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The Value of Third-Party Certification of Preconditioning Claims at Iowa Feeder Cattle Auctions

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  • Bulut, Harun
  • Lawrence, John D.

Abstract

After controlling a variety of feeder cattle characteristics and market and sale conditions, we estimate the price premiums for preconditioning (vaccinations and minimum 30 days weaning) claims with and without third-party certification (TPC) as $6.15/cwt and $3.40/cwt, respectively, in Iowa feeder cattle auctions. These premiums differ statistically (p-value less than 0.0001) and their difference exceeds the additional participation cost of TPC ($1/cwt) on average. This indicates that the third party certification is valued in the market to credibly signal preconditioning investment under asymmetric information.

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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12683.

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Date of creation: 25 Sep 2006
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Publication status: Published in Journal of Agricultural and Applied Economics, December 2007, vol. 39 no. 3, pp. 625-640
Handle: RePEc:isu:genres:12683

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
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Web page: http://www.econ.iastate.edu
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  1. Thomas L. Sporleder & Peter D. Goldsmith, 2001. "Alternative Firm Strategies for Signaling Quality in the Food System," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 49(4), pages 591-604, December.
  2. Kevin C. Dhuyvetter & Ted C. Schroeder, 2000. "Price-Weight Relationships for Feeder Cattle," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 48(3), pages 299-310, November.
  3. Brent Hueth & John D. Lawrence, 2002. "Quality Management and Information Transmission in Cattle Markets: A Case Study of the Chariton Valley Beef Alliance," Midwest Agribusiness Trade Research and Information Center (MATRIC) Publications 02-bp40, Midwest Agribusiness Trade Research and Information Center (MATRIC) at Iowa State University.
  4. Hatanaka, Maki & Bain, Carmen & Busch, Lawrence, 2005. "Third-party certification in the global agrifood system," Food Policy, Elsevier, vol. 30(3), pages 354-369, June.
  5. Ward, Clement E. & Lalman, David L., 2003. "Price Premiums From A Certified Feeder Calf Preconditioning Program," 2003 Conference, April 21-22, 2003, St. Louis, Missouri 18973, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  6. Avent, R. Keith & Ward, Clement E. & Lalman, David L., 2004. "Market Valuation of Preconditioning Feeder Calves," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(01), April.
  7. Dhuyvetter, Kevin C., 2004. "Preconditioning Beef Calves: Are Expected Premiums Sufficient To Justify The Practice?," 2004 Annual Meeting, June 30-July 2, 2004, Honolulu, Hawaii 36196, Western Agricultural Economics Association.
  8. Allen, Douglas W, 1993. "Pot-Bellies, Cattle Breeds and Revealing Signals," Economic Inquiry, Western Economic Association International, vol. 31(3), pages 481-87, July.
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Cited by:
  1. Zimmerman, Lance C. & Schroeder, Ted C. & Dhuyvetter, Kevin C. & Olson, K.C. & Stokka, Gerald L. & Seeger, Jon T. & Grotelueschen, Dale M., 2012. "The Effect of Value-Added Management on Calf Prices at Superior Livestock Auction Video Markets," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 37(1), April.
  2. Williams, Galen S. & Raper, Kellie Curry & DeVuyst, Eric A. & Peel, Derrell S. & McKinney, Doug, 2012. "Determinants of Price Differentials in Oklahoma Value-Added Feeder Cattle Auctions," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 37(1), April.
  3. repec:ags:joaaec:163228 is not listed on IDEAS
  4. Burdine, Kenny & Maynard, Leigh J. & Halich, Greg, . "Factors Affecting Feeder Cattle Prices in the Southeast," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 142976, Southern Agricultural Economics Association.
  5. Williams, Brian R. & DeVuyst, Eric A. & Peel, Derrell S. & Raper, Kellie Curry, 2014. "The Likelihood of Positive Returns from Value-Added Calf Management Practices," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 46(01), February.
  6. Schumacher, Stephanie & Peel, Derrell S. & Raper, Kellie Curry, 2013. "Non-Adoption of Best Management Practices: Demographics and Adoption Constraints of Oklahoma Cattle Producers," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 143094, Southern Agricultural Economics Association.
  7. Schumacher, Tucker & Schroeder, Ted C. & Tonsor, Glynn T., 2012. "Willingness-to-Pay for Calf Health Programs and Certification Agents," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 44(02), May.
  8. Williams, Brian R. & DeVuyst, Eric A. & Peel, Derrell S. & Raper, Kellie Curry, 2014. "Reducing Self-Selection Bias in Feeder Cattle Premium Estimates Using Matched Sampling," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 39(1), April.

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