staff. The reporting on the 
two types of pelts would be in addition to an estimated weekly average 
pelt value and value range.
    Currently this report is provided under the voluntary reporting 
system. If it were to become a mandatory report under LMR, it would be 
subjected to the same guidelines and regulations and problems discussed 
above. However, if those regulations are changed as discussed and 
proposed in this analysis, concerns of not being able to report due to 
threshold levels or confidentiality issues should not obstruct the 
reporting of pelt values.
LMR Lamb Market Reporting Recommendations
    Many types of transactions for slaughter lambs and lamb products 
may no longer be practiced to the extent seen when LMR was introduced 
in 2001. Other types of transactions and related data may be more 
suitable given industry changes over the last 10 years. Because of 
this, LMR guidelines pertaining to eligibility of parties under LMR and 
confidentiality regulations for lamb need to be updated to reflect the 
structural changes that have and will continue to occur in the sheep 
and lamb industry to ensure the continuation of lamb market data 
reporting.
    Based on this analysis, recommendations to help correct the 
problems described concerning the lamb LMR reported market data and to 
improve lamb market data reporting are:

  (1)  Recommend adjusting current FI packer slaughter and/or 
            processing thresholds to better align and reflect current 
            and future industry slaughter lamb supply levels. Current 
            LMR guidelines require an average of at least 75,000 lambs 
            each year for the prior 5 calendar years. To better reflect 
            current and projected slaughter lamb supplies, an 
            adjustment downward to a range of 35,000 to 55,000 lambs 
            each year would be considered. This would account for the 
            35% decline in FI slaughter lambs over the time period 
            since LMR implementation in 2001 to current levels and 
            future forecasted declines of 1% to 3% over the next 5 
            years. If the sheep and lamb industry continues to struggle 
            in increasing or at least stabilizing the flock size, this 
            range may need to be reevaluated in 2 or 3 years to reflect 
            industry capacity at that time.

  (2)  Consider amending current daily to weekly LMR reporting 
            guidelines if current FI packer slaughter and/or processing 
            thresholds were reduced, in an effort to ease the added 
            burden on smaller lamb packing and processing entities.

  (3)  Amending current importer thresholds to better reflect current 
            industry import levels. Current guidelines require an 
            average of at least 2,500 metric tons of lambs each year 
            for the prior 5 calendar years. Given the significant 
            decline in imported lamb in the last 5 years (down 20% from 
            2007-2011), it is recommended that the imported volume 
            level be adjusted downward to 1,500 metric tons each year. 
            This range would be more feasible given the reduction in 
            imported volumes, global sheep and lamb numbers since the 
            beginning of LMR in 2001 and the projected import trend 
            over the next 5 years.

  (4)  Adjusting current LMR regulations for slaughter and/or 
            processing entities and importers from a prior 5 calendar 
            years to 2 or 3 calendar years to better capture ongoing 
            structural changes in terms of industry size, trade 
            volumes, and market transactions. As the U.S. and global 
            sheep and lamb industry continues to become even more 
            concentrated in terms of inventory and firm numbers these 
            structural changes will occur at a much faster rate than in 
            other commodities and changes need to be incorporated under 
            LMR regulations in a timelier manner.

  (5)  Changing the LM_LM302 National Daily Lamb Report (Negotiated and 
            Formula Purchases)--Domestic Only to a weekly report if 
            recommendations No. 1 and No. 4 do not improve reporting of 
            data on a daily basis.

  (6)  Consider discontinuing the reporting of LM_LM304 Western Daily 
            Lamb Report (Negotiated and Formula Purchases) Domestic 
            Only, LM_LM353 Western Weekly Slaughter Sheep Review, and 
            LM_LM355 Weekly Western Direct Lamb Report. At this time 
            the only possible solution to restore these three reports 
            are: (1) changes to the entity threshold level as discussed 
            in No. 1 and No. 3 that may help to identify other 
            potential parties that purchase lambs in the western 
            region, and/or (2) allow for informed consent of those two 
            entities to restore these three reports.

  (7)  Propose for LM_XL552 National Weekly Lamb Carcass and Lamb 
            Cuts--Imported Product, to combine the two countries into 
            one regional category called Oceana. This would help 
            mitigate the current issues of only one reporting party for 
            a country and/or product items. By making this report more 
            broad in terms of one region it should help to satisfy 
            current LMR regulations and 3/70/20 guidelines allowing for 
            more imported lamb cut data to be reported.

  (8)  For LM_XL552 National Weekly Lamb Carcass and Lamb Cuts--
            Imported Product, consider combining fresh and frozen 
            product.

  (9)  Suggest for LM_XL552 National Weekly Lamb Carcass and Lamb 
            Cuts--Imported Product, to reduce the amount of detail in 
            regards to the number of product item categories reported. 
            This would also allow for more imported lamb product data 
            to be reported. In addition, this change would also require 
            a reevaluation in the product item categories currently 
            being reported and those actually being used in today's 
            marketplace.

  (10) Recommend for LM_LM302 National Daily Lamb Report (Negotiated 
            and Formula Purchases)--Domestic Only, an additional 
            formula purchased weight category of ``95 pounds and over'' 
            be added. This would require changing the current weight 
            category of ``over 85 pounds'' to ``85-95 pounds.''

  (11) Propose for LM_LM351 National Weekly Direct Lamb Report the 
            following: (1) an additional formula purchased weight 
            category of ``95 pounds and over'' be added. This would 
            require changing the current weight category of ``over 85 
            pounds'' to ``85-95 pounds'' and (2) reassess the 
            usefulness of the categories ``Prior Week Slaughter Head 
            Count, Domestic, Forward Contract'', ``Prior Week Slaughter 
            Head Count, Imported Forward Contract'' and ``Prior Week 
            Slaughter Head Count, Imported, Formula Arrangements'' as 
            the amount and type of date reported has declined 
            significantly due to either LMR regulations and/or lack of 
            use in the sheep and lamb industry.

  (12) Suggest the current LMR forward contract definition be 
            reassessed to determine if it can be amended, replaced with 
            another type of transaction such as ``lambs forward 
            priced,'' or removed.

  (13) Recommend for LM_LM351 National Weekly Direct Lamb Report to 
            change ``Prior Week Slaughter Head Count, Domestic, Forward 
            Contract.'' category to ``Prior Week Slaughter Head Count, 
            Domestic, Lambs Forward Priced.'' Suggest further analysis 
            of slaughter lamb transactions to determine if a 7 day 
            committed period is appropriate or if it should be extend 
            to a committed period of 14 day or 21 days.

  (14) Suggest for LM_LM352 National Weekly Slaughter Sheep Review 
            discontinuing the category ``Formula Price, Live Basis'' 
            due to structural changes that have resulted in this type 
            of transaction being rarely utilized within the lamb 
            industry.

  (15) Suggest for LM_LM352 National Weekly Slaughter Sheep Review the 
            following being reassessed ``Negotiated Dressed Sales, 
            Domestic'', ``Imported Negotiated Sales,'' and ``Imported 
            Formula Purchase'' categories as the amount and type of 
            date reported has declined significantly due to either LMR 
            regulations and/or lack of use in the lamb industry.

  (16) Recommend reviewing current calculations used to determine the 
            LM_XL502 Estimated National Lamb Carcass Cutout in a 
            timelier manner, such as every 2 years. This would also 
            include a review of the process/packaging per hundredweight 
            cost used to estimate the reported net carcass value.

  (17) Propose further evaluation of LM_LM350 National Weekly Carcass 
            Premiums and Discounts for Slaughter Lambs report when the 
            industry reexamines the lamb carcass grading system and/or 
            adopts value based marketing on an industry wide basis.

  (18) Suggest further discussions regarding the usefulness of 
            submitted carcass purchase data as authorized under the 
            2008 reauthorization of LMR.

  (19) Suggest a review of the AMS/LMR definition for ``custom 
            processing'' as a growing percentage of slaughter lambs are 
            being processed under these types of programs.

  (20) Propose adjusting pelt price reporting to that of reporting an 
            estimated value paid for all pelts by packers on slaughter 
            lambs purchased on a negotiated, formula, or contract 
            basis. This would include the reporting of an average low/
            high pelt value range. This would help to eliminate and 
            minimize many of the issues regarding current pelt 
            reporting such as the number of reporting entities, 
            accuracy of pelt grading descriptors, and purchase 
            transactions types.

  (21) Suggest LMR participants provide and submit market data in the 
            required LMR reporting formats to improve the market 
            reporting for lamb.

  (22) Request AMS to consider more detailed reporting enforcement of 
            LMR participants similar to that described for other 
            commodities in the reporting of data under LMR to avoid AMS 
            staff from having to amend data for current LMR reports.

    Of the listed recommendations, those with the highest priorities 
are those that address LMR regulations that prohibit data from being 
reported. This would include:

   Adjusting current FI packer slaughter/processing and 
        importer volume thresholds to better reflect current and future 
        industry levels.

   Changing current LMR regulations for slaughter and/or 
        processing entities and importers from a prior 5 calendar years 
        to 2 or 3 calendar years to better capture ongoing structural 
        changes in terms of industry size (i.e., inventory levels, 
        number of entities at packing, processing and wholesale), trade 
        volumes, and market transactions.

   Improving the reporting of imported lamb product and 
        modifying the current reporting to be more broad-based in an 
        effort to provide more data (and in some cases any data) for 
        the industry.

   Addressing current pelt price reporting problems and 
        consider changing to an estimated value paid for all pelts by 
        packers on slaughter lambs purchased on a negotiated, formula, 
        or contract basis, given its importance to the industry (e.g., 
        role in USDA livestock risk protection program) and other 
        issues surrounding the current report.

    Changes in lamb LMR have become necessary due to changes in the 
industry over the decade since LMR implementation. Industry marketing 
adjustments have been driven by consolidation in the number of 
traditional participants, but also by an increase in the importance of 
niche markets, new branded products, custom packing, and non-
traditional consumers. Non-traditional U.S. market consumers include 
ethnic consumers, whose demand for lamb has increased the number of 
small packers and live and meat outlets.
    These changes have far reaching implications for price reporting 
and data needed by the industry. For example, pelt prices are used in 
the USDA Livestock Risk Protection (LRP) Lamb program in projecting 
lamb prices for insurance coverage. The change, or loss, of that data 
has had a large impact on the ability of lamb producers to manage price 
risk. It is critical to understand that the AMS generated LMR data for 
lamb are used and matters greatly for industry success.
Concluding Comments
    AMS has done a good job in acting in the best interests of the 
livestock industry in the development, implementation, and maintenance 
of mandatory price reporting. Despite the challenges over the last 
decade, AMS has generally adapted LMR to meet current industry needs 
and practices. The lamb sector has faced significant changes since the 
implementation of LMR in 2001. AMS has been, and continues to be 
willing to work with the industry on adjusting current LMR to improve 
the market reporting for lamb. According to AMS staff, many of the 
suggestions in this analysis would help in providing more information 
and transparency on the slaughter lamb and lamb meat market. Many 
changes would probably require minimal code changes to the current 
reporting forms submitted by packers to AMS and may require some 
changes in reporting guidelines (i.e., data submittal), reducing the 
burden on all parties. A list of the packer/processor reporting forms 
that are submitted to AMS under LMR and the corresponding LMR reports 
are provided in the attached Appendix.
    At this time, based on conversations with AMS staff, AMS has been 
advised that the 3/70/20 confidentiality is to be applied across all 
commodities reported under LMR. Whether or not changes can be made for 
individual commodities is unknown. Currently, under LMR, there is not 
an alternative to the 3/70/20 rule when there are only one or two 
eligible entities to report data (e.g., LM_LM304, import product 
categories). Of note, USDA's National Agriculture Statistics Service 
(NASS) does experience this issue when collecting voluntary 
agricultural statistical data. NASS may release data with permission 
pertaining to that sole individual party, if the quality of the data is 
acceptable and of use to the objective of the report. This is referred 
to as an ``Informed Consent'' in which permission to report data is in 
writing and signed by the party.\18\ This agreement is renewed every 5 
years and the party may revoke permission at any time. Since the nature 
of the data collected and purpose of each agency differs this may or 
may not be a viable alternative for AMS to consider.
---------------------------------------------------------------------------
    \18\ USDA-NASS. Policy and Standards Memorandum, No. PSM-CS-4. 
April 2010.
---------------------------------------------------------------------------
    Highly concentrated sectors, such as the sheep and lamb industry, 
should be required to report useful data in a timely fashion to assist 
market function and transparency. It is imperative that actions are 
taken to ensure all market related volume and price data are reported 
under LMR. This analysis provides a review of current lamb marketing 
data that are frequently unavailable and discusses some potential 
remedies to help improve LMR. In addition, other comments, suggestions 
and recommendations are provided based on discussions with USDA-AMS 
staff. These solutions include updating regulatory guidelines to better 
reflect the current industry structure, changing report categories and 
descriptors to reflect current marketing practices in effort to provide 
more accurate and usable market information, and consolidating reports 
and/or sections of reports (internal and external) to ensure market 
data is reported.
    Looking ahead, as the industry prepares for the next 
reauthorization of LMR in 2015; it may be of use to continue 
discussions with AMS staff with regard to what changes to current lamb 
LMR reporting forms would be required if any of the changes discussed 
in this analysis are requested by the industry. The price reporting 
system cannot be static in a changing marketplace, periodic industry 
input and monitoring is required.

     Appendix: LMR Reporting Form and Corresponding LMR Lamb Report
------------------------------------------------------------------------
 
------------------------------------------------------------------------
           LS_121        LM_National Daily Lamb Report (Negotiated and
                             Formula Purchases)--Domestic Only
           LS_121        LM_Western Daily Lamb Report (Negotiated and
                             Formula Purchases)--Domestic Only
           LS_121        LM_National Weekly Slaughter Sheep Review
           LS_121        LM_Western Weekly Slaughter Sheep Review
           LS_123A       LM_National Weekly Direct Lamb Report
           LS_123A       LM_Weekly Western Direct Lamb Report
           LS_123B       LM_National Weekly Direct Lamb Report
           LS_123B       LM_Weekly Western Direct Lamb Report
           LS_123C       LM_National Weekly Direct Lamb Report
           LS_123C       LM_Weekly Western Direct Lamb Report
           LS_124        LM_National Weekly Direct Lamb Report
           LS_124        LM_Weekly Western Direct Lamb Report
           LS_125        LM_Weekly Premium and Discount Report
           LS_125        LM_Western Weekly Premium and Discount Report
           LS_128        LM_National 5 Day Rolling Average Boxed Lamb
                             Cuts--Negotiated Sales
           LS_128        LM_USDA Estimated National Lamb Carcass Cutout
                             (5 Day Rolling Average)
           LS_128        LM_National Weekly Lamb Carcass and Lamb Cuts--
                             Imported Product
           LS_129        LM_National Daily Lamb Carcass Report
           LS_129        LM_National Weekly Comprehensive Lamb Carcass
                             Report
------------------------------------------------------------------------

                              Attachment 2
ASI's Proposed Amendments to Livestock Mandatory Reporting for Lamb
   Add the following definitions to the 1999 Act: Lambs 
        Committed, Formula Marketing Arrangement, Forward Contract, 
        Packer, and Packer-Owned Lamb.

   Define in the 1999 Act/Amend LMR Regulations: ``Lambs 
        Committed'' as lambs that are intended to be delivered to a 
        packer beginning on the date of an agreement to sell the lambs.

   Amend ``Importer'' LMR Regulation as follows: For any 
        calendar year, the term includes only those that imported an 
        average of 1,000 metric tons of lamb meat products per year 
        during the immediately preceding 4 calendar years.

   Define in the 1999 Act/Amend LMR Regulations for ``Packer'' 
        as follows:

     Any person or entity with 50 percent or more ownership 
            in a facility engaged in the business of buying lambs in 
            commerce for purposes of slaughter, manufacturing/preparing 
            meats/meat food products from lambs, or of marketing meats/
            meat food products from lambs in an unmanufactured form 
            acting as a wholesale broker, dealer, or distributor in 
            commerce.

     For any calendar year, the term lamb packer includes 
            any federally inspected lamb processing plant that 
            slaughtered or processed the equivalent of an average of 
            35,000 head of lambs per year for the immediately preceding 
            5 calendar years.

   Define in the 1999 Act/Amend LMR Regulations ``Packer-Owned 
        Lamb'' as lambs that a packer owns for at least 28 days 
        immediately before slaughter. Also revise the definition so 
        that the base or average lot price will be reported as a ``type 
        of purchase'' and provide USDA/AMS with the flexibility to 
        report transactions when non-traditional ``marketing 
        arrangements'' are used.

   Include in the 1999 Act/Amend LMR Regulations such that 
        information required for packer-owned lamb shall include an 
        estimated average price.

   Include in the 1999 Act/Amend LMR Regulations to allow for 
        the mandatory reporting and publication of a Weekly Lamb Pelt 
        Report as follows:

     The value paid by packers for slaughter lambs 
            purchased on a negotiated, formula, or contract basis.

     Classifications that may include, but is not limited 
            to: Shorn, Unshorn, Supreme, Premium, Standard, Fair, Mixed 
            Class, Damaged, and Puller,

     Descriptors that may include, but is not limited to: 
            Square Footage Grey/Black Fiber, Manure/Seed Free, Staple 
            Length, Micron Length, and Processing Defects.

   Add to the 1999 Act/Amend LMR Regulations such that boxed 
        lamb cutout calculations are reviewed every other year.

   Review and amend the 3/70/20 confidentiality guideline as 
        applied to LMR-Lamb as appropriate in order to both protect 
        confidentiality and yield the maximum amount of price data.

    The Chairman. Thank you very much. Mr. Greiman?

STATEMENT OF EDWARD C. GREIMAN, CHAIRMAN, CATTLE MARKETING AND 
                 INTERNATIONAL TRADE COMMITTEE,
       NATIONAL CATTLEMEN'S BEEF ASSOCIATION, GARNER, IA

    Mr. Greiman. Mr. Chairman, Ranking Member Costa, my name is 
Ed Greiman. I am a cattleman from Iowa. I am also Chairman of 
NCBA's Cattle Marketing and International Trade Committee. I 
have led our efforts on discussing mandatory price reporting 
over the past 4 years. We have spent those years looking at 
price discovery, and the overall market conditions we are 
seeing across the country. The bottom line is that MPR is an 
important tool for overall market transparency, and we support 
its reauthorization.
    NCBA is a strong supporter of mandatory price reporting 
because it is a valuable tool to cattle producers, who rely on 
it to get a feel for what their cattle may be worth. It allows 
them to formulate their marketing plan. The cattle price 
transparency that comes from mandatory price reporting is an 
important component in formulating price discovery, as well as 
enhancing competition in the marketplace.
    While NCBA is supportive of reauthorizing mandatory price 
reporting, we would like to see mandatory price reporting made 
an essential function of government, so the reports will 
continue in the event of another government shutdown. These 
reports have significant impact on the bottom line for many of 
our producers. To go without them leaves producers in a 
situation where it is much harder to understand what is taking 
place in the market.
    As an owner and manager of a relatively small beef 
operation, I am not engaged in the beef market 100 percent of 
the time. The beef market is a complex and volatile place. 
Prices are influenced not only by supply and demand of beef, 
but also by the world economy. With a market so diverse, it is 
hard to stay up on the current prices of beef and fed cattle. 
The market information supplied by MPR is valuable, in that it 
gives me the ability to make informed decisions.
    Many small producers do not have the exposure to the daily 
complexities of cattle trade. There are times in a year that I 
am looking at opportunities to sell a large portion of my fed 
cattle to a packer. At these times I need to be able to 
reference what has been done by other producers and packers, 
and to get an understanding of what the market is looking at. 
Though the information is very general in nature, it gives me a 
starting point to evaluate from.
    Mandatory price reporting allows all cattle producers a 
chance to competitively sell into this complex market. Twice a 
year I find myself having to sell cull cows from our cow/calf 
side of the operation. Our cows are above average, so selling 
directly to the packer is advantageous. However, when one only 
visits this marketplace twice a year, it is impossible to stay 
in touch. Mandatory price reporting allows me to get a bid from 
a packer, then take a look at past marketings to see if it is 
competitive. Mandatory price reporting doesn't necessarily get 
me more money, but it allows free access to the information, 
and more fair trade.
    In summary, NCBA strongly supports reauthorization of 
mandatory price reporting, and we look forward to working with 
you to further improve the program. Thank you.
    [The prepared statement of Mr. Greiman follows:]

Prepared Statement of Edward C. Greiman, Chairman, Cattle Marketing and 
 International Trade Committee, National Cattlemen's Beef Association, 
                               Garner, IA
    Mr. Chairman, Ranking Member Costa, my name is Ed Greiman and I am 
a cattle feeder from Iowa. I also chair NCBA's Cattle Marketing and 
International Trade Committee and have led our efforts on discussing 
Mandatory Price Reporting for 4 years. We spent those 4 years looking 
at price discovery and the overall market conditions we are seeing 
across the country. The bottom line is that MPR is an important tool 
for overall market transparency and we support its reauthorization.
    The National Cattlemen's Beef Association (NCBA) is a strong 
supporter of the Livestock Mandatory Reporting program which was 
authorized as part of the original Livestock Mandatory Reporting Act of 
1999. Mandatory price reporting is a valuable tool to cattle producers 
who rely on it to get a feel for what their cattle may be worth, and it 
allows them to better formulate their marketing plan. The cattle price 
transparency that comes with mandatory livestock price reporting is an 
important component in formulating price discovery, as well as 
enhancing competition in the marketplace.
    While NCBA is supportive of reauthorizing Mandatory Price 
Reporting, we would like to see mandatory price reporting made an 
essential function of government so the reports will continue in the 
event of another government shutdown. These reports have a significant 
impact on the bottom line for many producers. To go without them leaves 
producers in a situation where it is much harder to discern what is 
taking place in the market.
    As an owner and manager of a relatively small beef operation, I am 
not engaged in the beef market 100 percent of the time. The beef market 
is complex and volatile. Prices are influenced by not only the supply 
and demand of fed cattle, but also the world economy. With a market so 
diverse, it is hard to stay up on the current prices of beef and fed 
cattle. The market information supplied by MPR is valuable in that it 
gives me the ability to make informed decisions. Many smaller producers 
don't have exposure to the daily complexities of cattle trade. There 
are times in the year that I am looking at opportunities to sell a 
large portion of my fed cattle with a packer. At these times I need to 
be able to reference what has been done by other producers and packers 
to get an understanding of what the market is. Though the information 
is general in nature, it gives me a starting point to evaluate from. 
MPR allows all cattle producers the chance to competitively sell into 
this complex market. Once a year I find myself having to sell cull cows 
from our cow/calf side of the operation. Our cows are above average, so 
selling direct to the packer is advantageous. However, when one only 
visits this market twice a year, it is impossible to stay in touch. MPR 
allows me to get a bid from a packer and then take a look at past 
marketings to see if it is competitive. MPR doesn't necessarily get me 
more money, but allows free access to information and fair trade.
    In summary, NCBA strongly supports reauthorization of Mandatory 
Price Reporting, and we look forward to working with you to further 
improve the program.

    The Chairman. Thank you very much. We will now move into a 
period of questions. Members will have 5 minutes each to ask 
questions of their choice. I am going to start with Mr. Dopp, 
with the Meat Institute.
    Can you shed some light on the nature and substance of the 
discussion that the Meat Institute has held with livestock 
producers regarding reauthorization?
    Mr. Dopp. Well, Mr. Chairman, we have had an opportunity to 
meet with representatives of all three industries so far, and 
have looked at some concept papers, in at least one instance, 
some draft legislative language. But that has pretty much been 
the extent of it.
    The Chairman. Do you all have an opinion regarding the 
substance of the livestock producer groups' proposals as a 
whole?
    Mr. Dopp. We have had an opportunity to converse with our 
members about some of these concepts. Some of the ideas that 
have been advanced we have no objection to, and there are some 
that are troubling.
    The Chairman. Which ones do you find troubling?
    Mr. Dopp. Well, Mr. Chairman, there are a couple ideas that 
have been advanced by the cattle industry. And if I told you I 
understood all of the nuances of the proposal, that would be 
untrue. One of the things I learned when I had the opportunity 
to participate in the origins of the statute, the framework 
back in 1999, I spent a lot of time, as did some other people 
in the room, putting this together, and then again, when we 
worked through the negotiated rulemaking process for wholesale 
pork cuts. All of this is extremely complicated, so if you are 
looking for me to explain to you all the nuances and issues 
that are attendant to that. I'm a food and drug lawyer. I am 
not the person who buys pork. I am not a person who buys hogs 
or buys cattle, so I would be unable to answer that question, 
if that is what you are asking.
    The Chairman. We all have our areas of expertise, I 
understand.
    Mr. Heimerl, as a North Carolina native, and, of course, I 
represent southeastern North Carolina, and, more specifically, 
I have a couple of the top hog producing counties in the 
country, in fact, I wanted to ask a few questions regarding the 
pork industry's provisions that you are looking at. Does the 
pork industry proposal to add a purchase category for 
negotiated formula sales and purchases present any problems for 
the industry as a whole?
    Mr. Heimerl. No, none at all. We think it would be very 
advantageous to the industry, and the market outlook would be 
great for us to do that.
    The Chairman. Along those lines, does the pork industry 
proposal to add a provision to include late day purchases, and 
subsequent day's reporting present any problems for the 
industry?
    Mr. Heimerl. No. We think it would be a great opportunity. 
It would help on our confidentiality, and have more pigs come 
to the market, and have more market opportunities for us to 
use.
    The Chairman. Can you also elaborate a bit on how 
purchasing--pardon me, on how adding a purchase agreement or a 
purchase category for negotiated formula sales and purchases 
would better serve the pork industry?
    Mr. Heimerl. Yes. We think that would add--like I said in 
my statement, it would add at least two to four percent more by 
adding those hogs that are being under-negotiated. We 
definitely need to have more negotiated hogs that have a more 
proven market for each day for us to trade with. And by adding 
that to that column, we would pick up another 50 to 100 
percent. That is a big number, but that is a project we have. 
So we think we could double the amount of hogs that are going 
into that column.
    The Chairman. I will yield back my time, and turn to Mr. 
Costa, if he has some questions.
    Mr. Costa. All right. Thank you very much, Mr. Chairman. I 
was listening to the gentleman from Iowa, and was reminded of 
how much our industries have changed. The collective 
representation that you have there, I am more familiar with the 
cattle industry, and the poultry industry in California than I 
am with the hog industry. But the video of markets that take 
place daily, in which a lot of cattle is traded, is far 
different than 10 years ago, 15 years ago.
    Mr. Dopp, can you discuss what the cost is to your industry 
for the different reporting requirements? Has NAMI done a 
survey on that, and how do you look at it, in terms of the 
breakdown of the costs and evaluate it?
    Mr. Dopp. Mr. Costa, we have not done that analysis. What I 
can tell you is that when the program was initiated, the 
statute was originally enacted in 1999, it probably took a 
couple years, if I remember correctly, for the rulemaking 
process to finish. I know this, the companies that are required 
to report, that initial investment, that initial capital 
investment, if you will, was several million dollars, I am 
sure, for the companies, they had to reconfigure their computer 
programs. There are, I am sure, some ongoing costs because, if 
I remember correctly, with some degree of regularity, and Dr. 
Morris probably knows better than I, the agency occasionally 
makes some software changes, and other changes, such that 
companies have to adjust accordingly. What those numbers are at 
this point, I can't tell you. We haven't done the economic 
analysis at this point. It is 15 years after the fact, and 
those costs are sunk.
    Mr. Costa. No, I understand. That is why I want to go back 
and get some information from my local folks, to see what 
suggestions that they might have as well. Tell me, during the 
government shutdown, and a lot of us were very frustrated 
during that whole process, it should have never happened, it 
was irresponsible, but having said that, what happened within 
the industry? Did you evaluate the impacts when those services 
were deemed not essential, and how it dealt with the lack of 
information that has been provided now for 15 years?
    Mr. Dopp. Well, if you are asking, again, whether any sort 
of economic analysis was done, the answer is no, at least not 
by us. What I can tell you is that everybody needs to remember, 
not only does the producer community not have access to that 
information, the packers who are required to report not only 
what they pay for their livestock, but also what they receive 
for the boxed product, either beef or pork. Many of their 
sales, their customer relationships, are also tied to this 
information. It is fair to say, at least from my opinion, the 
producer and the packer/processor community were sort of 
operating in the dark collectively.
    Mr. Costa. For that period of time.
    Mr. Greiman, do you care to comment? I mean, you are kind 
of where the rubber meets the road, as you described your own 
circumstance.
    Mr. Greiman. Yes, I can comment on the government shutdown. 
In working with a packer right now, currently our operation is 
sending cattle out there to one of the packers on what we call 
a grid, and so I am getting paid based on the value of the 
cattle, and what they are worth to the packer. Those cattle are 
also going into a branded product line, and so when you do 
that, I am buying these cattle 6 to 8 months ahead of a time, 
knowing that they are going to go to that packer, and we have 
already agreed on a formula to price them, which at that point 
in time was the Nebraska weighted average.
    When we no longer received the Nebraska weighted average, 
all of a sudden we are kind of in limbo, because we have--these 
cattle are still going to market, the trade is still going on. 
We are still--the packers are still taking cattle, and I am 
still----
    Mr. Costa. You operate through a feedlot----
    Mr. Greiman. Yes, these were operated through a feedlot, 
but I also still have the cow/calf, and so these----
    Mr. Costa. Do you have a cow/calf operation?
    Mr. Greiman. We have both. Yes, we have both, yes. So, at 
that point in time, all of a sudden we had to have a phone call 
in terms of how are we going to price these cattle? It is okay 
to do that maybe for 1 week with a government shutdown, to say, 
``Okay, we are not going to have a third party verification of 
how these cattle will be priced,'' so we had to agree on a 
price. But they are--all of a sudden the branded products like 
that kind of find themselves in limbo, because I am committed 
to deliver the cattle, they are committed to take them, but we 
don't know how to price them.
    Mr. Costa. Yes. Well, it just kind of shows, as I said 
earlier, the complexity, and how much has changed over the last 
10, 15 years. And for some of your operators, some of the folks 
in my area that have markets in Asia, obviously this has an 
impact there, because we have product that you have a customer, 
and you want to satisfy your customer, and it all comes 
together.
    My time has expired, Mr. Chairman, but I thank the 
witnesses, and if we have another round, I will take another 
shot at them.
    The Chairman. Thank you, Mr. Costa. I want to recognize the 
gentlelady from Missouri, Mrs. Hartzler, for any comments, or 
any questions, that she might have.
    Mrs. Hartzler. Sure. I appreciate that, Mr. Chairman, and, 
as a pork producer most of my life, and a person that is 
raising cattle, cow/calf operation today, this is certainly an 
important topic for all of us. And, in Missouri's Fourth 
District, we have a lot of cattle, a lot of livestock of all 
kinds.
    Just quickly, does anyone on the panel not support timely 
reauthorization of Livestock Mandatory Reporting Act? Okay, we 
are all on board. I thought so, but I wanted to verify that. 
And we are aware that there have been ongoing negotiations 
within and between each of the industry groups represented here 
today. So, of the proposals that have been highlighted, are 
there any that are problematic for any of your organizations? 
Could this be a non-controversial issue here on Capitol Hill? 
Mr. Chairman, this would be amazing.
    My last question goes to Mr. Pfliger. Your testimony 
suggested the Committee consider requiring USDA report 1 year 
prior to the next reauthorization date that would provide 
recommendations on how to ``better and more inclusively 
accomplish price reporting in the current industry and market 
environment.'' So I was just wondering, has that suggestion 
been included as a part of your proposal for reauthorization, 
and do you have any particular issues in mind that you hope 
would be addressed by the report?
    Mr. Pfliger. This recommendation, that has not been part of 
our discussions, but was developed as we prepared our 
testimony, we would ask that the Committee consider the 
inclusion of the report requirement in order to better focus on 
all the parties' needs, and the improvements for mandatory 
price reporting to the reauthorization.
    Three years ago ASI commissioned a study by the Livestock 
Marketing Information Center to review MRP, how it could be 
improved. ASI spent about 18 months working with AMS, 
addressing the recommendations from the study, which have not 
been finalized. The LMIC report, and ASI's final report as a 
result of this process, are being submitted for part of the 
record. Many of the LMIC recommendations are not included in 
the ASI statutory reauthorization to the Committee, because we 
are still hopeful, and expect USDA to implement some of these 
recommendations. However, there is no assurance that USDA will.
    For instance, one of our more important issues that we 
believe should be addressed is that AMS have some flexibility 
in how prices are reported for the modern marketing 
arrangements between packers and producers, and how this change 
interprets the packer owned category. For example, one U.S. 
firm has a marketing arrangement with producers who owns the 
lambs all the way through, from the producer, through the 
wholesaler, to the retail product. And this firm handles about 
\1/3\ of the lambs in this country, and yet they are not 
allowed to report that lamb, even though the prices are 
recorded, because of AMS's definition of a packer.
    So if USDA is required to issue a report in consultation 
with the industry, all interested parties would have a much 
better view of where the issues stand prior to reauthorization, 
and which, in turn, would allow the Committee to focus on these 
issues needing attention.
    Mrs. Hartzler. Sounds good. Could you please get the 
Committee that language that you would like to have included in 
there? Could you----
    Mr. Pfliger. I am----
    Mrs. Hartzler. Could you get us the information that you 
would like to have included, the language?
    Mr. Pfliger. Absolutely.
    Mrs. Hartzler. Okay. Thank you very much. I appreciate 
that. I yield back.
    The Chairman. I will yield to Mr. Costa.
    Mr. Costa. Thank you very much. Just a couple quick 
questions here, Mr. Chairman.
    Dr. Morris, as we discussed earlier, the industries that 
are testifying here this afternoon have changed dramatically in 
the last 15 years, in terms of the processing, the marketing, 
and the markets that drive so much of the technology. The 
United States Department of Agriculture provides a great deal 
of information that provides an important role. Could you talk 
about some of the data that is being reported under this 
program to give Members of the Subcommittee here a sense of 
just how significant this information is that you provide?
    Dr. Morris.* You bet. Livestock Mandatory Reporting Program 
is a very powerful tool. Unlike the market reporting activities 
the Department carries out for a vast majority of the other 
commodities, which are collected through voluntary means, the 
LMR program requires, essentially, the nation's largest beef 
packers, pork packers, lamb packers, and lamb importers to 
transmit to USDA up to several times per day all of their 
purchases of livestock and sales of meat, in the case of 
importers, the imported product.
---------------------------------------------------------------------------
    * Editor's note: Dr. Morris did not testify, or submit a prepared 
statement; therefore, he is not listed in the Table of Contents.
---------------------------------------------------------------------------
    In terms of what we are capturing, we are right now 
publishing, through the LMR program, fully 80 percent of the 
slaughter cattle in the United States, fully 93 percent of the 
boxed beef trade in the United States, fully 94 percent of the 
hog slaughtered in the United States, 56 percent of the lamb 
slaughtered in the United States, 46 percent of the boxed lamb 
meat that enters commerce, and 87 percent of the wholesale pork 
that enters commerce.
    We communicate that information to producers through 62 
different daily reports in 47----
    Mr. Costa. And in real time?
    Dr. Morris. In virtually real time. It is within an hour of 
the time that we receive the information. We have made an 
investment in an IT system that then compiles that data. We 
have trained Market News reporters that then review that data, 
look for anomalies----
    Mr. Costa. Which gives the cattlemen, which gives the 
feedlot operator, which gives the packer all important 
information, in terms of how they best deal with their product.
    Dr. Morris. Absolutely true, and it depends on the 
commodity in question, but certainly, on one extreme, you would 
have the swine industry, that we aren't really reporting a 
price of what has occurred, as often is the case with the 
market reports we put out. The prices we are publishing 
actually derive the price for those livestock going to market.
    Mr. Costa. From the USDA's perspective, do you have a 
comment with regards to the impacts that the market felt as a 
result of the government shutdown, and this important service 
deemed as not essential?
    Dr. Morris. Without question, price discovery in the 
livestock sector was significantly impacted by the 17 days loss 
of data due to the shutdown. The broad impact, we believe, was 
clearly the unavailability of market use data for producers, 
growers, small farmers. Producers effectively had no market 
price information to determine the value for their livestock, 
which are perishable commodities. When animals are ready for 
market, they really need to be shipped at that point.
    Mr. Costa. I am glad you underlined that, because so much 
of what we produce in America, sadly, the consumer thinks it 
comes from the grocery store, and these are all perishable 
items that have a limited shelf life in the market--in the 
store that they purchase these at, and perishable nature is an 
important part of this all.
    Dr. Morris. The entire system is built upon the fact that 
they are ready for market at a certain time.
    Mr. Costa. Well, I have some other questions, Mr. Chairman, 
that are more of a technical nature that I would like to submit 
to the USDA at the appropriate time, I will do that, and I will 
yield back the balance of my time, and I thank you for holding 
this hearing. And we will take the information not only from 
our witnesses this afternoon, but I will go back home and ask 
my folks if they have any other thoughts on how we can build a 
better mousetrap, so to speak. And we hope to--I am certain--
that we will see bipartisan effort on this legislation.
    The Chairman. Absolutely. Thank you, Mr. Costa. I will now 
yield to Mr. Newhouse, if he has any comments and/or questions.
    Mr. Newhouse. Thank you, Mr. Chairman. Short on comments, 
but just a couple of questions, thank you. Thank you all for 
being here this afternoon. First of all, to start with a fellow 
farmer, and I am sorry I wasn't here for part of the testimony, 
so if you have covered this in other questions, my apologies, 
but, Mr.--could you pronounce your name for me?
    Mr. Heimerl. Heimerl.
    Mr. Newhouse.--producers of my state probably fall in the 
same category that you do, as being a rancher that you 
described a relatively small operation. So could you help me 
understand, by describing from your perspective the benefits 
you may see in a mandatory price reporting system, and also, 
maybe on the converse side, what issues you could see that 
would improve the system to make it better for small 
operations?
    Mr. Heimerl. Well, a mandatory pricing system is, to me, an 
absolute. If you go back to the voluntary, it was kind of one-
sided, whatever the packer, or the person that was recording it 
wanted to give and take, I guess. Mandatory, it gives all cuts, 
and all the record are all kept as needed, and, I guess I 
should say, are authenticated. And when it was voluntary, we 
didn't know what we were getting. Sometimes you only get what 
people wanted you to hear, I guess. Under mandatory, we know 
that it is a reliable source. The voluntary, you go back before 
1999, it was whatever the person wanted to trade in, or give 
the information to. So I don't think there is anything but 
mandatory that we can accept in this day and age to be 
acceptable.
    To update it and make it better, we worked as a group here, 
and with AMS, in saying that there are different reports as--we 
brought in a report today, three different items. This is an 
essential thing we have to have. We can't afford another 
shutdown within the system, as we did in 2013. But there are 
several things we always can tweak to go into the future, 
because markets do change. As far as different reports, we want 
the 24 hour report to make it into the next day reporting, and 
things like that. There is always tweaking we can do as the 
markets change through modernization and so forth, and new 
markets coming forward.
    Mr. Newhouse. Yes.
    Mr. Heimerl. But mandatory is the only way that it can go. 
It is just an absolute for us in our business.
    Mr. Newhouse. Thank you very much. Mr. Dopp, if you could 
perhaps put on your consumer hat, and speak from a perspective 
of what kinds of benefits American shoppers could anticipate 
under a mandatory price reporting system?
    Mr. Dopp. I look at it this way: The greater the 
transparency, in terms of what the information that the 
producer gathers, the information that the packer/processor 
gathers, and the information, frankly, that my members, 
customers, gather hopefully provides for a more efficient, more 
effective marketplace, and hopefully that results in lower 
prices to the consumer. And that is what this system, I 
believe, is intended to create. That all flows to the--
ultimately it is supposed to flow to the benefit of the 
consumer, I believe. Have I answered your question?
    Mr. Newhouse. Yes, I think so.
    Mr. Dopp. Thank you.
    Mr. Newhouse. Yes. Thank you. Quickly, Dr. Morris, could 
you talk specifically about what steps are taken to protect 
buyer and seller identity in the price reporting process?
    Dr. Morris. We are required under statute to protect the 
confidentiality of those packers and lamb importers that are 
required to report. We basically subject all of the information 
that we receive to a statistical test that was referenced 
earlier in the testimony that ensures that. That has withstood 
external review from a variety of groups. We have worked 
closely, as, especially the sheep industry, has seen 
consolidation in the packing sector, and in the firms that are 
required to report, to see if there are modifications that can 
be made to that, and we are willing to look into those issues 
for sure.
    Price reporting is a very powerful tool. You are, to those 
firms that are required to report, exposing essentially all of 
their business practices. As Mr. Dopp referenced, hopefully 
that brings a much more efficient and effective marketplace, to 
the benefit of consumers, but it is incumbent on us to ensure 
that that information also protects the business interests of 
those packers, which are required to essentially disclose 
information that other market participants are not.
    Mr. Newhouse. Okay. Thank you very much, Mr. Chairman, and 
appreciate the opportunity. I yield back.
    The Chairman. Thank you, Mr. Newhouse. Unless my friend Mr. 
Costa has another question, I am going to say a few closing 
remarks, and then yield to Mr. Costa for any closing remarks he 
may have.
    Let me just thank all the witnesses for your willingness to 
come before the Committee today. I appreciate your willingness 
to work in good faith on this issue. It is very important that 
we work together--packer, and producer, and everybody at the 
table--and do everything possible to come to a consensus that 
is a win-win across the board, and we are well on our way to 
that. We still have a little bit of work to do, but I look 
forward to clearing that hurdle soon, and I appreciate and 
commend you for your dedication, and your willingness to work 
with us to get this reauthorization underway.
    Mr. Costa, I will yield to you, if you have any closing 
comments.
    Mr. Costa. Thank you very much, Mr. Chairman. I just want 
to thank you, and Members of the Subcommittee, for holding this 
hearing. I think it is our important role, as the Committee of 
oversight, to provide the due diligence, to gather the 
information, to provide the reauthorization. Look forward to 
working with you on this important legislation to America's 
livestock industry. And I thank the witnesses for your 
testimony, and we will continue to work together. Thank you 
very much.
    The Chairman. Under the rules of the Committee, the record 
of today's hearing will remain open for 10 calendar days to 
receive additional material and supplementary written responses 
from the witnesses to any questions posed by a Member. This 
Subcommittee on Livestock and Foreign Agriculture hearing is 
now adjourned.
    [Whereupon, at 3:27 p.m., the Subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
  H.R. 2051, Mandatory Price Reporting Act of 2015, Submitted by Hon. 
     David Rouzer, a Representative in Congress from North Carolina

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                                  [all]