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Grader Bias in Cattle Markets? Evidence from Iowa

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  • Philippe Marcoul
  • John Lawrence

Abstract

Live cattle are increasingly priced as an explicit function of U.S. Department of Agriculture yield and quality grades. Human graders visually inspect each slaughtered carcass and call grades in a matter of seconds as the carcass passes on a moving trolley. We examine whether there is systematic bias in grade calls using a sample of loads delivered to three different midwestern packing plants during 2000–2002. Overall, results indicate that indeed there is a bias, and that grading standards vary significantly across packing plants. Results also are consistent with a behavioral model where graders are more accurate when grading relatively low-quality carcasses. Copyright 2007, Oxford University Press.

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File URL: http://hdl.handle.net/10.1111/j.1467-8276.2007.01026.x
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Bibliographic Info

Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 89 (2007)
Issue (Month): 4 ()
Pages: 890-903

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Handle: RePEc:oup:ajagec:v:89:y:2007:i:4:p:890-903

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References

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  1. Hueth, Brent & Lawrence, John D., 2006. "Information Transmission in Cattle Markets: A Case Study of the Chariton Valley Beef Alliance," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 24(1).
  2. Stéphan Marette & John Crespi, 2003. "Can Quality Certification Lead to Stable Cartels?," Review of Industrial Organization, Springer, vol. 23(1), pages 43-64, August.
  3. Luis Garicano & Ignacio Palacios-Huerta & Canice Prendergast, 2001. "Favoritism Under Social Pressure," Working Papers 2001-16, Brown University, Department of Economics.
  4. McDonald, R. Allen & Schroeder, Ted C., 2003. "Fed Cattle Profit Determinants Under Grid Pricing," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 35(01), April.
  5. James A. Chalfant & Richard J. Sexton, 2002. "Marketing Orders, Grading Errors, and Price Discrimination," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(1), pages 53-66.
  6. Chalfant, James A. & James, Jennifer S. & Lavoie, Nathalie & Sexton, Richard J., 1999. "Asymmetric Grading Error And Adverse Selection: Lemons In The California Prune Industry," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(01), July.
  7. Espinosa, Juan Andres & Goodwin, Barry K., 1991. "Hedonic Price Estimation For Kansas Wheat Characteristics," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(01), July.
  8. Hueth, Brent & Lawrence, John D., 2006. "Information Transmission in Cattle Markets: A Case Study of the Chariton Valley Beef Alliance," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 24(1).
  9. Diaz, Edgar F. Pebe & Brorsen, B. Wade & Anderson, Kim B. & Richter, Francisca G.-C. & Kenkel, Philip L., 2002. "The Effect Of Rounding On The Probability Distribution Of Regrading In The U.S. Peanut Industry," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 20(1).
  10. Bruce Gardner, 2003. "U.S. Food Quality Standards: Fix for Market Failure or Costly Anachronism?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(3), pages 725-730.
  11. Freebairn, John W., 1973. "The Value Of Information Provided By A Uniform Grading System," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 17(02), August.
  12. Hennessy, David A., 1998. "Microeconomics of Agricultural Grading: Impacts on the Marketing Channel," Staff General Research Papers 1703, Iowa State University, Department of Economics.
  13. Sylvette Monier-Dilhan & Hervé Ossard, 1999. "Pleasures of Cockaigne: Quality Gaps, Market Structure, and the Amount of Grading," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 501-511.
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Cited by:
  1. Ibarburu, Maro A. & Lawrence, John D. & Busby, Darrell, 2007. "Economics of Increased Beef Grader Accuracy," 2007 Conference, April 16-17, 2007, Chicago, Illinois 37558, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  2. Ferrier, Peyton & Liu, Qihong, 2010. "Consumer sorting of vertically differentiated goods," Economics Letters, Elsevier, vol. 109(1), pages 11-13, October.

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