OBSTACLES TO CARCASS GRADE AND WEIGHT MARKETING OF LIVESTOCK

ALPHONSE LEE MEYER, Purdue University

Abstract

It has been argued that carcass grade and weight marketing of livestock is superior to liveweight marketing because the method bases on information available after slaughter. Possible benefits of the carcass-based method include: more equitable payment, improvement of information available to livestock producers, reduction in risk to packers and improved transmittal of economic incentives. In spite of these suggested benefits, less than one-fourth of the slaughter cattle and one-tenth of the slaughter hogs were traded on a carcass-basis in the United States in 1977. The objective of this study was to identify obstacles hindering increased use of the carcass-based method. The first step was to generate hypotheses. Informal interviews were conducted with livestock producers, packers, market operators and others familiar with the industry. These interviews and a review of related research produced two lists of hypothesized obstacles, one related to producers' use of the method and one to its use by packers. The second step was to collect primary data. Packers in Indiana, Illinois, Iowa, Kansas and Nebraska were surveyed by mail. Information was received about purchasing practices at 76 of the 165 surveyed plants (46 percent). Questionnaires were sent to 895 livestock producers in Indiana, Illinois and Iowa. The response rate was 34 percent. Data given by packer respondents indicated that most of the packers who bought some livestock on a carcass basis wanted to increase that proportion but that producers seemed to be unwilling. Reasons given by most responding packers for not buying on a carcass basis were that they either graded no livestock or procured most of their livestock through a non-direct market channel. (Livestock not sold directly to the packer are seldom traded on a carcass basis.) Three major obstacles were found to hinder producer use of the carcass-based method. Farmers find it difficult to compare prices which are on a carcass basis. Some producers are not confident that their livestock will be accurately valued (especially since evaluation occurs in the packing plant). Finally, the fact that the livestock must be committed to a particular buyer before value is determined effects producer use of the method. Policies likely to increase use of the carcass-based method and unlikely to have undesirable side effects include educating producers to help them make price comparisons (which might also increase their confidence that they have selected the highest price) and improving methods and standards of grading. Policies to standardize carcass-based procurement systems or to subsidize their use, while likely to increase use of the method, may have harmful side effects. Further, there are indications that not all of the potential benefits of carcass-based trading might be realized even if a substantially greater proportion of livestock were traded on a carcass basis.

Degree

Ph.D.

Subject Area

Agricultural economics

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