"Due to a technical error in the computer program for the Mandatory Livestock Reporting System, the boxed beef cutout and primal cut 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."

As I have said since Mandatory Price Reporting was first conjured up; asking overzealous politicians to create legislation in order to solve a problem (perceived or otherwise) with limited information in an election year is a bad idea! So, does this fiasco spell death to a bad idea or is this just the first of many unintended consequences?

The problem! Monday and Tuesday - no published reported prices and beef cutout values: by Thursday May 17, the report reappeared and with it came the above explanation, and suddenly the cutout was $6/hundredweight higher than the previous week and Choice/Select spread widened from $11 to $16/hundredweight. So what was the problem? Apparently, there wasn't a problem with the prices reported by the packers for the individual cuts. The problem was with the contractor USDA had hired to pull packer-reported price data together and create the cutout values. Prices for no-roll beef were mixed with the Choice cuts, thus lowering the true Choice Cutout as well as distorting the Choice/Select spread which was actually wider than the cutout calculations indicated.

Market impact? From the standpoint of market impact, the most plausible impact would be that live cattle prices that are formula-driven from USDA's cutout that would have been higher if in fact, the reported cutout was higher.

Who's to blame? Consequently, this was the beginning point for the finger pointing that ensued. Whether this is valid will be left to the courts and /or some Congressional committee, but at this point, I think it is important to keep in mind the political and economic environment of the livestock industry when the law was passed. There was a great deal of pressure from the livestock industry to force legislation that would improve price reporting and generate more information about livestock and meat markets. It was an emotionally charged issue in an election year and these ingredients often spell disaster. Is USDA at fault for the wreck? Perhaps to some extent, in that they let the politicians speed a process that was far more complex than most people were willing to admit and maybe to the extent that they did not exercise proper oversight on the software contractor programming the reported prices into the computer. Is there relevance to claims of a packer conspiracy operating behind the 3-60 rule to let the reported cutout stay low in order to pay less for cattle? Not in my opinion. Why should the packer provide oversight for USDA, particularly when the law was concocted in order to provide oversight to packers! Packers would have little to gain if retailers were balking at higher asking prices for wholesale beef after looking at a cutout that suggested a lower trending market. Are the over-zealous politicians at fault? You may have already guessed my answer to this. Perhaps a few of those over-zealous politicians could provide oversight since they were the ones who made the law. In fact, in analyzing the impact to markets and lost equity to the industry, we might want to consider market performance if voluntary price reporting were still in place.

What will be the outcome? While this confusion may not signal the beginning of the end for Mandatory Price Reporting, it certainly should be a wakeup call to the pitfalls of rapid-fire legislation conceived in the midst of a tumultuous election year. I suspect everyone has an opinion about the outcome and anyone's opinion about the end result will be biased toward their attitude about markets and market performance. My attitude is biased toward allowing markets to function with as little government interference as possible. In crafting this law, I believe the politicians stepped over the line, and this system will do little toward "leveling the playing field" and bolstering competition. I hope Congress will now have the foresight to fix the wreck they created and revert to a system that more closely resembles the old voluntary price reporting system. Those of us who worked with the system over the years understood it and that's an important part of market performance. There were shortcomings to the old system, but my sense is they were far fewer than we have with the new Mandatory Price Reporting. Let's work toward a sensible system and leave the politicians out of the process.