AMS Recalculating Cutout Values

May 21, 2001

The American Meat Institute says it is keeping in touch with USDA's Agricultural Marketing Service to determine the scope of a problem with boxed beef cutout and primal cut values reported by the agency and ensure miscalculations do not occur in the future. The values reported in the National Daily Boxed Beef Cutout and Boxed Beef Cuts reports for April 3 through May 11 may have been incorrectly calculated due to a technical error in the computer program for USDA's mandatory price reporting system.

AMS is recalculating the boxed beef cutout values from April 3 through May 11 and primal cut values from April 3 through May 15 and will post the recalculated values in a future reports. Corrections of boxed beef cutout values for May 14-15 have been issued. The calculations for boxed beef cutout and primal values beginning May 16 are correct, says AMI

Boxed beef cutout and primal cut values may be accessed at http://www.ams.usda.gov/lsg/mncs/ls_mpr.htm.

AMI Senior Vice President of Regulatory Affairs and General Counsel Mark Dopp said the inaccuracies "are unfortunate." He added, "As we understand the problem at this point, the error occurred due to a software problem that has been identified and corrected. Mandatory price reporting of meat and livestock is the law, and we will do everything possible to ensure that this new system operates as effectively as possible."

He continued, "At this point, it is impossible for us - or anyone who does not have the complete, revised data at hand - to determine the scope of the problem or its financial impact. Numbers quoted in some news reports are based largely on speculation. We understand that AMS intends to issue actual, corrected numbers as early as May 21 (today).

Although producers may have been underpaid for their livestock as a result of this error, meat packers also may have not received full value for their beef based on the problematic data and may also have suffered economic losses, according to Dopp. "We hope to meet with USDA next week to learn in greater detail the degree of error and to participate in the development of a reasonable and workable solution for all parties. We also hope to work with USDA to prevent software problems like this one in the future," he said.

A report from Chicago by BLOOMBERG NEWS said the problem may have cost operators of cattle feedlots "millions of dollars." The new program may have undervalued beef from the start, analysts said. "We rely on beef prices as a negotiating source on pricing cattle," said Paul Engler, chairman of Cactus Feeders Inc. in Amarillo, TX, the nation's largest feedlot operator. "If a seller was basing his asking price on this information, then there probably was a significant difference."

The report says feedlots say it is still too soon to determine the full extent of any losses as a result of the computer error.