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Impact of Boxed Beef Price Reporting Error on Cattle Prices by James Mintert, Extension Agricultural Economist, K-State Research & Extension Three studies have been conducted on the impact USDA's boxed beef price reporting error from early April through mid-May had on cattle prices. USDA, in a report to the Secretary of Agriculture written by the Livestock Mandatory Pricing Review Team, concluded that the weekly average slaughter cattle pricing error attributable to the error in boxed-beef price reports from early April through mid-May ranged from a low of $0.02 to a high of $0.56 per cwt. and averaged $0.29 to $0.32 per cwt. Price impacts varied for steers and heifers and also for high choice vs. low choice cattle. Analysis conducted at Kansas State University by Ted Schroeder and James Mintert concluded that the error did not affect slaughter cattle prices until late April, but when negative price effects were detected, they were larger than indicated in the USDA report. Negative price effects appeared to begin the week ending April 27th and continued through the week ending May 18th, according to the K-State analysis. Negative impacts on slaughter cattle prices ranged from a low of $0.54 to a high of $2.39 per cwt. Wayne Purcell at Virginia Tech concluded that the price reporting error had no negative price impacts during April, but did have a negative effect on prices during May. Purcell's estimates of weekly average price impacts ranged from a low of $0.50 to a high of $2.83 per cwt. Based on Purcell's analysis, slaughter cattle prices were negatively affected by the boxed beef price reporting error from the week ending May 4th through the week ending May 25th. At this point it appears unlikely that USDA will compensate the industry for losses incurred as a result of the boxed beef reporting error. In the report to the Secretary of Agriculture, the Livestock Mandatory Price Reporting Team (LMPRT) concluded that USDA "has no authority to pay compensation for losses which may have been sustained by producers as a result of errors in implementation of USDA's price reporting system." The report also indicated that the Office of General Counsel concluded that lawsuits for damages filed by producers were not likely to be successful since there did not appear to be any basis for liability under the Federal Tort Claims Act. As a result, it appears that the only plausible avenue for compensation is for Congress to pass legislation authorizing payments to be made. USDA's LMPRT did not recommend USDA support passage of legislation authorizing compensation. One problem is identifying a payment scheme which treats all industry participants fairly, a task which would be difficult if not impossible. For example, some cattle feeders purchased feeder cattle at the same time they sold slaughter cattle. Since feeder cattle prices were also negatively impacted, calculation of a net loss would be necessary to determine how much compensation would be due producers in this situation. |
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