Livestock Mandatory Price Reporting: A Literature Review and Synthesis of Related Market Information Research

Abstract

Congress passed into law the Livestock Mandatory Reporting Act in 1999 and a mandatory pricing reporting system for livestock and meat began in 2001. The implementation was problematic. It is also difficult to find any research prior to the legislation that demonstrated inadequacies in the voluntary price reporting system that had been in existence since the Agricultural Marketing Act of 1946. Thus, there is little evidence upon which to evaluate the new system. Available research suggests mandatory price reporting increased transparency and information at the national level and across cash and non-cash market choices, reduced price information in regional markets, and increased spatial and vertical market integration. Research shows diverse opinions on the success of the new system. Research also shows the potential for retail meat scanner data to significantly improve the accuracy of reported retail meat prices. Related research suggests clear benefits of the new system will be hard to measure. A primary conclusion from the literature is that benefits were unforeseen and unintended consequences were large. And that continued cost/benefit oriented research of the policy and legislation would be useful.

Impact of the livestock mandatory reporting act on the vertical price transmission within the beef supply chain

“…Results indicate that the reduced noise improves buyer competition, which leads to higher reserve prices of sellers and higher profits to sellers. Koontz and Ward () review the literature on the impact of the MPR but note that several questions remain unanswered.…”

Procurement Price Relationships for Fed Cattle and Hogs: Importance of the Cash Market in Price Discovery

“…Koontz and Ward () review the theoretical and empirical literature related to mandatory price reporting (MPR). Some theoretical work suggests potential adverse consequences from MPR regarding possible collusive behavior by buyers.…”

“…Tomek () argued increased price variability was related to a decline in number of transactions, i.e., a thinning market. Additional research should focus on the increased variability of cash prices and whether its cause is market thinning, in particular the increased use of AMAs, or by mechanical changes in price reporting discussed by Koontz and Ward (). Lastly, research should address whether or not increased price variability is related to potential market power or market manipulation by packers.…”

“…Since implementation of LMRA in April 2001, most research related to the Act has focused on availability and transparency of data and how it affected price levels and regional price relationships (Franken, Parcell, & Tonsor, ; Grunewald et al, ; Pendell & Schroeder, ; Perry et al, ). Passage of mandatory price reporting legislation generated several new data series of both prices and volumes not before available regarding AMAs for both fed cattle and hogs (Koontz & Ward, ).…”

Risk and marketing behavior: pricing fed cattle on a grid

“…Another strand of the asymmetric information literature is concerned with the effect of imperfect information among packers on their coordinated behavior and market efficiency. Numerous articles (Azzam, ; Boyer and Brorsen, ; Koontz and Ward, ; Njoroge, ; Njoroge et al., ) have evaluated whether the increased informational symmetry (price transparency) intended by the passage of the Livestock Mandatory Reporting Act of 1999 (MPR) increased coordination among packers. Grid pricing is a tangential issue in these MPR studies.…”