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Formula focus of quarrel
Packers' attorneys claim producers' calculations about prices too simplistic
By Scott Waltman
American News Writer
Whether the price of boxed beef largely dictates what meat packers will pay for live cattle is a heavily disputed point in a federal court case in Aberdeen.
Three cattlemen who believe boxed beef is the primary factor in what packers will give them for their animals have sued the nation's four largest packers. They claim the companies knowingly used erroneous U.S. Department of Agriculture information to pay less for live cattle in spring 2001.
The trial started Friday at the federal courthouse. The first witnesses were called Monday.
Two of the cattlemen plaintiffs - Michael Callicrate of St. Francis, Kan., and Roger Koch of Omaha, Neb. - testified that there's a formula that producers commonly use to know what they should get for their live cattle. It's accepted, they said, that a cattle's dressed carcass - the part sold for meat - is 63 percent of the animal's live weight, on average. What remains after that is the hide, innards, bones and whatnot. They said that what they get for their cattle should be the dressed weight times the boxed beef price reported by the USDA.
How it works: Using that formula, if a head of live cattle weighed 1,000 pounds and the price of boxed beef was reported at $1 a pound, a farmer or rancher should be able to fetch $630 per animal - a dollar per boxed beef pound.
Callicrate and Koch said that they weren't getting enough for their animals between April 2 and May 11, 2001, because the packers took advantage of USDA reports that listed boxed beef prices as too low. The mistake was the result of a computer program including lower quality meat in the boxed beef averages for better cuts. That it occurred is not in dispute, but what impact it had is.
Attorneys for the packers said the 63 percent formula is too simplistic and doesn't accurately represent what a cattle producer can expect.
Callicrate testified that once the USDA admitted it made a reporting error, live cattle prices went way up - $30 a head or even considerably more. Attorneys for the packers, however, said that shortly after the mistake was reported, the number of live cattle available for them to buy was low, forcing them to pay more.
Koch said he lost $48 a head on cattle he sold to Excel Corp., also known as Cargill Meat Solutions, during spring 2001. Had the USDA been reporting accurate boxed beef numbers, Koch said he might have made as much as $30 a head.
Excel is one of the defendants in the case. The others are Tyson Fresh Meats (formerly IBP), Swift (formerly ConAgra Beef) and National Beef (formerly Farmland National).
Tracking prices: In depositions, former employees for the packers said that they do track boxed beef prices and, at least occasionally, compare them to similar internal numbers. But, they said, that's just one factor in what they pay for live cattle. What price grocery stores are willing to pay for boxed beef, what producers are willing to take for their animals and futures markets are some others.
Attorneys for the packers moved to have the case dismissed Monday because of comments Callicrate made about mandatory boxed beef reports packers must make to the USDA. That request was denied.
Herman Schumacher, owner of a livestock auction in Herreid, is the third plaintiff. He's expected to testify today. The case resumes at 9 a.m.
The plaintiffs claim the meat packers cost cattle producers as much as $42.79 million. The lawsuit has been granted class-action status. That means that if the plaintiffs win, all cattle producers who sold cattle to the four packers during the disputed period and have not opted out of it could receive a portion of any settlement.
Packers' attorneys claim producers' calculations about prices too simplistic
By Scott Waltman
American News Writer
Whether the price of boxed beef largely dictates what meat packers will pay for live cattle is a heavily disputed point in a federal court case in Aberdeen.
Three cattlemen who believe boxed beef is the primary factor in what packers will give them for their animals have sued the nation's four largest packers. They claim the companies knowingly used erroneous U.S. Department of Agriculture information to pay less for live cattle in spring 2001.
The trial started Friday at the federal courthouse. The first witnesses were called Monday.
Two of the cattlemen plaintiffs - Michael Callicrate of St. Francis, Kan., and Roger Koch of Omaha, Neb. - testified that there's a formula that producers commonly use to know what they should get for their live cattle. It's accepted, they said, that a cattle's dressed carcass - the part sold for meat - is 63 percent of the animal's live weight, on average. What remains after that is the hide, innards, bones and whatnot. They said that what they get for their cattle should be the dressed weight times the boxed beef price reported by the USDA.
How it works: Using that formula, if a head of live cattle weighed 1,000 pounds and the price of boxed beef was reported at $1 a pound, a farmer or rancher should be able to fetch $630 per animal - a dollar per boxed beef pound.
Callicrate and Koch said that they weren't getting enough for their animals between April 2 and May 11, 2001, because the packers took advantage of USDA reports that listed boxed beef prices as too low. The mistake was the result of a computer program including lower quality meat in the boxed beef averages for better cuts. That it occurred is not in dispute, but what impact it had is.
Attorneys for the packers said the 63 percent formula is too simplistic and doesn't accurately represent what a cattle producer can expect.
Callicrate testified that once the USDA admitted it made a reporting error, live cattle prices went way up - $30 a head or even considerably more. Attorneys for the packers, however, said that shortly after the mistake was reported, the number of live cattle available for them to buy was low, forcing them to pay more.
Koch said he lost $48 a head on cattle he sold to Excel Corp., also known as Cargill Meat Solutions, during spring 2001. Had the USDA been reporting accurate boxed beef numbers, Koch said he might have made as much as $30 a head.
Excel is one of the defendants in the case. The others are Tyson Fresh Meats (formerly IBP), Swift (formerly ConAgra Beef) and National Beef (formerly Farmland National).
Tracking prices: In depositions, former employees for the packers said that they do track boxed beef prices and, at least occasionally, compare them to similar internal numbers. But, they said, that's just one factor in what they pay for live cattle. What price grocery stores are willing to pay for boxed beef, what producers are willing to take for their animals and futures markets are some others.
Attorneys for the packers moved to have the case dismissed Monday because of comments Callicrate made about mandatory boxed beef reports packers must make to the USDA. That request was denied.
Herman Schumacher, owner of a livestock auction in Herreid, is the third plaintiff. He's expected to testify today. The case resumes at 9 a.m.
The plaintiffs claim the meat packers cost cattle producers as much as $42.79 million. The lawsuit has been granted class-action status. That means that if the plaintiffs win, all cattle producers who sold cattle to the four packers during the disputed period and have not opted out of it could receive a portion of any settlement.
