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Economics of Increased Beef Grader Accuracy

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  • Ibarburu, Maro A.
  • Lawrence, John D.
  • Busby, Darrell
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    Abstract

    Carcass data from more than 38,000 cattle was used to compare the called and measured yield grade in two different periods: before and after the slaughter plant incorporated another grader in the line to improve grading accuracy. The study shows that the graders accuracy significantly increased. The higher accuracy affected all yield grades, but most notably resulted in more called yield grade 4 and 5 carcasses. This analysis will develop insight of what will be the effect of instrument grading that will be more accurate than previously called grades.The results are expressed as the conditional distribution of the called yield grade for a given value of the measured yield grade. The pricing grid currently used by the industry was used to analyze the effect of the graders errors on the expected values of the premiums on both periods and by yield grade. The results show that the company has an incentive to improve accuracy of grading. Simulating the results of measured vs. called yield grade over prices at the time and a standard industry grid showed that the plant can benefit by $1.32 per head by increasing grading accuracy.

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    Bibliographic Info

    Paper provided by NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management in its series 2007 Conference, April 16-17, 2007, Chicago, Illinois with number 37558.

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    Date of creation: Apr 2007
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    Handle: RePEc:ags:nccsci:37558

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    Keywords: cattle; carcass grading; accuracy; economics of grading;

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    1. Brent Hueth & John D. Lawrence & Philippe Marcoul, 2004. "Grader Bias in Cattle Markets? Evidence from Iowa," Center for Agricultural and Rural Development (CARD) Publications 04-wp355, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    2. Peter Bogetoft & Henrik B. Olesen, 2000. "Incentives, Information Systems and Competition," CIE Discussion Papers 2000-12, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
    3. 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.
    4. Hennessy, David A., 1996. "Information Asymmetry As a Reason for Food Industry Vertical Integration," Staff General Research Papers 5032, Iowa State University, Department of Economics.
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