MANHATTAN, Kan. – For some and for a while, it seemed like the aggie version of pulling the plug on Wall Street. The price quotes simply disappeared.
The flow of livestock sales data has improved somewhat since April 2, when USDA’s Agricultural Marketing Service first implemented Mandatory Price Reporting, required by an act of Congress passed in late 1999.
Even so, “it appears that price information made available under the new reporting system will continue to evolve for some time,” said Kansas State University agricultural economist James Mintert.
“Given the complexity of the transition from the old voluntary reporting system – which had been in place for decades – to the new mandatory system, it’s not surprising there have been a large number of problems.”
Under the old system, market watchers got updated, regional price reports for the bigger livestock categories at least once a day.
But, during the first month under the new system, regional data on cattle sales became scarce. Reports on the important Iowa hog market were even more infrequent.
“Technical problems were most pronounced in the hog sector. Apparently, the problem revolved around AMS’ ability to sort through and properly aggregate the myriad price reports received from packers,” said Mintert, who is K-State Research and Extension’s livestock marketing economist.
By early May, the regional hog reports had resumed. But the regional cattle reports remained “infrequent,” as did sales data on sheep, he said.
Mintert suspects this is one of two problems that will take longer to resolve. In part, it relates to one of the rules developed to implement the new reporting law.
This rule, known as the 3/60 Guideline, already is in the preliminary discussion stage for revision.
“There appears to be widespread agreement within the industry and at AMS that the 3/60 Guideline, as currently interpreted by AMS, is unworkable.
“Fortunately, the 3/60 Guideline is just what it says it is: a guideline,” Mintert said. But, “at this point, it’s too soon to tell the direction in which the changes at AMS will go or how quickly changes will be implemented.”
The guideline was meant to protect confidentiality of individual firms providing price data, as well as prevent undue influence by one segment’s trading data.
In its current form, the guideline says USDA can publish information only if (1) it comes from at least three packers/importers who represent different companies; (2) the data from one packer/importer makes up no more than 60 percent of a report; and (3) AMS believes the report will protect the confidentiality of the information source.
“So, in the short run, the new reporting system has come to mean less, rather than more, price information in some markets,” Mintert said.
He believes the new system has the potential to provide more detailed information price information, segmented by livestock weights and quality levels.
It also could fill some data gaps, particularly in meat price reporting.
“But, in the case of hogs, it’s still difficult to determine what price the bulk of hogs traded at, on any given day in the western Corn Belt, Iowa or other regional markets – which is a price that would be more comparable to the price reports under the old voluntary pricing system,” the economist said.
The quality specifications for hogs changed between the old and new systems, too. Thus, all trend studies and year-to-year comparisons are open to question.
“This issue could be resolved once AMS learns to deal with the large volume of pricing information received from packers and makes some modifications in the way it reports that price information,” Mintert said.
In the meantime, however, the situation may continue a small business boom that developed in April, when frustrated market participants started looking for information from private firms with market news services.
“The services were free to report prices they obtained via a variety of sources and did not have to deal with any of the restrictions imposed by Mandatory Price Reporting,” Mintert said.