Industry waits as USDA implements the new price reporting system and works out the glitches.



Mandatory price reporting — once it is fully implemented — will help pork producers find the best markets to earn the most from their hogs, says Weldon Hall, assistant branch chief of livestock and grain market news for USDA's Agricultural Marketing Service (AMS).

“Producers can look and see how their hogs stack up against all others on quality and price and buying program,” he says. “They will be able to go to the matrix and compare their kill sheet data.”

Each of the regional market reports has a kill sheet matrix that uses backfat, loineye area and loineye depth to chart carcass prices.

The new system launched April 2. Fifteen of 90 total price reports (for all species) were available that day. The transition from the old voluntary reporting system to implementation of new computer technology at packing plants and AMS played a role in temporarily limiting information available to livestock producers.

As of mid-May, AMS had ramped up to 83 reports available on a regular basis.

Hall understands the frustration of producers trying to establish a price for their hogs during the transition period in April and the first half of May.

“Patience is difficult when they are trying to get out in the marketplace and establish a price,” he says. “They have to be patient. We want to have all the information correct first.”

U.S. Agriculture Secretary Ann Veneman has ordered an internal review of the system, due to inaccuracies in hog and cattle reports, which may have cost producers and packers millions of dollars.

Background

In 1999, Congress passed the law authorizing mandatory price reporting. Under the law, pork packers who processed more than 100,000 hogs a year are required to report prices, types of contract and negotiated purchases and slaughter hog numbers twice a day to USDA. The reports include regional hog purchase and slaughter reports, national hog purchase, prior day slaughter, non-carcass premium and slaughter cost reports.

Agricultural economists expected the transition to mandatory reporting to take time.

“I'm not surprised by the slow start. In addition to having to change the way people — packers and market reporters — operated the computers, they also had to communicate,” says John Lawrence, Iowa State economist. “I imagine that there are several ‘bugs’ to be worked out of the system.”

Producers must remember that the new system is complex, and the old reporting system had been in place for decades, says James Mintert, Kansas State economist.

“It's not surprising that there have been a large number of problems,” he says. “It appears that price information made available under the new reporting system will continue to evolve for some time.”

Making It Complicated

The new reports try to combine two important, but separate, market functions. The first is timely information on the direction of the market, which producers use to make marketing decisions. The second is very detailed information to make the market transparent and fair. The system combined the two functions and was set up to gather, summarize and then turn out detailed market information.

“I argued that we should separate the two functions and have timely superficial data throughout the day and very detailed, very complete data dumped to USDA overnight or over the weekend,” Lawrence says.

3/60 Guideline

One of the mechanisms limiting information available to producers is the “3/60” guideline. The guideline restricts USDA from releasing information if fewer than three packers in a region report purchase and slaughter data, or if one packer contributes more than 60% of the data.

AMS is researching new options to replace the 3/60 rule, Hall says.

“We are looking at other statistical methods that would still protect individual packer confidentiality,” he says.

One of the options may be a 3/80 guideline (no information reported if fewer than three packers or if 80% of the data comes from one firm.)

“We are taking information where the 3/60 rule was used and studying it to see how many reports could be released under these guidelines,” he explains.

After they find the best option, AMS officials will have to get approval from Veneman and the Office of Management and Budget before changing the guideline. Hall could not estimate how long that process would take.

The confidentiality rule is not new. Lawrence finds similarity between the 3/60 guideline and USDA reporting guidelines for other data. “The Census of Ag data shows no data are reported for some categories — for example, county level data on broilers or laying hens in Iowa — even though we know there are operations of these types in a county,” he explains.

Patience is a Virtue

Steve Meyer, director of economics for National Pork Producers Council (NPPC), asks producers to allow AMS to fully implement the complete reporting package.

“This is a big system. Producers asked for this,” he says. “Everyone is working hard to comply with that law, and I think they are going to. We have to be a little patient about it.”

Meyer also stresses that producers need to study the reports carefully and learn what the numbers mean. He suggests printing out the entire list of pork reports from the AMS Web site at www.ams.usda.gov/lsg/mncs/LS_MPR.htm.

Meyer suggests that producers continue reporting price via USDA's voluntary producer reporting lines.

“We ought to be calling in and reporting prices as confirmation of what we are seeing under the mandatory price reporting laws,” he says.

The producer reporting telephone numbers include:

  • Illinois: (888) 458-4787;

  • other Eastern Corn Belt: (217) 782-4925;

  • Missouri: (573) 751-5528 or (573) 751-4339;

  • Iowa and Western Corn Belt: (800) 687-7410;

  • North Carolina and Mid-South: (912) 226-2198; and

  • All others: (800) 687-7410.



Educational Materials

NPPC is preparing a packet of educational materials on mandatory price reporting. Visit www.nppc.org for more news about these materials.