ORGANIZATION FOR COMPETITIVE MARKETS

P.O. Box 6486

Lincoln, NE 68506

Web site: www.competitivemarkets.com

Date: January 21, 2002 For Immediate Release

Contact: Fred Stokes: 662.476.5568

Michael C. Stumo: 860.379.6199

GIPSA Finds Packers had 28% more Captive Supply than Previously Revealed

USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA) released a report and audit on Friday (January 18, 2002) revealing that meat packers have been under reporting their captive supply numbers. In their 1999 annual reports to GIPSA, for example, meat packers previously reported that their captive supply numbers were 25.2% of annual slaughter. The audit revealed that the 1999 captive supply numbers 32.3%, more than 28% higher than what packers reported. GIPSA also reiterated its definition of captive supplies.

“It seems that meat packers, like other corporations in the news, provide inaccurate information calculated to deceive,” said Fred Stokes, president of OCM. “Producers have long known that packer captive supply numbers were larger than packers admitted. The USDA-GIPSA audit has now shown this to be true.”

GIPSA claimed that the difference in numbers was due to a “misunderstanding” in their definition of captive supply. Thus, the agency has now restated its definition of captive supply as “livestock that is owned or fed by a packer more than 14 days prior to slaughter, livestock that is procured by a packer through a contract or marketing agreement that has been in place for more than 14 days, or livestock that is otherwise committed to a packer more than 14 days prior to slaughter.” This definition will be published in the federal register.

“Producers need to bear in mind that the new captive supply numbers were for 1999,” stated Stokes. “We know that in 2002, the numbers are much higher. Also, the hog industry is reported to have at least 83% captive supply. The captive supplies allow packers a tremendous amount of control over the markets.”

Further, it is a mistake to conclude that the non-captive supply cattle in 1999 constituted a truly competitive spot market where producers and packers actively negotiate on price. “Many of the non-captive supply cattle are sold without negotiation because producers have no choice in packers… there is only one buyer in many regions,” said Michael C. Stumo, general counsel of OCM. “Additionally, many cattle sold are ‘relationship cattle’ in that the producer just sends them to a packer because he has a relationship with that packer that is not a true contract. The number of cattle and hogs which make up a truly competitive market are a small percentage indeed.”

The Organization for Competitive Markets is a multidisciplinary, nonprofit group of farmers, ranchers, academics, attorneys, and policy makers dedicated to reclaiming the agricultural marketplace for independent farmers, ranchers and rural communities.

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