Accuracy of USDA Fed Cattle Price Reporting: Is Mandatory Price Reporting Needed?

Cattle industry members are concerned over the accuracy of prices reported by the USDA Agricultural Marketing Service (AMS) and there is interest in instituting mandatory price reporting. Currently, AMS relies on voluntary cooperation by feedlots and meatpackers in confirming transactions. Only confirmed transactions are released to the public. This research examines the accuracy of reported fed cattle prices in the southern and central plains states. AMS reported prices are compared to an extensive private database of cattle feeding closeout information for the time period from 6/86 to 6/93. Individual transactions are classified as below the reported range, within the reported range, or above the reported range. An ordered multinomial logit model is used to explain the probability that a transaction is in one of the three classifications. Results suggest that changing cash market conditions and expectations of changing market conditions impact whether or not a transaction is reported. There is evidence that price reporting is inefficient. Reported prices do not adjust to changing market conditions fast enough. However, there is also strong evidence of selective reporting behavior by market participants and that most of the selective reporting would benefit meatpackers. Further, AMS appears to do an effective job of not including nonstandard cattle in price reports. There is also evidence that the reporting ability of AMS is hindered by limited resources. Manadatory price reporting may be warranted in principle but will be difficult to implement in practice.