010565 USDA Corrects Beef Price Reports

Washington - The Agriculture Department corrected six weeks' worth of livestock pricing reports and began evaluating the financial impact of the errors on cattle producers and meatpackers.

The errors in the reporting system - a new system that began operating April 2 - generally understated the prices that packers receive for beef. Producers and packers use the price reports to negotiate deals and to track fluctuations in beef demand. Some cattle contracts are pegged directly to the price reports.

Because of the errors, prices for beef graded as “choice” were reported about 2.3% lower than they should have been on average, the department said. Price reports for beef that's classified as “select,” a lower grade used for leaner meat, averaged about 0.4% too low.

On a few days, the price reports were actually too high, said Keith Collins, the department's chief economist.

The department will now use the corrected reports to determine how much money the beef industry may have lost by relying on the inaccurate reports.

“We're trying to get a handle on how many contracts or what portion of the market settles” on those reports, Collins said.

The department's lawyers do not think the government can be held legally liable for the errors, Collins said.

“This was an error by public employees performing their duties in a workmanlike, well-intentioned way,” he said.

USDA has blamed the mistakes on a software error. The price reports, which are issued twice daily, are estimates of the average values of beef carcasses based on prices that packers are getting for individual cuts of beef.

The biggest impact of the mistake would fall on sales contracts that were tied directly to the inaccurate reports. Producers could seek compensation from the department or Congress for their losses.

“Our next step is to take these numbers out, put them into the grinder and see what we can come up with as to the impact on the nation's producers,” said Jay Truitt, executive director of legislative affairs for the National Cattlemen's Beef Association .

The new reporting system uses pricing data that packers are now required to give USDA. It replaced a system that relied on voluntary reports.

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