Does The Producer Have An Incentive To Sell Fed Cattle On A Grid?
Barriers to the adoption of grid pricing by fed cattle producers are investigated over a 206-week period (January 1997 to December 2000). The empirical findings document the following potential barriers to adoption: (1) 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, resulting in variability in the monetary incentive to market-fed cattle on a grid relative to selling cattle at an average price, and (3) the variability in per-head grid revenue is consistently higher than per-head dressed weight revenue variability over time. The marketing implications for fed cattle producers 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 also been increasing over time; (4) selling on a grid results in higher per-head revenue variability relative to selling fed cattle dressed-weight, indicating that while producers are rewarded when selling high quality cattle on a grid relative to selling at an average price, it is also a riskier marketing option relative to average pricing; and (5) the 4-year trend in the price differential per cwt. for above-average cattle has been positive but negative for the below-average quality cattle. This trend indicates that packers are providing monetary incentives and disincentives based on overall cattle quality when fed cattle are sold on a grid relative to purchasing fed cattle at an average price. Corresponding with this shift in the incentive structure of grid pricing, overall carcass quality has improved in the region from which data was collected. However, the empirical evidence supports the conclusion that the barriers to the adoption of grid pricing continue to exist.
Volume (Year): 05 (2002)
Issue (Month): 01 ()
|Contact details of provider:|| Postal: 1010 Vermont Avenue, Suite 201, Washington, DC 20005, USA|
Phone: 1 (202) 429-1610
Web page: http://www.ifama.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Feuz, Dillon M., 1999. "Market Signals In Value Based Pricing Premiums And Discounts," 1999 Annual Meeting, July 11-14, 1999, Fargo, ND 35739, Western Agricultural Economics Association.
- Feuz, Dillon M. & Fausti, Scott W. & Wagner, John J., 1995. "Risk And Market Participant Behavior In The U.S. Slaughter-Cattle Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 20(01), July.
- Purcell, Wayne D., 1998. "A Primer on Beef Demand," Staff Papers 232526, Virginia Tech, Department of Agricultural and Applied Economics.
- Dillon M. Feuz & Scott W. Fausti & John J. Wagner, 1993. "Analysis of the efficiency of four marketing methods for slaughter cattle," Agribusiness, John Wiley & Sons, Ltd., vol. 9(5), pages 453-463.
- Fausti, Scott W. & Feuz, Dillon M. & Wagner, John J., 1998. "Value Based Marketing For Fed Cattle: A Discussion Of The Issues," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IFAMA), vol. 1(01), pages -.
- Feuz, Dillon M., 1999. "Market Signals In Value-Based Pricing Premiums And Discounts," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(02), December.
- Scott W. Fausti & Dillon M. Feuz, 1995. "Production Uncertainty and Factor Price Disparity in the Slaughter Cattle Market: Theory and Evidence," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(3), pages 533-540.
When requesting a correction, please mention this item's handle: RePEc:ags:ifaamr:34581. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.