The driving force behind the
use of alternative marketing agreements by
meatpackers and livestock producers is
“increased demand by consumers for higher and
consistent quality beef,” according to an
interim report to Congress released by the
Grain Inspection, Packers and Stockyards
Administration (GIPSA). The report, entitled
“Spot and Alternative Marketing Arrangements
in the Livestock and Meat Industries,” was
mandated by Congress in 2003.
“This
report confirms that alternative marketing
agreements are good for all participants, from
the producer down to the ultimate consumer,”
said J. Patrick Boyle, president and CEO of the
American Meat Institute. “These
market-driven arrangements allow consumer
preferences, notably product quality and
consistency, to guide the meat production
system,” he stated. “These factors help
ensure consumer loyalty and potentially boost
overall meat consumption.”
The
report’s summary notes that “increased
demand by consumers for higher and consistent
quality of beef is the driving force toward the
use of marketing arrangements." Such
arrangements allow market participants to
improve information sharing and supply chain
management in the beef and pork industries.
Meatpackers are able to “secure slaughter
needs and ensure cattle and beef quality
control” through a combination of alternative
marketing agreements and the cash market, the
report says.
Interestingly, the
report called the findings of studies that
looked at the relationship of alternative
marketing agreements with cash market prices,
“statistically insignificant.”
“Producers [who use marketing agreements] can
benefit through reducing price risk, obtaining
favorable financing, ensuring a buyer for
cattle, and reducing marketing costs. For meat
packers, forward contracts secure slaughter
needs, secure quality cattle, reduce
procurement costs, and reduce price risk,”
the report stated.
“Quantity and
quality assurances, risk management and market
flexibility” have underscored the move away
from cash markets in the pork industry,
according to the report. "Hog farmers use
alternative marketing arrangements because of
the desire for market access, income stability
[due to price volatility], improved efficiency,
market security, access to capital, and reduced
marketing management. Packers' rationale for
using alternative marketing arrangements
includes input supply, assurance and control,
improved response to consumer demand, expanded
and diversified operations, and risk
sharing."
The report also
notes the downstream impact consumer
preferences and retailers have had on spurring
the movement toward marketing agreements.
"Changes in demand due to non-price factors,
including those related to demand for food
consumed at home versus away from home, have
increasingly become important for beef and
pork." "Retailers are attempting to bolster
meat sales by tailoring sales to consumers who
are time starved, nutrition conscious, quality
conscious, and environmentally conscious."
“The best chance of future domestic
growth for the meat industry lies in our
ability to respond rapidly and effectively to
signals from consumers. Market and poll data
tell us that the ability to produce a
consistently good product, and offer it in an
easy to prepare format, will be a key to
success for our industry,” noted Boyle.
Consumer Demand for Quality, Consistency, and Loyalty Driving Force Behind Use of Alternative Marketing Agreements, Says Interim GIPSA Report
Tuesday, August 16, 2005
For more information contact:
David Ray Vice President, Public Affairs 202-587-4243 dray@meatinstitute.org |
Janet Riley Sr. Vice President, Public Affairs 202-587-4245 jriley@meatinstitute.org |

