NATIONAL MEAT ASSOCIATION h 1970 Broadway, Suite 825, Oakland, CA 94612

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Edited by Jeremy Russell

May 29, 2001




In a press release issued last Friday, USDA’s Market News corrected calculations for the daily Select and daily Choice cut out values that it had issued two days earlier. These are corrections that date back to the inception on April 3 of the Mandatory Price Reporting (MPR) program. They are the result of a programming error, which AMS has acknowledged occurred when the programmers did not understand the significance of differences between choice, select and no roll, and misallocated values for the individual cuts that make up the carcass cut out value. 


The following is the essential data in Friday’s press release:


Corrected calculations for the daily Select cutout values for the period April 3 through May 11 averaged $0.71 or 0.60 percent higher per hundredweight than the values originally reported, ranging from a one-day low of -$1.10 to a one-day high of $1.72. The choice cutout values averaged $2.85 or 2.26 percent per hundredweight higher, ranging from a one-day low of $0.73 to a one-day high of $7.69. Choice and Select boxed beef cutout and primal cut values reported since Wednesday afternoon, May 16, have been correct.


USDA stresses that the prices of individual meat cuts which have been reported are accurate and were not affected by the programming error.


The twice corrected data is available at




USDA hosted a meeting at USDA on May 21, 2001 to discuss mandatory price reporting issues, primarily last week’s problems with the boxed beef cut out value and confidentiality; NMA Executive Director Rosemary Mucklow and NMA Legislative Aide Meredith Matty were in attendance. USDA’s Chief Economist, Keith Collins, introduced a Review Team, appointed by Secretary Veneman to report to her about the Mandatory Price Reporting Program’s troubles (see box below). Collins then asked Dr. Ken Clayton, Acting Administrator of AMS, to discuss the problem of confidentiality and technical software problems that caused the boxed beef cutout SNAFU. He said that the Agency had  run tests in March, but the problem was not recognized until May when the Choice value should have separated more from the Select.


Attendees included leaders of various organizations, including NCBA, NPPC, AFBF and AMI, as well as NMA. Chandler Keys, representing NCBA, said that NCBA wants USDA to get it right. They want an analysis of when and how it went wrong and will ask a third party, a university, to give them an economic evaluation. He also said NCBA wants to talk to packers about when and how they came to know about the problem.


Rosemary Mucklow reminded attendees that voluntary reporting, which was the idea of market news officials fifteen years ago, has worked extraordinarily well, has done extremely well under the traditional reporting system.


Secretary Veneman’s Review Team:


Greg Parham, Office of Chief Information Officer (OCIO)

Scott Steele, Office of Budget & Program Analysis (OBPA)

Rich Allen,  National Agricultural Statistical Service (NASS)

Jack Neilan, National Agricultural Statistical Service (NASS)

Shale Shagam, World Outlook Board (WAOB)


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In just a few months IBP and Tyson have gone from wedding bells to Court TV. It was January 2 when the $3.2 billion merger agreement was struck between the beef giant and the poultry powerhouse, but on January 8 IBP received a letter from the Securities and Exchange Commission (SEC) saying that things at its subsidiary, DFG Foods, were worse than anyone thought. That was how IBP Chairman Robert Peterson described events from the stand in Delaware Chancery Court. Peterson also testified that he told Tyson executives at a December 8 meeting that IBP was conducting an internal probe of DFG; in fact, he told them DFG was a “big black hole.” As embarrassing as it was to admit, that’s what he says he said. “They knew,” he added under oath, “and if that bothered them, then don't sign.”


At the heart of the dispute is the material adverse change (MAC) provision, included in almost every merger agreement. The clause gives parties the right to call off a deal if they uncover material information that changes the strategic or financial reasons behind the transaction. Tyson disputes Peterson’s testimony, claiming instead that they pulled out of the deal because they were misled. Merger attorneys have suggested that an SEC letter dated December 29 could back up Tyson's claim. And when Tyson walked away from the companies' merger in late March, it cited numerous breaches to the merger contract, not limited to the ongoing DFG accounting probe. In essence, Tyson is claiming that it was “induced” into the merger.


The case is being watched by many beyond the meat industry because it could potentially set new rules about when companies should be allowed to walk away from such agreements. Some are already calling it a landmark case. It could determine the future of the MAC clause.


“The MAC clause allows the buyer to have some level of comfort so if the cover starts coming off the baseball and the seams start to come unglued, they can say, 'Wait a minute, this isn't what we signed up for,' and they have a way to get out,” Jonathan Layne, co-chair of the corporate transactions group at Gibson, Dunn & Crutcher explained in a Reuters report. “So in cases where the buyer loses confidence in the integrity of the [target's financial statements], the buyer can exercise the MAC clause. But,” he added, “cold feet alone is not enough to allow a buyer to get out of a contract.”


Cold feet is exactly what IBP alleges Tyson got, and that is why it is holding the poultry company to its agreement. In testimony, IBP President Richard Bond said that Tyson’s fears were based more on a slowdown in the chicken and cattle production. He testified that twice in March Tyson Senior Chairman Don Tyson said that he was worried about the combined companies' ability to meet debt obligations and earnings targets. It remains to be seen whether or not the court will accept his argument, but investors are showing their approval, driving IBP’s shares up as much as five percent on the theory that it was fairing better in the case than Tyson.





5/8/98-Jac Pac Foods-$58.6 million

7/17/98-Jordan’s Meats-$84.6 million

10/18/98-DFG -$91.6 million

4/8/99-Zemco Industries-$170.5 million

4/12/99-H&M Food Systems-$134.5 million

6/28/99-Wilton Foods-$19.1 million

8/23/99-Thorn Apple Valley-$13.1 million

12/1/99-Wright Brand Foods-$116.5 million

2/7/00-Corporate Brand Foods America-Issued 14.4 million in common shares and assumed $344 million in debt


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Etta Reyes, NMA Associate Director, visited with many of NMA’s exhibitors of MEATXPO’01 at the largest meat and poultry industry equipment show in Europe. IFFA, the International Food Fair Equipment show in Frankfurt, Germany covered miles of show floor displaying products of over 1600 companies. The theme of the show carried the call for more technical and automated process and food safety. During her visit, Reyes met with old friends from Pringle Meats, Dick & Pat Heimans of Oakland, CA and Rene Kyburz of Kyburz of California. Time with some of the Associate Advisory Committee Members – Mike Botto of American Food Equipment, Steve Tennis of Handtmann, and Tim Moskal of Alkar – was also of great value. Bob Philips, designer of the new Townsend exhibit, was also on hand to show off the new KONTURA continuous casing system. Great coverage of the show was provided by Meat Processing Magazine, Meat & Poultry Magazine, the National Provisioner and Meat Marketing & Technology (see their pictures of IFFA on the website). Reyes says her experience of IFFA will be a lasting one for sure.




A study of Salmonella isolates taken from animals at just prior to slaughter between 1990 and ’96 found a significant mismatch between those serotypes and the ones distributed among humans. The research was compared against a mathematical model which showed, based on the serotype findings in the animals, the rates at which humans should contract certain serotypes. If this research proves correct, then it challenges the assumption that raw animal products are the primary source of salmonellosis. It could also show that some serotypes of Salmonella are more likely or less likely to cause illness in humans than others.




NMA member ConAgra announced that, based on the preliminary results of an investigation undertaken by it and the Audit Committee of its Board of Directors, accounting and conduct matters at its United Agri Products Companies (UAP) subsidiary during FY99 and 2000 will result in the restatement of financial results for those years. Certain accounting adjustments will also result in a restatement for FY98. This will reduce revenues and earnings in FY98, ‘99 and 2000, and will increase them in FY01. UAP, which distributes seed, fertilizer and agricultural chemicals to growers, represented approximately 9% of total operating profit for the FY98-2000.


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Karen Stuck of the FSIS Technical Service Center’s Import/Export/Program Analysis Staff reported last Wednesday at a U.S. Meat Export Federation meeting that many plants previously listed with FSIS as exporters to Mexico had not resubmitted a completed FSIS Form 9080-3. Establishments who were on the list of plants eligible to export to Mexico and did not resubmit FSIS Form 9080-3 will not be eligible for export to Mexico unless they resubmit a signed application. NMA wishes to remind its members that all establishments that intend to export meat and/or poultry products to Mexico must be able to demonstrate compliance with the Mexican requirements and should have either submitted or resubmitted a completed FSIS Form 9080-3.


NMA Remembers Betty Stevens


Betty Stevens, formerly editor in chief and vice president of the National Provisioner prior to her retirement in 1989, died May 9 in Illinois. She was 79.


Betty was a tireless and fearless reporter earning the Provisioner, published weekly, the reputation as the “poor man’s trade association” in the turbulent 70s and 80s. You could always count on Betty to be in the front row at meetings and conventions, taking notes and taking pictures. She was a kind woman and an uncompromising professional in her pursuit of high journalistic standards.  Our condolences go to her family. 



NMA - East: 1400 - 16th St. N.W., Suite 400, Washington D.C. 20036 Ph. (202) 667-2108

NMA - West: 1970 Broadway, Suite 825, Oakland, CA 94612 Ph. (510) 763-1533 Fax (510) 763-6186

Edited by Jeremy Russell

May 29, 2001




Congressman Larry Combest (R-TX), Chairman of the House Agriculture Committee, convened a hearing May 24 to review the USDA’s Mandatory Livestock Reporting System. Dr. Keith Collins, USDA’s Chief Economist and Dr. Ken Clayton, AMS Acting Administrator, presented testimony. Congressman Stenholm (D-TX), Ranking Minority, said that he hoped the industry overall would develop a “better attitude” toward making mandatory price reporting work.


Dr. Clayton explained the way in which an error in the computer programming system had affected the calculation of the beef cutout value, and that Ag Secretary Veneman has ordered a top to bottom review. He also explained the 3/60 rule which protects the identity of packers who submit data and said that a relaxation of the rule may be necessary to increase the amount of information in the marketplace.


In response to questions by Committee members, the following additional information was noted: The error was discovered by AMS staff when the seasonal differences between Choice and Select values did not materialize. And, the relaxation of the 3/60 rule may be possible if the system looks to where the cattle are actually bought rather than the slaughter locations. Dr. Clayton suggested that in a relaxation of the 3/60 rule, if it was known that, for example, five or six companies could have potentially bought, but only one did on a given day, they might be able to report the information.


Dr. Clayton acknowledged that AMS is aware of problems with protecting confidentiality in the lamb report because of the very small number of reporting entities. He also indicated that some entities may have figured out that there was a problem sooner than USDA caught it, but he had not heard specific allegations. He said the computer error would not impact producers and packers doing business under contract. The Review Team appointed by Secretary Veneman will look at the question as to who felt the economic loss from the computer error.




Since the implementation at the beginning of April 2001 of Mandatory Price Reporting pursuant to the 1999 statutory authority, concerns have arisen that the beneficiaries of price reporting information are receiving less rather than more information. There are various possible reasons that support this view. NMA has printed a paper which explores how best to develop a price reporting system that will meet all of the needs and expectations of the marketplace. The paper discusses what is needed for a price reporting system to succeed at least as well as the voluntary system did in the past. For a copy of the paper, send a self-addressed, stamped (34¢) envelope to Jeremy Russell at NMA-West and be sure to include the newsletter date with your request, or e-mail your request to [email protected].


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The United States lifted the 10-week-old ban on imports of animals and raw meat products from European Union nations that have had NO confirmed cases of Foot-and-Mouth Disease (FMD). The ban will remain in place on meat from Britain, France, Ireland, the Netherlands and Greece. Of course, beef products remain banned due to Bovine Spongiform Encephalopathy (BSE). “Essentially this only allows the importation of pork or pork products and semen,” Bobby Acord, associate administrator of the USDA's Animal and Plant Health Inspection Service, told the Associated Press. “This in no way lessens our effort at ports of entry,” he added, “We will continue our efforts to increase personnel at ports of entry.”


Some believe there is still a chance FMD will spread to the U.S. and absolute vigilance remains necessary to thwart the disease in the event that it does appear on our soil. “This would be no different than biological warfare,” said South Dakota governor Bill Janklow at a regional conference he called to discuss contagious animal diseases last week. “I think people will agree it will be war – total war.”


Recent outbreaks of FMD worldwide are of two different varieties. Type O outbreaks include the United Kingdom, Mongolia, Kuwait, Qatar, and the Netherlands. Type A outbreaks include Argentina, Uruguay and Brazil. NMA provides routine updates to interested members by e-mail. If you wish to receive these, send a request to [email protected].




Although the portion of women and minorities in the Senior Executive Service – among the federal government’s top managers and technical experts – grew over the past decade, the growth was distributed differently among agencies. In the cases of both women and minorities, the Agriculture department was among the top three agencies in terms of percent change between 1990 and 1999.




In a letter dated May 22 to the Food Safety and Inspection Service, nine industry trade groups, including National Meat Association, wrote to ask for an extension on the Proposed Rule on Performance Standards for the Production of Processed Meat and Poultry Products. Calling the proposed regulations “massive in scope,” the groups said that a host of new questions have arisen, as well as significant data needs and other substantive issues. “At the same time, the agency requested a great deal of additional data and information from trade associations, ranging from industry estimates of the economic effects of this proposed rule, to how many plants will be affected, to how helpful the FSIS draft guidance materials will be for small and very small plants. We need additional time to obtain the substantial amount of information that the agency has requested,” wrote the groups. They asked for time to survey members, assess potential approaches to data collection, meet with the Agency to determine data type and format, and develop policies that encourage rather than discourage industry environmental testing.