Pricing Program Fix Announced

July 3, 2001

USDA has announced a series of improvements to be made in Livestock Mandatory Price Reporting Program to ensure more accurate and complete collecting, disseminating and reporting of market data by the Agricultural Marketing Service (AMS). The National Cattlemen's Beef Association said the improvements will increase the amount of price reporting information disseminated and is expected to improve the reporting program overall.

"The review by our team outlines several important measures that USDA will begin taking immediately to ensure the effectiveness and reliability of these programs," said Agriculture Secretary Ann M. Veneman. "It is important that we continue to build and maintain a system of checks and balances to prevent any potential error in reporting."

On May 18, 2001, Secretary Veneman assigned a team of experts to review the program after inaccurate reports for boxed beef carcass values were released during its first six weeks in operation.

Tuesday the team submitted its report, outlining findings and recommendations as follows:

1. There was a programming error and inadequate testing done prior to and after April 2 to ensure accuracy of reports. To correct this, AMS will now parallel test the data to experience a wide range of reporting conditions; work with livestock/meat industry to develop realistic validation data sets; use validation data sets to test any change in programming; test all changes on test systems and develop additional procedures to ensure correct input data.

2. The audit surveillance plan for ensuring the accuracy of data being submitted is behind schedule and needs improvement. To correct this, AMS will accelerate the audit process, change job hiring specifications, seek additional personnel details or utilize other agency personnel for audit purposes.

3. Confidentiality provisions are preventing release of a significant portion of information, and requires change. The Department will move forward on an alternative confidentiality standard which will apply confidentiality standards to data collected over a multi-day period rather than the current several hour collection period.

4. Cow-calf operators and feedlots incurred financial losses totaling $15 – 25 million, while losses to packers and futures traders are undetermined. Because producer losses are an indirect effect of the misreported data, loss estimates may vary widely, depending on assumptions used to develop the estimates. The review team found that USDA is not liable for any losses incurred and has no authority to make compensation payments as a result of the misreported data. The review team did not recommend that USDA support legislation to provide payment to producers.

"The change in this reporting structure under the new law was a huge undertaking that fundamentally changed the reporting system," said USDA Chief Economist Keith Collins. "Through these recommendations, our dedicated team of employees will have more effective tools to ensure collectively the continued integrity of the system."

On April 2, 2001, AMS began collecting and disseminating livestock market information under the Livestock Mandatory Reporting Act of 1999. The new law required substantial changes to the reporting program, including nearly doubling the number of required reports and releasing reports in a more expeditious manner. Under the program, larger packers and importers are required to report to USDA the details of all transactions involving purchases of livestock and imported boxed lamb cuts, and the details of all transactions involving domestic and export sales of boxed beef cuts, sales of domestic and imported boxed lamb cuts, and sales of lamb carcasses.

The review team's report is available at http://www.usda.gov/oce/mp-report/index.htm.

NCBA Chief Economist Chuck Lambert said, "We strongly support the USDA plan to modify confidentiality standards. NCBA is pleased that USDA responded to industry concerns about the limited amount of information being released and adopted cattle producers' recommendations for change. NCBA policy was adopted during the February 2001 convention calling for modification of confidentiality standards."

Lynn Cornwell, NCBA president, "applauded" Veneman "for her quick response and equitable solution" and added, "This new proposed system will allow greater access to pricing information."