Grid Pricing of Fed Cattle

Abstract

Grid prices, or value-based marketing, refers to pricing cattle on an individual animal basis. Prices differ according to the underlying value of the beef and by-products produced from each animal. Schroeder et al. have reported that pricing fed cattle on averages is detrimental to the industry because it does not send appropriate price signals to cattle feeders, stockers and, ultimately, cow-calf producers. However, incentives to sell cattle on averages and problems associated with identifying beef quality have inhibited the development of value-based pricing. Both cattle feeders and packers have been reluctant to change from a live animal pricing system to a carcass pricing system.