Document Type

Article

Publication Date

9-1-2001

Keywords

fed cattle, livestock markets, cattle production, beef markets

Abstract

Barriers to the adoption of grid pricing by fed cattle producers are investigated over a 206-week period (Jan. 1997 to Dec. 2000). The empirical findings document: I) when fed cattle are evaluated on a grid pricing system versus a dressed weight pricing system, a price differential per cwt. and a per-head revenue differential exists over time, 2) the price differential per cwt. is subject to seasonal variation which contributes to inconsistent price signals transmitted to producers concerning the market value of carcass characteristics over time; 3) grid revenue per-head variability is consistently higher than dressed weight revenue per-head variability over time; and 4) while grid pricing has not been widely adopted by producers, overall carcass quality has trended higher in the region from which data was collected. The marketing implications for decision makers are: 1) the incentive to market on a grid versus selling fed cattle dressed weight is lower in the spring relative to the fall; 2) marketing on a grid does reward producers selling high quality steers and the incentive to market higher quality cattle on a grid has been increasing over the 206-week period of the study; 3) grid discounts levied on lower quality cattle have been increasing over time; 4) grid pricing results in higher per-head revenue variability relative to selling fed cattle dressed-weight, indicating that while producers do receive premiums for selling fed cattle on a grid, it is also a riskier marketing option relative to average pricing; and 5) the four-year trend in packer premiums and discounts for above-average and below-average quality cattle, respectively, have been increasing. This trend indicates that packers are providing a price incentive to producers to encourage improvement in overall cattle quality.

Publisher

Department of Economics, South Dakota State University

Series Number

2001-4

Number of Pages

18

Download

Share

COinS