Implications of Grid Marketing for Retained Ownership

John D. Lawrence, Cody Forristall and Gary May

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: The number of U.S. fed cattle marketed through a value-based or grid marketing system is increasing dramatically. Most grids reward Choice or better quality grades and some pay premiums for yield grades. The Choice-Select (C-S) price spread increased 55 percent, over $3/cwt during the 1990s. However, there is a cost associated with pursuing these carcass premiums both in the feedlot and the cowherd. Correlations between carcass and performance traits resulted in economic tradeoffs that change across input costs and quality grade premiums and discounts. Feedlot profitability was largely determined by marbling, carcass weight, and feed efficiency. Carcass weight was most important at a low C-S spread but give way to marbling at average and higher quality premiums. Data suggests that cow size and marling score are negatively correlated. The current trend toward wider C-S spreads places greater emphasis on marbling ability of calves. These correlations and results suggest that higher marbling is associated with lower cost cows to maintain.

Date: 2003-02-01
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