010555 USDA Admits Errors in Livestock Price Reporting

Washington - The beef industry is reeling from the government's disclosure that a new livestock-reporting system was spitting out inaccurate price reports during its first six weeks of operation.

Millions of transactions, including contract sales and individual cattle and beef trades, could have been affected by the twice-daily reports, which understated wholesale beef prices, industry experts said Friday. The Agriculture Department, which runs the system, blamed the mistake on a software error.

The reports are closely watched by both meatpackers and producers to track demand for beef.

“I don't know how we'll ever calculate” the loss, said Rosemary Mucklow, executive director of the National Meat Association, a packers group. “It's going to be huge.”

Cattle Buyers Weekly, a trade publication, estimated that cattle producers and traders may have lost up to $40 million.

One key price indicator affected by the error jumped about 6%, or nearly 8 cents a pound, when USDA corrected the system on Wednesday. There was probably no significant impact on supermarket prices, industry officials said.

The new system, which started April 2, was mandated by Congress in 1999 to provide livestock producers with more accurate and timely data. The system is based on reports that packers are now required to give the Agriculture Department about their cattle purchases and beef sales. It replaced a smaller system that was based on voluntary reports.

Agriculture Secretary Ann Veneman ordered an internal review of the system.

“We are taking this very seriously. We're very concerned about it and we're going to address it very quickly,” she said.

She didn't rule out providing compensation to producers but said she didn't know whether the department had the legal authority to do so. Some producers are expected to seek reimbursement from packers.

The extent of the producers' and packers' losses won't be known until all the daily reports are corrected, said Keith Collins, the department's chief economist.

The error came at a peak season for cattle trading, as packers speed up production to meet summer demand for beef. More than 700,000 cattle are slaughtered weekly at this time of the year.

“Virtually every transaction that took place was skewed at some level, whether it's very minor or dramatic,” said Jay Truitt, executive director of legislative affairs for the National Cattlemen's Beef Association.

The biggest impact of the mistake would fall on sales contracts that were tied directly to the inaccurate price, industry officials say. One major packer estimates that 20% of cattle are purchased under such contracts.

Sen. Tim Johnson, D-S.D., asked Veneman to meet with farm-state senators. “Producers make decisions daily on when to market their livestock and they need accurate, timely information to make sound decisions,” he said.

Even before Thursday's disclosure, some producers were complaining that they were receiving less data under the new system than they did before.

About 15% of the 91 reports issued under the system have been blank because of confidentiality rules that prevent the disclosure of prices in markets where there are fewer than three companies buying livestock or where one firm controls more than 60% of the purchases.

The rules are meant to prevent disclosing what individual packers are paying. The rules did not apply to information that was released voluntarily.

The lack of data has primarily affected cattle producers in Texas, Oklahoma, Kansas and Nebraska.

The system was developed under the Clinton administration and was undergoing testing when Veneman took office in January.

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