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US cattleman blames losses on beef price errors

April 3, 2006

ABERDEEN, South Dakota (Reuters) – Roger Koch, a Nebraska
cattle producer, testified in federal court on Monday that
because of beef price reporting errors in 2001 by the U.S.
Agriculture Department he lost $48 a head on cattle he sold at
that time.

Koch and two other cattlemen are suing the nation’s four
largest beef companies claiming they knew of the errors and
used that knowledge to depress the prices they paid for cattle.

If the errors had not of occurred, Koch claimed he would
have made money on the cattle sale.

The class-action suit being heard in U.S. District Court in
South Dakota, filed in July 2002, seeks damages from Tyson
Foods Inc., Swift & Co., National Beef Packing Co., and Excel
Corp., which is now a unit of Cargill Inc.

Tyson Foods, the nation’s largest beef producer, has denied
the allegations.

“The plaintiffs are unfairly trying to make the packing
industry pay for an unintentional market reporting mistake made
by USDA,” Tyson said in an e-mail. “Our company has done
nothing wrong.”

Cargill and Swift declined to comment. National Beef did
not respond to a request for a comment.

The case relates to a period from April 2 to May 11, 2001,
when calculating errors by USDA caused beef prices in its daily
boxed beef reports to be quoted lower than what they should
have been. USDA admitted the errors and later published the
correct prices.

However, Koch and the other plaintiffs, Herman Schumacher
of South Dakota and Michael Callicrate of Kansas, claim the
beef companies knew of the price errors before USDA discovered
the mistakes.

The trial, which began with jury selection on Friday, is
expected to last about two weeks.

Former employees of beef companies, in depositions that
were presented on Monday, said that boxed beef prices are only
a part of what beef companies use to determine cattle prices.
Other elements include what grocery stores will pay for the
beef, what producers will take for their cattle, and the prices
at the Chicago cattle futures markets.

The National Cattlemen’s Beef Association, which is not a
party in the suit, in 2001 estimated that the errors cost the
nation’s cattle producers $42 million to $54 million in lost
revenue.

Jim Robb, an economist with the Livestock Marketing
Information Center, said the three cattlemen may have a hard
time proving their case. The jury will have to be educated on
how beef prices are calculated, which Robb says could be
complicated.

“You have to prove the next step that it actually did
impact cattle prices and buying patterns. That process I think
is rather difficult to show,” said Robb.

Should the cattlemen win, Robb said the damages will likely
be too small to affect quarterly earnings of the beef
companies.


Source: reuters



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