Grader Bias in Cattle Markets? Evidence from Iowa

Brent Hueth, John D. Lawrence, Philippe Marcoul
March 2004  [04-WP 355]

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Hueth, B., J.D. Lawrence, and P. Marcoul. 2004. "Grader Bias in Cattle Markets? Evidence from Iowa." Working paper 04-WP 355. Center for Agricultural and Rural Development, Iowa State University.


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.

Keywords: cattle markets, grader bias, quality measurement.