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Grader Bias in Cattle Markets? Evidence from Iowa

  • Hueth, Brent
  • Marcoul, Philippe
  • Lawrence, John D.

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 モgridヤ 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 モqualityヤ and モyieldヤ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. Keywords: cattle markets, grader bias, quality measurement.

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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 11465.

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Date of creation: 01 Nov 2007
Date of revision:
Publication status: Published in American Journal of Agricultural Economics, November 2007, vol. 89 no. 4, pp. 890-903
Handle: RePEc:isu:genres:11465
Contact details of provider: 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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  1. Stéphan Marette & John Crespi, 2003. "Can Quality Certification Lead to Stable Cartels?," Review of Industrial Organization, Springer, vol. 23(1), pages 43-64, August.
  2. 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).
  3. 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.
  4. Hennessy, David A., 1998. "Microeconomics of Agricultural Grading: Impacts on the Marketing Channel," Staff General Research Papers 1703, Iowa State University, Department of Economics.
  5. 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.
  6. 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.
  7. 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).
  8. 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.
  9. 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.
  10. 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.
  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. Vuong, Quang H, 1989. "Likelihood Ratio Tests for Model Selection and Non-nested Hypotheses," Econometrica, Econometric Society, vol. 57(2), pages 307-33, March.
  13. Luis Garicano & Ignacio Palacios-Huerta & Canice Prendergast, 2001. "Favoritism Under Social Pressure," Working Papers 2001-16, Brown University, Department of Economics.
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