Iowa Public Television


Price Disclosure Under Estimated Prices

posted on July 6, 2001

While packaging certainly can add value to commodities, producers, especially livestock producers, have been struggling in recent years to determine value.

As the number of meat processors has shrunk, more of livestock production has become part of the "captive" supply – produced under contract to the processors. Lost in the new order has been the disclosure of the price packers have paid to farmers.

In an effort to provide more information about market prices, the government initiated a system of price reporting. However, the effort has been less than successful. Indeed, it seems to have cost producers.


Price Disclosure Under Estimated Prices

USDA says cattle producers lost between $15 million and $25 million because of errors in the government's new system for reporting livestock prices. But a study issued by the department this week said it was impractical for the government to try and compensate producers for their losses.

Based on its own commissioned studies, the National Cattlemen's Beef Association says producers lost at least $42 million. The group says it will poll its members to decide whether to pursue compensation.

The reporting errors involved underestimated prices paid by packers for beef. Producers and packers use the price reports to negotiate deals and track fluctuations in demand. Some cattle prices are pegged directly to the reports.

USDA blamed the errors on software problems, but also announced changes in confidentiality rules that will make more data available in the daily reports.

According to independent beef producers, the change in confidentiality rules was necessary to plug gaping loopholes in the reporting system.

Under the old rules, disclosure of prices was not required in markets where there were fewer than three companies buying livestock ... or where just one firm controlled more than 60 percent of the purchases. Given the high level of concentrated ownership in the beef packing industry, that meant many of the 91 reports issued by USDA since mid-May had been left blank. The lack of data primarily affected producers in Texas, Oklahoma, Kansas and Nebraska.

Tags: agriculture cattle livestock markets news USDA