APPENDIX I JUSTIFICATION FOR MEAT PACKING A. PROCUREMENT 1. Requests for data concerning purchases at various corporate accounting levels have a dual purpose: (a) To ensure that all purchases for a particular slaughtering facility are accounted for; and (b) To determine the relative buying power of various procurement levels. 2. Questions 2 through 4 attempt to determine the disposition of all cattle which are fed by the company. Questions 3 and 4 request specific information concerning the revenue contribution of packer-controlled feedlot operations. 3. Questions 5 through 10 attempt to account for all purchases of cattle for slaughter made from stocks not fed by the company. These six questions specifically deal with cattle purchased on different types of liveweight bases-f.o.b., delivered, and on a contract basis from the feedlot. 4. The series of questions, 11 through 17, analyze all purchases made on a carcass basis. The differentiation between carcass and liveweight questions is made to evaluate any trend in the direction of either purchase basis, and also to avoid problems of aggregation if the two were considered simultaneously. Consignment purchases are examined according to degree of lag in payment to ensure that there are no abnormal waits in remuneration for the farmer/feeders. 5. Question 19 provides a sampling base for data which is not usually aggregated on a weekly basis. The results from this analysis will provide a check against the weekly data provided in the remainder of the questionnaire. 6. Question 20 analyzes the purchase and sale of carcasses from other packers in order to evaluate charges of imperfections in market structure at the procurement level. 7. The same questions explained above are posed for different procurement levels-21-40 for regional accounting management entities, 41-60 for slaughtering facility purchases, and 61-80 for all other purchases. 8. An examination of specific problems in the area of procurement is provided by the series of questions 80 through 84. Question 81 examines special considerations granted to larger customers; 82 determines revenues derived from custom slaughtering, especially relevant during the period of the price freeze; 83 attempts to ascertain the offal-beef ratio; and 84 provides data on all non-beef purchases so that general corporate costs can be allocated to the production of beef. 9. The section of questions numbered 85 through 115 provides data on individual expense items, both of an operating and capital nature. Though some of the individual questions may seem overly specific in nature, each one is necessary in order to avoid problems arising through the use of different accounting procedures from firm to firm. If more general categories were utilized, the results would not be directly comparable. 10. Question 116 seeks to determine general buyer's practices in order to gauge the general degree of market power which each firm possesses. B. SALES 1. Questions 1 through 21 ascertain the individual expenses associated with the sales operation affiliated directly with the slaughtering facility. 2. Questions 22 through 42 ascertain the sales expenses incurred by branch houses. 3. As in the procurement section, question 43 is to ensure that all sales of items produced at this slaughtering facility are accounted in the questionnaire. 4. Questions 44 through 49 seek a detailed breakdown of sales information for the most important categories of sales. Both overall sales and sales to retail stores are broken down according to weight and revenue of steers and heifers purchased either on an f.o.b. or delivered basis for each quality and yield grade. This degree_of specificity is needed in order to adequately assess charges that USDA spread data do not account for sales and purchases of Good grade beef. In addition, it is necessary to separate f.o.b. and delivered purchases in order to properly ascertain the impact of transportation charges. 5. Questions 50 through 55 merely ask for the weight and revenue of all carcass, fores, and hinds sold to all other categories of customers since it is clearly not feasible to require a specific breakdown for all categories of sales. 6. Questions 56 and 57 analyze sales to other meat packing companies in order to assess charges levied regarding manipulation of Yellow Sheet Prices. 7. Question 58 asks for information on a sample basis which is not usually aggregated. This information is needed both to provide a check of weekly data provided elsewhere in the questionnaire and to gauge the relative frequency of different types of sales to evaluate market structure questions. 8. Question 59 evaluates the total amount of transfers made to affiliated branch houses. This disaggregation is undertaken for purposes of evaluating industry organization, since sales made from branch houses are usually made to smaller customers than those made from other corporate accounting levels. 9. Question 61 evaluates the problem of rejection in the beef industry so that relative industry efficiency may be compared with other industries. Question 62 is important to questions of market structure since different sources of prices may result in differing sales procedures. |