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010714 USDA Errors Cost Cattlemen $25 Million

July 3, 2001

Washington - Cattle producers lost $15 million to $25 million because of errors in a new system for reporting livestock prices that was started this spring, the Agriculture Department said.

However, a study issued by the department said it would be impractical and unnecessary for the government to compensate the industry for the losses.

“When you get down to an individual producer it's almost impossible to know what their losses were,” said the department's chief economist, Keith Collins, who directed an internal review of the reporting system.

The National Cattlemen's Beef Association estimates the losses were much higher, at least $42 million, based on studies done for the group by economists at Virginia Tech and Kansas State University.

The errors generally understated the prices that packers were receiving 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. USDA disclosed the mistakes on May 17 and blamed them on a software error.

“It's unreasonable to think that every time the government has a misreporting in some form or another of economic intelligence ... that the government should pay a compensation claim on that,” Collins said.

The National Cattlemen's Beef Association plans to poll its state affiliates to see if they want to pursue compensation, said Chuck Lambert, the group's chief economist.

“All these analyses are based on econometric models and the outcome is determined by the assumptions that go into them. It's entirely possible that scientifically valid models can come out with different results.”

Lambert praised USDA for announcing changes in confidentiality rules that will result in more data being available in the daily price reports.

Many of the 91 reports issued under the system have been blank because of the 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.

As a result of changes recommended by the report, USDA said it could disclose more information in the reports without disclosing the identity of the companies.

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

The report also said it would improve its testing of the reporting system and accelerate its auditing of meatpackers to ensure that the data they are providing are accurate.

Wayne Purcell, a Virginia Tech economist who performed one of the two studies for the producers group, said the industry's losses from USDA's errors could be as high as $54 million.


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