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Grader Bias in Cattle Markets? Evidence from Iowa

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  • Brent Hueth
  • John D. Lawrence
  • Philippe Marcoul

Abstract

Participants in U.S. markets for live cattle increasingly rely on federal grading standards to price slaughtered animals. This change is due to the growing prominence of "grid" pricing mechanisms that specify explicit premiums and discounts contingent on an animal's graded quality class. Although there have been recent changes in the way cattle are priced, the technology for sorting animals into quality classes has changed very little: human graders visually inspect each slaughtered carcass and call a "quality" and "yield" grade in a matter of seconds as the carcass passes on a moving trolley. There is anecdotal evidence of systematic bias in these called grades across time and regions within U.S. markets, and this paper empirically examines whether such claim is supported in a sample of loads delivered to three different Iowa packing plants during the years 2000-02.

Suggested Citation

  • 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.
  • Handle: RePEc:ias:cpaper:04-wp355
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    References listed on IDEAS

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    6. John W. Freebairn, 1973. "The Value Of Information Provided By A Uniform Grading System," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 17(2), pages 127-139, August.
    7. 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).
    8. 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).
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    11. David A. Hennessy, 1995. "Microeconomics of Agricultural Grading: Impacts on the Marketing Channel," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(4), pages 980-989.
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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. Jang, Ju Won & Ishdorj, Ariun & Anderson, David P., 2015. "Searching for the Possible Sources of Grader Bias in Beef Grading: A Non-parametric Approach," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205734, Agricultural and Applied Economics Association;Western Agricultural Economics Association.
    3. Ferrier, Peyton & Liu, Qihong, 2010. "Consumer sorting of vertically differentiated goods," Economics Letters, Elsevier, vol. 109(1), pages 11-13, October.
    4. Scott W. Fausti & Zhiguang Wang & Bashir A. Qasmi & Matthew A. Diersen, 2014. "Risk and marketing behavior: pricing fed cattle on a grid," Agricultural Economics, International Association of Agricultural Economists, vol. 45(5), pages 601-612, September.
    5. Jang, Ju Won & Ishdorj, Ariun & Anderson, David P. & Purevjav, Tsengeg & Dahlke, Garland, 2015. "Exploring The Existence Of Grader Bias In Beef Grading," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196872, Southern Agricultural Economics Association.

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