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Estimated Value of Increased Pricing Accuracy for Fed Cattle

Author

Listed:
  • Ted C. Schroeder
  • Jennifer L. Graff

Abstract

To improve vertical market coordination beef packers have introduced fed cattle grid pricing systems that offer premiums or discounts for varying carcass quality and yield grades. This study calculates the value of cattle quality information for producers considering live, dressed, and grid pricing alternatives. The value of fed cattle quality and yield grade information is at least $15/head. When fed cattle are sold on a live weight basis, high-quality cattle subsidize low-quality cattle by an average of $30/head. Price signals that could improve beef market coordination are ignored when fed cattle are marketed using traditional live or dressed weight methods.

Suggested Citation

  • Ted C. Schroeder & Jennifer L. Graff, 2000. "Estimated Value of Increased Pricing Accuracy for Fed Cattle," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 22(1), pages 89-101.
    • Handle: RePEc:oup:revage:v:22:y:2000:i:1:p:89-101.
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    File URL: http://hdl.handle.net/10.1111/1058-7195.t01-1-00008
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    Citations

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    Cited by:

    1. Ward, Clement E., 2005. "Supply Effects on Price Discovery and Pricing Choice for Fed Cattle," 2005 Conference, April 18-19, 2005, St. Louis, Missouri 19034, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    2. Johnson, Heather C. & Ward, Clement E., 2006. "Impact of Beef Quality on Market Signals Transmitted by Grid Pricing," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(1), pages 1-14, April.
    3. Jayson L. Lusk & Randall Little & Allen Williams & John Anderson & Blair McKinley, 2003. "Utilizing Ultrasound Technology to Improve Livestock Marketing Decisions," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 25(1), pages 203-217.
    4. Fausti, Scott W. & Wang, Gerald & Diersen, Matthew A. & Qasmi, Bashir A., 2012. "Pricing Fed Cattle on a Grid: An Analysis of the Incentive Mechanism over Time," 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama 119670, Southern Agricultural Economics Association.
    5. Ward, Clement E., 2005. "Factors Influencing the Extent of Grid Pricing of Fed Cattle," 2005 Conference, April 18-19, 2005, St. Louis, Missouri 19035, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    6. Thompson, Nathanael M. & DeVuyst, Eric A. & Brorsen, B. Wade & Lusk, Jayson L., 2016. "Using Genetic Testing to Improve Fed Cattle Marketing Decisions," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 41(2), May.
    7. Scott W. Fausti & Zhiguang Wang & Bashir A. Qasmi & Matthew A. Diersen, 2014. "Risk and marketing behavior: pricing fed cattle on a grid," Agricultural Economics, International Association of Agricultural Economists, vol. 45(5), pages 601-612, September.
    8. Hogan, Robert J., Jr. & Carlberg, Jared G. & Ward, Clement E. & Peel, Derrell S., 2012. "Factors Affecting Quality Grade Discounts for Fed Cattle," 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama 119814, Southern Agricultural Economics Association.
    9. Tian Xia & John M. Crespi & Kevin C. Dhuyvetter, 2019. "Could packers manipulate spot markets by tying contracts to futures prices? And do they?," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 67(1), pages 85-102, March.
    10. Schroeder, Ted C. & Coffey, Brian K. & Brester, Gary W., 2002. "Estimating The Effects Of Factors Influencing Grid Pricing Revenue," 2002 Annual Meeting, July 28-31, 2002, Long Beach, California 36604, Western Agricultural Economics Association.
    11. Fausti, Scott W. & Qasmi, Bashir A. & Diersen, Matthew A., 2008. "The Efficacy of the Grid Marketing Channel for Fed Cattle," 2008 Annual Meeting, February 2-6, 2008, Dallas, Texas 6884, Southern Agricultural Economics Association.
    12. Fausti, Scott W. & Qasmi, Bashir A. & Diersen, Matthew A., 2008. "Grid Marketing and Beef Carcass Quality: A Discussion of Issues and Trends," Economics Staff Papers 37149, South Dakota State University, Department of Economics.
    13. Fausti, Scott W. & Qasmi, Bashir A. & Diersen, Matthew A., 2008. "The Efficacy of the Grid Marketing Channel for Fed Cattle," 2008 Annual Meeting, February 2-6, 2008, Dallas, Texas 6884, Southern Agricultural Economics Association.
    14. Yanyan Liu & Mary K. Muth & Stephen R. Koontz & John D. Lawrence, 2009. "Evidence of the role of marketing arrangements and valuation methods in improving beef quality," Agribusiness, John Wiley & Sons, Ltd., vol. 25(2), pages 147-163.
    15. Fausti, Scott & Diersen, Matthew & Qasmi, Bashir & Adamson, Bill, 2015. "The Influence of Market Power and Market Trends on Grid Market Signals," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 40(1), pages 1-12.
    16. Susana MEJIA & Andres Ramirez HASSAN, 2016. "Determining the optimal selling time of cattle: A stochastic dynamic programming approach," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 62(11), pages 517-527.
    17. Fausti, Scott W. & Qasmi, Bashir A., 2002. "Does The Producer Have An Incentive To Sell Fed Cattle On A Grid?," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 5(1), pages 1-17.
    18. Ardian Harri & John Michael Riley & John D. Anderson & Keith H. Coble, 2009. "Managing economic risk in value‐based marketing of fed cattle," Agricultural Economics, International Association of Agricultural Economists, vol. 40(3), pages 295-306, May.
    19. Fausti, Scott W. & Qasmi, Bashir A. & Diersen, Matthew A & Adamson, Bill, 2014. "Grid Valuation of Beef Carcass Quality: Market Power and Market Trends," Economics Staff Papers 171423, South Dakota State University, Department of Economics.
    20. Lusk, Jayson L. & Norwood, F. Bailey & Brorsen, B. Wade, 2004. "Forecasting Limited Dependent Variables: Better Statistics For Better Steaks," 2004 Annual Meeting, February 14-18, 2004, Tulsa, Oklahoma 34612, Southern Agricultural Economics Association.
    21. Fausti, Scott W. & Lange, Brent, 2011. "Uncertainty and Producer Fed Cattle Marketing Decisions: Theory and Evidence," Economics Staff Papers 102692, South Dakota State University, Department of Economics.
    22. Fausti, Scott W. & Qasmi, Bashir A. & Diersen, Matthew A., 2008. "Grid Marketing and Beef Carcass Quality: A Discussion of Issues and Trends," Economics Staff Papers 37149, South Dakota State University, Department of Economics.
    23. Janzen, Matthew & Coatney, Kalyn T. & Rivera, Daniel & Harri, Ardian & Riley, John Michael & Busby, Darrell & Groves, Matt, "undated". "Fed Cattle Marketing: A Field Experiment," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252844, Southern Agricultural Economics Association.

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