B-‘l 106
April 197i

  rs Affecting Price
to Qnces of   Cattle
 Southwest

IVERSITY
ICULTURAI. EXPERIMENT STATION
iglActing Director, College Station, Texas

Summmy
and

Conclusions

    
   
   
   
   
 
 
 
 
   
    
 
  
  
  
  
 
    
  

Estimates of the values placed on various 
istics of cattle by markets in the Southwest are
to assist. in determining the most profitable 
produce and the most profitable time and a
market the animals. The changes in price m“
associated with certain animal characteristics l»
past two decades were determined. The estim --.
be useful as basic information for other --'
extension projects. i‘

Regression equations were utilized to esti
extent to which selected factors contribute to i
variation of feeder and slaughter cattle in -__
west. Under a given level of prices, variations
prices would be expected to result from two f
sources: i 4

(1) Variations in animalcharacteristics 
grade, market class and breed type;

(2) Variations in non-animal characte
market location, lot size and season of the w a»

Estimates of price differences for these f - 
developed from two data sources: (a) the 19687
from purchases at auctions of a large order b '_
and 1966-68 quotations from the firm and (b) A
average prices compiled by Market News 7
USDA, for the regional markets in the Sou L:
1964-68. 5

Feeder Cattle

Order buyer grades of Okie #1, Okie #2 o
#3 were used with the order buyer data. Thy
correspond to USDA grades of Choice, Good . '
ard for feeder calves and should not affect a
mates of price difference associated with the A
characteristics} '

Prices differed by about 5 percent betw
#1 and #2 and between Okie #2 and #34
Prices differed about 12 percent between OK
and heifers of the same weight and grade. Oki
‘For this study, an Okie is defined as an animal of 
ing with some evidence of dairy or Brahman breeding. y

the proportion of English beef breeding the higher y
and the lower the Okie grade. ' j

   
   
 
 
  
  
   
    
  
   
 
   
  
    
   
  
   
   
   
  

 in the fourth quarter brought about 3 per-
; an those sold in the second and third quar-
 year during 1966-68. Between the weights of
 pounds, price declined at a constant rate.

ound by 3 percent.

_ News Service data included all types of
_’ e marketed at regional markets in the South-
nglish beef breeds were predominant. There
‘a 10-percent price difference between Choice
i and between Good and Standard. Weight
i were about the same as for the Okie data.
if price differences between steers and heifers
t) and between the third and fourth quarter
I (2 percent) were slightly less for Market

ifferences due to market location were small
ly less than the transfer cost between the
, is satisfies one of the necessary conditions
Ly competitive market. Generally, the cow-
w, the lowest prices and feeding areas the
'nor exceptions may be due to errors in
v-t.

8

 1964-68, price difference due to grades
ier cattle was about $1.50 per 100 pounds
 er Good steers and about $1.30 for Choice
‘l heifers. Price difference due to vary-
i for the same grade was small; for example,
{about the same for slaughter steers with
}ing from 850 to 1,150 pounds.

 ference due to location was small and gen-
pan the transfer cost between the markets.
i" of average prices at different markets from
 did not reflect expectations concerning
deficit areas for slaughter cattle in all cases;
, the results must be considered as tentative.

Qf steers averaged 62 cents per 100 pounds
eifers of the same grade; prices the first

pd increase in weight of a feeder reduced the '

quarter of the year were lowest, those the third quarter
highest.

Trends

Prices between slaughter cattle grades narrowed
over the period 1955-68. If the trend line is projected
to 1972, the price difference between Prime and Choice
is essentially eliminated. On the other hand, price
differences between feeder grades increased slightly
during the same period. Some of the trend may be due
to redefinition of grades, but most appears to be due
to greater efficiency in cattle feeding and to more
accurate reflection by the market of the relative value
of specific animal quality.

- Implications

For feeder cattle production, these findings pro-
vide useful guides on returns in the breeding program;
for example, an index of total value per head suggests
the amount of grade a producer can sacrifice to obtain
more rapid gain. In a cross breeding program, a pro-
ducer apparently can introduce some dairy, Brahman or
other cattle breeds into his herd to produce higher wean-
ing weights. If this cross breeding results in a reduc-
tion from Choice to Good grade feeders or from Good
to Standard, animals must gain at least 50 pounds in
weaning weight with no additional feed cost to make
the practice pay. If the grade drops from Choice to
Standard, then animals must increase weaning weights
to about 100 pounds before the change in the breeding
program is profitable. If the higher weaning weights
have extra costs associated with cow maintenance or
creep feeding, it becomes more difficult to overcome
the discount due to loss in grade or the discount due
to heavier weights. In other words, if a cross breeding
program does not maintain the same grade level, serious
questions may be raised as to its profit potential.

For feedlot operators, these findings imply that
they can afford to pay $12 to $18 per head more for
a feeder one grade higher assuming the same weight
and feeding efficiency potential.

Contents

SUMMARY AND CONCLUSIONS .......................................... -. ............ -- 2
Feeder Cattle ............................................ -. 2
Slaughter Cattle .... -.  .......................... .- 3
Trends-_ .. .  3
Implications ................ .- -. 3

INTRODUCTION ....................................................................................... -. 5
Purpose of Study ....................................... .. . . -- 5

A Method of Analysis .... .. S
PRICE DIFFERENCES OF FEEDER CATTLE .................................... .- 6
Analyses of Order Buyer Auction Data .......................................... -- 6
Analyses of Market News Data .... -- . ..... .. 7
Percentage Differences in Feeder Cattle Prices .............................. .. 8
PRICE DIFFERENCES OF SLAUGHTER CATTLE .......................... .. 9
TRENDS IN PRICE DIFFERENCES OF
FEEDER AND SLAUGHTER CATTLE ................................................ .-10
Trends in Price Differences of Slaughter Cattle .............................. ..11
Price Trends Associated with Grade Differences .................. .-11
Price Trends Associated with Weight Differences ................ -.13
Trends in Price Differences Between Steers and Heifers ........ .-14

Trends in Price Differences of Feeder Cattle .................................... --14
Price Trends Associated with Grade Differences .................. __15
Price Trends Associated with Weight Differences ................ __16
Trends in Price Differences Between Steers and Heifers ........ -_16

Summary of Trends in Price Differences of

Feeder and Slaughter Cattle .............................................................. __17

ACKNOWLEDGMENTS.-- . .17

REFERENCES _ 18

APPENDIX ....... Q . . . . . . _ _ , _ _ , , _ "18

4

 

   
  
  
   
   
  
  
   
  
   
   
   
  
  
   
   
   
 
 
  
   

1;» CHANGING AS TO the kinds of beef
 ed for feedlot operations and the kinds
iired by packers and retailers. Ranchers,
 operators, wholesalers, packers and
 oming more aware of the importance
'ghts, daily weight gains, breed character-
liiciency, grades, carcass yields and yields
j Therefore, the industry and researchers
it more information concerning the value
,1 es on various animal characteristics, the
 tion of markets and the seasonal avail-
, . It is inefficient for each operator or
v industry to make his own price analysis
“(decisions involving many other relation-
'ore, there are gaps in most data series.
 to provide more extensive, com-
ully, better estimates of price differ-
 rtain factors than are now available.
jShOHld assist the industry in determining
is ble animals to produce and the most
 place to market the animals. Analy-
if dertaken to determine whether price
fated with certain animal characteristics
uring the past two decades.

f? objectives of this study were

 ibe the relationship between the prices
Esold at auction markets in the South-
gcattle characteristics. The feeder cattle
lnsidered were the grade, weight, type
‘llanimal. The influences of other factors,
 e of the sale, location of markets and
 year on feeder cattle prices, were also

fyze the price differences among feeder
Si» cattle sold at regional markets in

 research assistant and associate professor,
y cultural Economics and Rural Sociology.

J I A fleetin g Price Dflfereneer of Cattle
l;   in the Southwest

J. B. Janus AND D. E. FARRI$*

the Southwest. The influences of grade, weight, class,
season and market location on market price were exam-
ined; and

3) To determine whether the price differences
associated with the market class, weight and grade of
feeder cattle and of slaughter cattle have changed dur-
ing the last two decades.

Method of Analysis

For Objectives 1 and 2, linear regression equations
were utilized to estimate the extent to which selected
factors contribute to the price variation of feeder and
slaughter cattle in the Southwest. Under a given level
of cattle prices, variations in cattle prices would be
expected to result from two principal sources:

(1) Variations in animal characteristics——weight,
grade, market class and breed type;

(2) Variations in non-animal characteristics-—
market location, lot size and the year and the season of
the year in which the transaction occurs.

The effects of these factors on the price of feeder
and slaughter cattle are illustrated by the following general
statistical model:

P = B0 + G1 + BIXI + B2X2 + B3X3 +  +
B4X4 + Qk + YrL + E
Where
P = the price in dollars per hundredweight,

B, — constants,

G, = grade,

X1 = weight,

X2 = market class (sex),
X3 = breed,

ML, = market location,
X4 = lot size,

Qk season,

YrL = year,

E = error terrn.

Certain of the independent variables in this model,
such as weight and the lot size, can take values over
some continuous range. Other independent variables,
such as grade or market location, are not easily meas-
ured on a continuous scale. Therefore, it was necessary
to assign these variables numerical values to introduce
them into the model. Such variables are commonly
called dummy variables. Suits describes the procedure
for the use of dummy variables in regression equations
(8). James gives more detail on the statistical analysis
(5).

For Objective 3, linear regression techniques were
used to estimate the time trend in price differences
associated with the animal characteristics of weight,
grade and market class in both feeder and slaughter
cattle.

Price Differences of Feeder Cattle

In any price analysis, the usefulness and limitations
of the estimates are dependent on the source and form
of data. Prices of feeder cattle were developed from
several sources and time periods, and each set of data
yields slightly different estimates. Feeder cattle prices
and related information were obtained from the follow-
ing sources:

(1) Auction market invoices of Okie feeder cattle
purchased by a large order buying firm in 1968 were

expected to provide the most precise measure of price ‘

differences because a specific description of each lot and
the exact price paid for each lot were available. Further-
more, 1968 was a year of relatively stable cattle prices
when the market would be expected to transmit accu-
rate measures of the value of different characteristics;

(2) Order buyer price quotations for the 1966-68
period were used for estimates of additional variables
not included in the data from invoices. The longer
period was one of relatively stable, but slightly rising
prices;

(3) Prices compiled by the Market News Service
provided more extensive coverage, but the estimates of
price differences due to different characteristics were
probably less precise than those of the other two sources.
These data were compiled by, averaging price ranges
quoted daily by grades and weight groupings and, con-
sequently, had less precision than more narrowly defined
quotations or specific sales records. Monthly averages
of daily prices for the period 1964-68 were used.

Analyses of Order Buyer Auction Data

Data for the livestock auction price difference
analyses were obtained from the records of an order
buying firm located in Fort Worth. The firm’s staff of
buyers purchase feeder cattle from many country live-
stock auctions, primarily from those located within a

6.

   
    
  
 
    
   
  
  
  
  
 
   
  
  
  
 
   
 
 
  
   
 
   
    
  
 
  
   
  
 
   
  
  
  

250-mile radius of Fort Worth. However, 
also purchases cattle from more distant auctions 
the Fort Worth market. It is assumed that u,
is a competitive buyer on each market from 
buys feeder calves; consequently, the prices it -“
expected to reflect the market for the specific.
cattle under consideration. ‘Although the fir
primarily in Okie type calveslit purchased Englis
cattle for its customers. The firm differentiati
quality with its own numerical grading system. 1
ingly, Okie #1, Okie #2 and Okie #3 grades‘
pond to the USDA grades of Choice, Good an,
ard, respectively. i

Data for certain of the analyses were i
directly from the firm’s livestock auction pur 1'
voices. The invoices covered selected months
year period, 1968, and represented a sample of 
in each cardinal point of the compass from Fort,
Other data originating from auctions were t
from feeder cattle price quotations issued by i"
These prices are the approximate prices (f
Worth) charged feedlot customers for givenf
weight categories of feeder cattle. The price q 
also differentiate between the breed and the sex i
within a particular grade-weight category. i‘

The price quotations are approximate in g
are the firm’s best estimates of current pri 
firm’s normal procedure is to purchase cattle 
lot operators at cost plus a charge for the perf
of the buying and assembly function. Revi j
quotation sheets are mailed to potential pur 0v
feeder calves when significant changes occur
prices the firm pays for cattle on the market fr =5
it purchases. Quotation sheets covering a 3-ye i
1966-68, were obtained for analysis. ‘i

Four different analyses were conducted usi =1
buyer data, each designed to develop estimates,
ferent factors (Table 1). The 1968 data on 
and Okie #2 steers provide reliable estimates,
effect of area and weight on prices and proba,
the best estimates on the difference between Q
and Okie #2 steers because it covers a period
tively stable prices and a rather uniform group f

The data from order buyer quotations i
were used to develop estimates of price differ
tween seasons or quarters of the year, three Oki
Choice steers and Choice heifers and English b A
and Okies. 4’

The average difference between an Okie
Okie #2 steer was $1.35 per hundredweight;
increase in weight of 50 pounds decreased the
price paid by $0.79. The weight effect appear
linear over the range of 300- to SOO-pound i

   
   
  
  
   
  
   
  
  

l-68 period when average prices were
 than in 1968, the effects of grade and
» so lower. Number 5 Okies were priced
fredweight below #2 (Table 1).

 es averaged $3.66 per 100 pounds above
‘f ity of heifers (Table 1), and Good and
‘h beef breed steers averaged $2.43 above
“same grades and weights (Table 1).

 IMATED DEVIATIONS FROM SPECIFIED
; PRICES PAID FOR FEEDER CATTLE AT
 TEXAS‘

Okie #1 Good 8c

“Okie" “Okie" Steers 8: Choice
steers’ steers’ heifers’ steers
1968 1966-68 1966-68 1966-68

——--——Do1larspercwt————-—

1.35 1.17
0.00 0.00
—1.§0
 ‘breeds 2.43
~  0.00
3.66
0.00
2.57 1.85 1.94 2.79
1.58 1.23 1.29 1.67
0.79 0.61 0.64 0.74
0.00 0.00 0.00 0.00
—-0.79 -—O.62 —O.65
0.80 0.75 0.60
1.08 1.31 1.54
1.09 1.36 1.46
0.00 0.00 0.00
-—0.20
0.00
0.25
—0.18

  
   
  
  
   
    
  

I auctions in western Arkansas, western Louisiana
klahoma.

 information obtained from order buyer invoices.
A information obtained from order buyer price

 order buyer were #1, #2, and #3 Okie,
' correspond to USDA grade of Choice, Good and

‘ usually having, some dairy or Brahman breeding.
» adjusted by inean distance from Fort Worth.

A Louisiana.

' - Oklahoma.

 extreme South Texas.

‘- far west or Plains areas.

A1 - from Order Buyer Price Information, This
 a compiled from Appendix Tables 1-4.

Considering the discount for extra weight and the
discount for marketing in the fourth quarter, the esti-
mates suggest that a 400-pound Okie feeder calf in the
third quarter, held until the next quarter and weighing
100 pounds more, would have increased in value only
about $19 during 1966-68 (Table 1):

500# >< (.2705 -— .0158) = 500 >< .2545 $127.25
400 >< .2703 = $108.12
Difference = .15 19.13

Analysis of prices by areas of Texas resulted in esti-
mates with a range of 45 cents per 100 pounds. The
southern area had the highest price and the western and
eastern the lowest (Table 1). These differences are
small and generally less than transfer cost between mar-
kets. It was hypothesized, based on knowledge of move-
ment of feeders, that prices in the northern area would
be higher than in the southern area. It is not clear why
the southern average price exceeded the northern by 25
cents per 100 pounds. This was not supported by the
analysis of feeder steers based on market news data
covering a longer time period. However, for the same
data source, the average price for feeder heifers at Hous-
ton exceeded the Fort Worth price. This finding of con-
flicting evidence is significant because of the location
relative to feeding areas. The Fort Worth and northern
Texas markets would normally be expected to be higher
than the Houston and southern Texas markets. Errors
in classification and measurement could be responsible

' for this result just as could errors of the marketing

system.

Analyses of Market News Data

Recent price differences of feeder cattle sold
through major Southwestern markets were estimated.
Data were obtained from market locations of Amarillo,
Clovis, Fort Worth, Oklahoma City, Phoenix, San
Angelo, San Antonio and Houston. The data were
monthly averages from market quotations for the 5-year
period, 1964-68, issued by the Livestock Division, Agri-
cultural Marketing Service, Department of Agriculture.
It was assumed that the grades of cattle are reported
uniformly and comparably for all the markets. An
important limitation is the possibility of different dis-
tributions of cattle for each grade and weight category.
This is an unknown in the data that cannot be specified.

Separate analyses were made for steers, for heifers
and for all data combined because the price response
associated with several characteristics may be different
between steers and heifers; however, by combining the
data the price difference between steers and heifers
could be estimated.

Most of the variability in prices of feeder cattle
during the 5-year period 1964-68 was accounted for by

7

grade, time and sex differences. The time variable
accounted for changes in the overall price level due to
changes in demand and supply. Prices of feeder cattle
were generally increasing from 1964 through 1968 with
variability in steer prices being greater than in heifer
prices. Variation in price per pound due to weight,
market location and season of the year was lower than
for the other factors measured (Table 2). The weight
effect for heifers, although statistically significant, is
not confirmed by other analyses and should be regarded
as atypical.

TABLE 2. ESTIMATED DEVIATIONS FROM SPECIFIED
FACTORS IN MARKET NEWS PRICES OF FEEDER CATTLE
ON MARKETS IN THE SOUTHWEST

Feeder Feeder All
Factor steers heifers feeders

- -- — Dollars per cwt. —- —— —-

Grade
Prime 5.55 2.90 5.21
Choice 2.15 1.59 1.89
GOOd 0.00 0.00 0.00
Standard —-2.48 -—1.88 -2.20
Utility -—5.57 —4.20 -4.85
Weight‘
350 pounds 0.75 —0.661 0.68
40o pounds 0.57 -0.17‘ 0.34
450 pounds 0.00 0.00 0.00
500 pounds ——0.57 —0.15 —-O.54
550 pounds —0.74 —0.61 —0.68
Market location
Amarillo 0.49 0-06 0-27
Clovis 0.26 0.57 0.50
Fort Worth 0.00 0.00 0.00
Oklahoma City 0.11 -0.40 --0.14
Phoenix —0.69 —1.18 —0.95
San Angelo 0.50 —0.18 0.04
San Antonio -0.05 0.28 0.11
Houston -0.55 0.22 —0.08
Season
First quarter 0.15 0.29 0.22
Second quarter 0.60 0.72 0.67
Third quarter 0.67 0.85 0.76
Fourth quarter 0.00 0.00 0.00
Sex
Steers 2.48
Heifers I 0.00
Year
1964 0.00 0.00 0.00
1965 1.71 1.51 1.53
1966 5.58 4.69 5.26
1967 5.60 4.70 5.28
1968 6.59 5.56 6.09

‘Data on weights were midpoints of quoted weight ranges; as a

result the effect of weight on price is less sensitive than other

analyses where actual weights of each lot were specified.

Source: Calculated from data obtained from Market News Serv-
ice, U.S. Department of Agriculture. This table was
compiled from Appendix Table 5.

     
 
  
   
   
   
    
   
  
   
    
  
  
 
  
  
  
 
 
   
   
   
   
   
  
   
  
  
  

Differences between the grades of Choi
and Standard were larger for steers than heif 
difference of Choice over Good steers was $f
Good over Standard $2.48 per hundredweigh ’
averaged $2.48 above heifers for the same g p
weight (Table 2). i‘

When comparing these estimates with -l
Table 1, it should be noted "that the estimates 
1 areonly for Okie cattle not graded by USDA ‘
In the previous analysis (Table 1), grades of 
buying firm were used, and the time period -
Estimates on the effect of weight on price -
cattle developed from the market news data ( 
would not be expected to be as sensitive as ~f
Table 1 because the market news quotations r6
weight ranges rather than to average weights if
Consequently, estimates of the effect of w
price are lower than in the previous analysis (i
and are believed to underestimate this factor. 

The effect of market location on price 
but statistically significant. Estimates were _;_'
consistent with expectations of higher prices in 
feeding areas and lower prices in the surplus g
areas. An exception was the Phoenix market ~~ 
the lowest prices for both steers and heifers o
regional markets considered. Other deviations 1
expected occurred in the heifer analysis. The San
and Houston markets were above the Fort Worth,
opposite was expected. “

Despite some unexplained variations, these"
suggest that the market paid a premium for t;
grades of feeder calves —— the improvement of u
on a 400-pound steer was worth from $6 to _
head from 1964 to 1968. *

Percentage Differences in Feeder Cattle Prices i

With a substantial change in price level,
price differences between different factors ~
expected to change. To provide a guide that ml
more general applications than the absolute d'
percentage price differences associated with g:
weight of feeder cattle were calculated from _

These estimates were expressed in terms of ,
based on value per head of a 400-pound Cho
using data from the order buyer price quot
Okie steers (Table 5) and data from Mark‘
Service which covered all types of steers genery
keted in the Southwest (Table 4). at

The weight indexes were about the same 
sets of data, with value increasing about 1O pe
head for each increase of 50 pounds. The in,
grade differences were about twice as large
Market News Service data as for the order *

  
  
    
    
  
   
   
    
   
   
   
   
  
  
   
  
 
 
  
 
 
  
 
  

.

DALUE INDEX OF “OKIE” FEEDER STEERS
j CHOICE 400-POUND STEER‘

i“ 55o 1b 40o lb 45o 1b 50o lb

 — -- Percent of total value per head — — --
89.4 100.0‘ 110.0 119.5
85.8 95.8 105.5 114.5
81.7 91.2 100.1 108.5

012% for Okie heifers of the same weight and
 - ct about 3% for animals marketed in the

» es are not official USDA grades.

Q ;- price of Okie #1 feeder steer weighing 400
"a .96/cwt during 1966-68.

--- from Order Buyer Quotations.

dex based on Market News Service data
 de difference of almost 10 percent be-
(it grades of steers (Table 4), whereas, that
ffsteer was almost 5 percent. This suggests
i4 buyer grades are more narrowly defined
3 grades.

1price that can be used as a base, these
 used to estimate the value of a different
“jight category by multiplying the price of
igory by the ratio of the indexes of the
father category. For example, if the value
‘d USDA Good steer was $135, the value
 USDA Choice steer would be estimated
2.o/1o2.2 = $161.

 in Table 3 would be more appropriate
jers and in Table 4 for English beef

flDifferences of Slaughter Cattle

ence of selected factors on the price per
of slaughter cattle sold through major
s in the Southwest was examined. Mar-

fUEVINDEX OF FEEDER STEERS RELATIVE
11C]! 400-POUND sTEER=

400 lb 450 lb 500 lb

i‘ — — Percent of total value per head -- -—
10o.0’ 111.3 122.0
91.9 102.2 111.8
82.5 91.6 100.1

i; steers reported by Market News Service,
i about 10% for heifers of the same weight and
L -= about 2% for calves marketed in the fourth

 price of 400-pound USDA Choice feeder steer
' during 1964-68.
 from Market News Quotations.

ket price quotations issued by the Livestock Division,
Agricultural Marketing Service, U.S. Department of
Agriculture furnished data for the analyses. Usable data
were obtained from the regional market locations of
Clovis, Fort Worth, Oklahoma City, San Antonio and
Houston.

The performance of the assembly function for
slaughter cattle has undergone rapid change. To a
large degree, the processor is bypassing established
marketing facilities and assembling slaughter cattle by
purchasing directly from feedlot operators. By 1967,
almost all of the fed cattle produced in Texas and
Oklahoma were sold ona direct-to-packer basis. Feed-
lot operators reported practically no shipments to public
markets in a study made by Dietrich (2). However, 82
percent of the feedlots in Texas and 67 percent of the
feedlots in Oklahoma used federal-state live cattle quota-
tions as their primary sources of price information.

San Angelo, Phoenix and Amarillo reported no,
or very few, quotations for slaughter steers and heifers
for 1964 through 1968. Consequently, these markets
were not included in the analyses. Oklahoma City re-
ported quotations only for the years 1964, 1965 and
part of one quarter for 1966. No price quotations for
1967 and only two quarters in each of the years 1966
and 1968 were reported at Houston. Other regional
markets reported data for only one or a few grade-
weight classifications over the 1964-68 period. Conse-

quently, only data for the period 1964-66 were sub-

jected to analysis. Further, only price quotations for the
grades of Good and Choice were used. Because of these
limitations the results must be interpreted with caution.

Although data were less complete than for feeder
cattle, estimates were generally in line with expectations.
Choice over Good grade was $1.49 per hundredweight
for steers and $1.30 for heifers. The price of steers
averaged $0.62 above that of heifers for the same grade
and weight range (Table 5 and Appendix Table 6).

For steers, weights of 950 to 1,050 were estimated
to bring the highest prices; however, there was little
difference paid per pound for steers weighing between
850 and 1,150 of the same grade. The difference in
prices of different weights of heifers of the same grade
was not statistically significant (Table 5).

Estimates of influence of market location are sub-
ject to question. Those for slaughter steers were not
statistically significant and those for heifers difficult to
explain because prices at Clovis, a surplus feeding area,
averaged higher than at other markets except Houston.
The analyses of both steers and heifers were expected to
yield a lower price at Clovis than at the other markets.
Since they did not, this should be considered a tentative
finding.

TABLE 5. ESTIMATED DEVIATIONS FROM SPECIFIED
FACTORS IN MARKET NEWS PRICES OF SLAUGHTER
CATTLE ON MARKETS IN THE SOUTHWEST (1964-1966)

Slaughter Slaughter
Variable steers heifers Combined
—-——-—Dollarspercwt-————--
Grade
Choice 1.49 1.30 1.43
Good 0.00 0.00 0.00
Weight
650 pounds —-0.59 NS NS
750 pounds —0.27
850 pounds —0.06
950 pounds —0.03
1,050 pounds 0.0
1,150 pounds —0.14
1,250 pounds —0.41
1,350 pounds —0.78
Market location
Clovis 0.32 N.S. 0.54 0.41
Fort Worth 0.00 N.S. 0.00 0.00
Oklahoma City 0.11 N.S. 0.45 0.24
San Antonio 0.19 N.S. 0.34 0.29
Houston 0.41 N.S. 0.83 0.45
Season
First quarter —-1.04 —-O.67 -0.87
Second quarter —0.30 -0.01 —0.16
Third quarter 0.59 0-53 0-59
Fourth quarter 0.00 0.00 0-00
Sex
Steers 0-52
Heifers 0-00
Year
1964 0.00 0.00 0.00
1965 2.44 1.86 2.18
1966 3.83 3.60 3.72

NS indicates the estimates were not significantly different from
the group mean at a probability level of at least 90%.

Source: Calculated from data obtained from Market News Service
U.S. Department of Agriculture. More detail in Appendix
Table 6.

The estimates from these analyses suggest that the
value of a 1,000-pound Choice steer over a Good steer
of the same weight was about $15 per head. The mar-
ket transferred about two-thirds of this premium back
to the feeder calf (comparisonof estimates from Tables
4 and 5). The difference per head for steers and heifers
appeared to be higher for the feeder ($10) than for the
1,000-pound slaughter animal ($6). That seasonal price
differences were lowest in the first quarter reflected
lower costs for feeder cattle purchased in the fourth
quarter.

Estimates of individual factors that affect prices of
feeder and slaughter cattle documented the generally
accepted hypothesis that the live cattle markets of the
Southwest operate competitively and pricing is relatively

10

  
  
 
 
 
  
   
  
  
   
  
  
    
  
   
   
   
  
  
    
   
   
   
   
 
  
   
  
  
 
  

efficient. Deviations from expectations based,
nomic theory were small and could be due i‘
errors in measurement or errors by participan
market. 

Trends in Price Differences of
Feeder and Slaughter Cattle

Trends in feeder and slaughter cattle an
age price differences associated with select
were analyzed. Specifically, the following -_
was examined: Developments in the last ‘tw
have resulted in a narrowing of price differen
market classes, grades and weights of slaugh
This hypothesis was based, in part, on the 
of a decrease in the value of edible tallow -~
consumer's changing preferences toward lessf
waste on retail cuts of beef; therefore, high
or heavier slaughter animals should be dec _
price relative to lower quality or lighter anim
a given weight and grade, it was believed that;
difference of a slaughter steer over a slaugh
had decreased because of improved feeding f
agement of heifers on feed. Feedlots are 7,;
produce slaughter heifers to a given weight I
risk to the packer and retailer of excess wast
pared with those marketed in the past. i‘

The hypothesis that price differences 
ket classes, grades and weights of feeder
increased was also considered. This hypothesis f
on changes provided by the development 
of the large feedlots and the increased effi
realizing gains. In addition, it was believed‘?
more specialized feeding industry is more ‘I
reflecting the value of individual feeder ani
it was formerly. The increased efficiency 
would be expected to place a relatively higher
lighter animals and on lower quality ani
efficiency of feeding heifer cattle has increase
increase in the efficiency of feeding steer v
have been greater; therefore, a widening of 
difference of a feeder steer of a given weight l‘
over a comparable feeder heifer might be i
Linear regression and correlation analysis was 
tical method used to test the hypotheses.

The general model is represented by the
Pd = B0 + BlT + E '

Where _
Pd =1 annual average price difference per 1

weight of animals differing by a sele _i
T = time in years, I
E = error term.

Data used in the analyses were obtained,
nual average market quotations issued by the,

    
  
  
   
  
 
  
  
 
 
   
   
  
  
   

 tural Marketing Service, U.S. Depart-
]' ture. Omaha market quotations were
 yses of price differences of slaughtered
F» as City quotations in the analyses of
 of feeder cattle. These two markets
 the most representative of the national
5' type of cattle considered.

 Differences of Slaughter Cattle

1.» of statistical analyses and graphs of
 and observations were examined for
i. in trend due to grade changes. Although
‘Jges were noted, there was evidence of
lions due to fundamental shifts in buyer

iaA8SOCillt8d with Grade Differences

peerage price differentials per hundred-
 with grade differences for both
' and steers trended downward over the
11955-68 (Table 6 and Figures 1 and 2).
(rage price difference per 100 pounds for
l’ steers over Choice slaughter steers was

about $1.50 for all three weight classifications examined
-—900 to 1,100 pounds, 1,100 to 1,300 pounds and
1,300 to 1,500 pounds. In each case, the price difference
of Prime grade steers over Choice grade steers has
trended downward at about 14 cents per year over the
period. Based on the regression equations, 1968 price
differences of Prime slaughter steers over Choice slaugh-
ter steers were estimated to be 52 cents for 900- to 1,100-
pound animals, 62 cents for 1,100- to 1,300-pound ani-
mals and 54 cents for 1,300- to 1,500-pound animals.

The 14-year average price difference of Choice
grade slaughter steers over Good grade slaughter steers
of the two weight classifications, 900 to 1,100 pounds
and 1,100 to 1,300 pounds, was $2.32 per hundred-
weight. For both weight classifications, this price dif-
ference has trended downward at about 10 cents per
year over the period. Estimates of the 1968 price dif-
ferences of Choice steers over Good steers were $1.64
for the 900- to 1,100-pound animals and $1.62 for the
1,300- to 1,500-pound animals.

The price differences per 100 pounds for Prime
slaughter heifers over Choice slaughter heifers weigh-

ie S IN PRICE DIFFERENCES DUE TO GRADE DIFFERENCES IN SLAUGHTER CATTLE AT OMAHA

Price difference (PD)

Regression in estimates

  

   
   
   
 

Intercept Trend in PD
Estimated Estimated 1955-68 value 1955-68
 Explanation 1972 1968 Average (b0) (b1) R’ S
. — — — — — —— —- Dollars per cwt — — — — ~ —— -
;~' lb
i minus Good 1.19 2.17 5.76 5.5880 -.2445** .7545 .6068
 'ce rninus Good 1.25 1.64 2.52 5.0918 _.1055** .5989 .5687
‘e minus Choice - .05 .52 1.44 2.5048 -.1417** .8249 .2845
Y 1i lb
e minus Good 1.21 2.24 3.91 5.8309 —.2566** .7509 .6435
v minus Good 1.19 1.62 2.52 5.1265 -.1074** .5765 .4010
  minus Choice .02 .62 1.59 2.7046 -.1492** .8241 .5001
 n lb
 minus Choice .05 .54 1.45 2.5115 -.1410** .8057 .5054
  minus Good 2.07 2.58 5.59 4.5555 -.1256** .5255 .5216
‘ice minus Good 1.69 1.89 2.21 2.5850 _.0495* .5082 .5252
 minus Choice .59 .69 1.18 1.7466 -.0755** .6718 .2296
~.‘._ ‘ t‘
_' e minus Good 1.87 2.02 2.27 2.5605 -.o585‘r .2249 .5098

' ‘ty level of 99%.
 level of 95%.
‘ " ‘ty level.“ of 90%.

   
  
   
  
  

i’ to hold weight groups completely constant over time due to changes in price reporting. Weight classifications for
- 'fers were 800 to 1,000 pounds during 1955-59, 900 to 1,100 pounds during 1960-68; Good heifers were 700 to
T195559 and 800 to 1,000 pounds during 1960-68.

‘w for Choice heifers were 600 to 800 pounds during 1955-59, 700-900 pounds during 1960-68 ; Good heifers were
during 1955-59 and 600 to 800 pounds during 1960-68.

 --- data obtained from Market News Service, USDA.

ll

$/cwt Prime minus Choice
" _ . (900—ll0O pounds)

Equation 4-3

OP‘ Min-b
l
v

1965 56 57 58 59 60 61 62 63 64 65 66 67 68

Choice minus Good
(900—1l00 pounds)

 

 
  
   
     
    
  

    

$/cwt 4 -

3 ' ' _ _ _
Equation 4-2 2 - ' ‘ , , ‘ , ’ '

1 ;

o I I I I I I l I I I I I I I

1955- 56 57 58 59 60 61 62 63 64 6s 66 67 .68
$/cwt 7 1 Prime minus Good

5 _ I (900—ll00 pounds)

5

4

3
Equation 4-1 2

1 _

0 _ I I I 1 I I I I I I r I T

1955 56 57 58 59 60 61 62 63 64 65 66 67 68
$/cwt 3 Prime minus Choice

2 ' ‘ , (1300-1500 pounds)
Equation 4-7 1 _ ' ' , ‘ _ _ ‘ . 6

O I I r I I I I I I I I l l ‘

1955 56 57 58 59 60 61 62 63 64 65 66 67 68
3 Prime minus Choice
s/“wt ' _ (1100-1300 pounds)

Equation 4-6 i ' ' 1 _ i ‘ 6 _ .

0 I 1 | l I I T I I I I I I l

1955 56 57 58 59 60 61 62 63 64 65 66 67 68
$/cwt 4 Choice minus Good

3 - ° (1100-1300 pounds)
Equation 4-5 5 ' . ' . ~ - , Q

0 I l I I 1 I I I l I I I 1 I

1955 56 57 58 59 60 61 62 63 64 65 66 67 68
$/cwt Z i 6 Prime minus Good
5 ‘ ' (1100-1300 pounds) 5
4 I Figure 1. Trends 
ferences between I

Eqmtim‘ 4'4 3 ' _ slaughter steers at i

2 - ' 5

l -

0 I I I 1 I I 1 I 1 I I I I 1

1955 56 57 58 59 60 61 62 63 64 65 66 67 68

ing approximately 800 to 1,100 pounds averaged $1.18 ter heifers over Good slaughter heifers was
during the 14-year period. This price difference trended to be $2.02. The average price difference 
downward at the rate of 8 cents per year, and for 1968 slaughter heifers over Good slaughter heifers I‘
the equation estimated a price difference of Prime approximately 700 to 1,100 pounds was $2 i
slaughter heifers over Choice slaughter heifers of 69 price difference trended downward at the q
cents. The average price difference per hundredweight cents per year and was estimated to be $1.98
for Choice slaughter heifers weighing about 500 to 800 All of the equations which examined '
pounds over Good slaughter heifers of the same weight price differences associated with grade diff a
was $2.27 and decreased at an average rate of 4 cents slaughter cattle reflected a downward trend. i
per year. The 1968 price difference of Choice slaugh- two equations, the regression coefficients w l

‘v12

 $lcvt

$I—'l\7U)#U1

 

§'$/gut 3 . Choice minus Good (Light Weight)
 2 q . . i o . u - _ o . . .
l 4
9 I I r F I I I I I I I I I T
- 1955 56 s7 58 59 60 61 62 63 64 65 66 67 68
1% $/cwt 3 I Prime minus Choice ( Medium Weight)
‘i 2 r‘ o ,
1 "' - u . I o 5 ‘ 9
0 I I I I I I I I I I I I I I
1955 56 57 58 59 60 61 62 63 64 65 66 67 68
1 Choice minus Good (Medium Weight)
7 $/cwt 3 — , _ _ _
2 q ‘ ° ‘ g a - ‘ c .
1 1
0 I I T I I I I I I I I I I I
1955 56 57. 58 59 61 61 62 63 64 65 66 67 68

Figure 2. Trends in price dif-
ferences between grades of
slaughter heifers at Omaha.

1955 96 57

  
    
   
   
 

-percent level of probability. One of the
I- trend coefficients was significant at the
1 el, and the second coefficient was signifi-
 I ‘percent level of probability. On the basis
F ts, the hypothesis that price differences
V,“ grades of slaughter cattle have decreased
ected.

Associated with Weight Differences

60f a lack of data for slaughter heifers,
p‘ calculated only for the price differences

‘it

l I I I I l l

66

associated with weight differences for slaughter steers.
All of the equations reflected very little rise or fall
over the period under study (Table 7 and Figure 3).
Only one of the seven trend coefficients calculated was
significant at a probability level of at least 90 percent.
Based on these results, the hypothesis that price differ-
ences associated with weight , differences in slaughter
cattle have decreased cannot be accepted.

The 14-year average price difference per hundred-
weight associated with weight differences varied from
48 to —12 cents per hundredweight. For the prime

 II S IN PRICE DIFFERENCES DUE TO WEIGHT DIFFERENCES OF SLAUGHTER STEERS AT OMAHA

Regression estimates

    
 

Average price Intercept Trend in PD
difference value 1955-68
Explanation (PD) (b0) (b1) R’ S
p — — — — — -— — Dollars per cwt — — — — — — —
I ( 90o to 1,100) minus (1,300 10 1,500) .36 .3529 .0009 NS .0001 .3715
Q, (1,100 r6 1,300) minus (1,300 r0 1,500) .48 .4456 .0044 NS .0084 .2078
 ( 900 to 1,100) minus (1,100 to 1,300) -.12 -.0927 -.0035 NS .0061 .1973
f;.( 900 to 1,100) minus (1,300 m 1,500) .37 .3679 .0007 NS .0001 .2961
.- (1,100 m 1,300) minus (1,300 to 1,500) .35 .2523 .0125 NS .0935 .1702
 ( 900 r0 1,000) minus (1,100 r0 1,300) .03 .1156 -.0119 Ns .0965 .1584
 ( 900 t0 1,100) minus (1,100 to 1,300) .03 .1501 —.0158'l' .2458 .1207

    
 

_ ility level of 90%.

ftrend coefficient does not differ from zero at a probability level of at least 90%.

 from data obtained from the Market News Service, USDA.

l3

Steers minus Heifers (Good Grade)

Figure 3. Tren
differences betw
steers and heifers

$/cwt 2 _l
Equation 4-21 l - _ _ . _ _ . ' - e
O 1 l l 1 l I I '
1960 61 62 63 64 65- 66 67 68
l Steers minus Heifers (Choice Grade)
$/cwt 2
Equation 4-20 1 _ _
0 I I I I I 1 I I I
1960 61 62 63 64 65 66 67 68
Steers minus Heifers (Prime Grade)
$/cwt 2 -
Equation 4-19 1 _ '
0 1 I n l l l I I I
.1960 61 62 63 64 65 66 67 68

grade, the 1,100- to 1,300-pound weight range had
slightly higher prices than lighter or heavier weights.
For the Choice grade the 900- to 1,100-pound weight
range had the highest prices. Within a grade of the
three top USDA grades, there was practically no dif-
ference in price paid for steers weighing between 900
and 1,300 pounds; however, weights beyond 1,300
pounds were discounted up to $0.50. The small differ-
ences in price due to heavier weights showed no signifi-
cant trend over the 14-year period.

Trends in Price Differences Between
Steers and Heifers

Data for the period 1960 through 1968 were used
for analysis of price differences between steers and
heifers weighing approximately 900 to 1,100 pounds in
each of the three grade categories-—Prime, Choice and
Good (Table 8 and Figure 3). The average price dif-
ference of steers over heifers was 76 cents for both
Prime and Good grades. The average price difference

TABLE 8. TRENDS IN PRICE DIFFERENCES BETWEEN SLAUGHTER STEERS AND HEIFERS AT OMAHA (1

of Choice steers over Choice heifers was 71 c ~
of the equations reflected a downward trendf
only one of the trend coefficients was signifii
95-percent level of probability. The remain:
cients were not significantly different from
probability level of at least 90 percent. On
of these results, the hypothesis that price.
between slaughter steers and slaughter h
decreased cannot be accepted. I

Trends in Price Differences of Feeder Ca

Because of weight classification changes 
news reporters, it was not possible to hold 
stant in the analyses. Changes also occur l_
methods of reporting grade classifications; f
the classification 300- to 500-pound Good J
heifers was used from 1955 through 1961. i
this classification was separated into the two-l
tions of 300- to 500-pound Choice heifers I
500-pound Good heifers. At times a com

Price difference (PD)

Regression estimates

Intercept Trend in PD
Estimated 1960-68 value 1959-68
Equation no. Explanation 1968 average (bu) (b1) R’
— — — ~ — — - Dollars per cwt — —— — -— —- — 
Steers minus heifers A
4-19 Prime, 900 t0 1,100 .77 .76 .7581 .0008 NS .0002
4-20 ChOiCC, 900 t0 1,100 .83 .71 .5573 .0500 NS .3048 -
4-21 Good, steers 900 to 1,100 .98 .76 .4883 0550* .4869

heifers 800 to 1,000

*Refers to a probability level of 95%.

NS indicates the coefficient was not different from zero at a probability level of at least 90%.
Source: Calculated from data obtained from the Market News Service, USDA.

14

   
  
 
 
 
  
  
  
 
  
  
   
  
 
  
 
 
 
 
  
  

  
  
  
   
  
  
  
 
  
   
   
  
    
    
 
  
    
    
   
    
   
   
  
  
   
  
   
  

ative of the USDA Market News Service indicated that
the standards are roughly comparable grade by grade.
In view of the preceding, this study assumed the two
sets of grade standards to be directly translatable.

 grade classification changes occurred.
 ociated with data used in a particular
ed in Table 9.

9;» 1964, the U.S. Department of Agricul-
 d redefined feeder cattle grades. Prior
was an "easing up” in the interpretation
 grade standards in anticipation of the
 There is little published material avail-
“the translation of the two sets of stand-
i, information obtained from a represent-

Price Trends Associated with Grade Differences

Due to a lack of data, only two equations were
calculated: Choice grade compared with Good grade
for medium weight steers and Choice grade compared
with Good grade for heavier weight steers (Table 9

S IN PRICE DIFFERENCES FOR FEEDER CATTLE AT KANSAS CITY (1955-1968)

Regression estimates
Price difference (PD) Intercept Trend in PD

Estimated Estimated 1955-68 value 1955-68
Explanation 1972 1968 Average (b0) (b1) R’ 5

 — — — — — — —- Dollars per cwt — — — — — - -
 (steers)

Yw weights
Choice minus Good 2.77 2.65 2.40 2.1415 .0547’r .2181 .2865

 weights

 Gxoice minus Good 1.99 1.85 1.61 1.5450 .0562‘r .2201 .2965
 (Good 8r Choice steers)

(Plight minus Heavy 4.21 5.99 5.64 5.2515 .0541 NS .0187 1.1085

Medium minus heavy 1.63 1.54 1.40 1.2418 .0214 NS .0200 .6513
Light minus medium 2.58 2.45 2.23 1.9896 .0327 NS .0164 1.1047

 weights

 Steers minus Heifers 4.09 3.80 3.34 2.8135 .0708** .4161 .3650
 H weights
 Steers minus heifers 3.03 2.94 2.81 2.6504 .0210 NS .0545 .3805

 ility level of 90%.

inn-- level of 99%.

I the coefficient is not significant at a probability level of at least 90%.

ple to hold weights completely constant over the 14-year period. The classifications were changed slightly during the per-
_'_ 4-22, weights for both grades were 500 to 800 pounds for the years 1955-65 and 550 to 750 pounds and 750 to 1,000

 1 1966-68. In Equation 4-23, weights for both grades were 800 to 1,050 pounds for the years 1955-61, 800 to 1,000
-- 1962-65 and 750 to 1,000 pounds for the years 1966-68.

i, analyses were: For lighter weight animals, the price of the one grade classification, Good and Choice, for the years
 average price of the two classifications of Good and Choice for the years 1962-68. For the classification of medium and
"ls, the average price of the two grades of Good and Choice was used for nhe entire 14-year period. Weight classifi-
9- analyses were: For the lighter weight animals, 300 to 500 pounds for the years 1955-61, 300 to 550 pounds for the
 the years 1962 through 1968, 300 to 500 pounds for the Good grade for the years 1962 through 1965 and 300 to 550
'-< 5 1966 through 1968; for the medium weight animals, 500 to 800 pounds for both Choice and Good grades for the
,_ 1966 and 550 to 750 pounds for both grades for the years 1966 through 1968; for the heavier animals, 800 to 1,050
do grades of Good and Choice for the years 1955 through 1961, 800 to 1,000 pounds for both grades for the years 1962
 750 to 1,000 pounds for the two grades for the years 1966 through 1968.

 analysis of lighter weight animals were: For both steers and heifers, prices for the one grade classification of Good
5111c years 1955 through 1961 and the average of the prices of the two grades of Choice and Good for the years 1962
eight classifications were: 300 t0 500 pounds for both steers and heifers for the years 1955 through 1961; for Choice
“Alto 550 pounds for the years 1962 through 1968; for Good grade steers, 300 to 500 pounds for the years 1962 through
3550 pounds for the years 1966 through 1968; for both Good and Choice grades of heifers, 300 to 500 pounds for the
F~ 1968.

i-A- steers and heifers, prices for the grade classification of Choice were used. The weight classifications were: For steers,
3» for the years 1955 through 1965, and 550 to 750 pounds for the years 1966 through 1968; for heifers, 500 to 750
-» 1 1955 through 1965, and 500 to 700 pounds for the years 1966 through 1968.

 from data obtained from the Market News Service, USDA.

t

I5

   

Figure 4. Trends in:
ferences between

$/cut Z “ Choice minus Good (Heavy Weight)
Equation 4-23 3 -
2.- . . o ' '
l- ‘ ' ' ' ' ' O
0 T I l I I l I I I I l F I I
1955 5 57 58 59 60 61 62 63 64 65 66 67 68
$/Cwt 5 ' Choice minus Good (Medium Weight)
4 _
Equation 4-22 3 “ , . 0 . -
2 ' , , 0 o o ° '
1 _
O n I | I l I 1 I 1 I I I 1 T
1955 56 57 58 59 60 61 62 63 64 65 66 67 68

and Figure 4). The average price difference between
Choice and Good feeder steers of the medium weight
category was $2.40 per 100 pounds. For the heavier
weight category, Choice feeder steers were found to
have an average price difference of $1.61 per hundred-
weight over Good steers. The 1968 price differences
were estimated to be $2.63 and $1.85, respectively. Both
of the equations exhibited an upward trend of 3.5 cents
per year, and the trend coefficients were significantly
different from zero at a probability level of 90 percent.
On the basis of these results, the hypothesis that price
differences associated with grades of feeder cattle have
increased cannot be rejected.

Price (Trends Associated with Weight Differences

Price differences associated with weight differences
of feeder steers exhibited slight upward trends for the
14-year period 1955 through 1968 (Table 9 and Figure
5). However, none of the regression coefficients were

Light Weight minus Medium Weight

’ feeder steers at K ~-

significantly different from zero at a probabi if
of at least 90 percent. On the basis of th i
the hypothesis that price differences associ .
weights in feeder cattle have increased c '
accepted. ‘

     
 
 
   
 

The average price difference of lighter;
(approximately 300 to 500 pounds) over hea
mals (approximately 800 to 1,000 pounds) wi
Medium weight animals (approximately 500 ..
pounds) had an average price difference of
hundredweight over heavier feeder steers. D __
14-year period, the average price difference 
weight steers over medium weight steers was _

Trends in Price Differences Between
Steers and Heifers f

Two equations were calculated to deter
trend in price differences associated with m ‘T’
—-steer prices minus heifer prices for light

Figure 5. Trends
differences between-

$/cwt S -
4 ~ , '
Equation 4-26 3 ' - ¢ .
2 . _ ~
1- o o 0
' o
o ‘ ‘ I I I I I I | | u a |
1955 56 57 58 59 60 61 62 63 64 65 66 67 68
$/cwt 3 _ Medium Weight minus Heavy Weight
2- ‘ '
Equation 4-25 1 _ _ ° - ' . ,
0 i ' 0
o I I I 1 I | I | | r -| I |
1955 56 57 58 59 60 61 62 63 64 65 66 67 68
$/cwt 7 _ Light Weight minus Heavy Weight
s- ~ '
5 _
Equation 4~24 4 _ ‘ ' _ _4‘
3- 0 F
2_ O
1- . ' ~
0

1955 56 S7 58 59 60 61

16

weights of feeder 7
Kansas City. ‘

63 64 65 66 67 68

 

   
   
   
   
   
  
   
  
   
  
    
 
 
  
  
    
 
  
   
  
  
  

 r prices minus heifer prices for medium
,6 ~ (Table 9 and Figure 6). Both equa-
w, an upward trend. However, the trend
 ulated for the medium weight animals
 " 500 to 800 pounds) was not significant
‘ty level of at least 90 percent. The trend
ff-culated for the lighter weight animals
y 300 to 500 pounds) was significant at
flevel of 99 percent. Considering the re-
“thesis that price differences associated
ass in feeder cattle have increased cannot
 the lighter weight animals and cannot
j~ the heavier weight animals. The average
i‘ 'al of steers over heifers was $2.81 for
 '_rnals and $3.34 for the lighter animals.
iégerence of lighter weight steers over lighter
i‘ was estimated to be $3.80 in 1968. The
 t for the lighter weight animals indi-
ge increase in the price difference of 7
_» tends in Price Differences of

i? ughter Cattle

if! feeder cattle and slaughter cattle price
 iated with the selected animal character-
 weight and market class are summarized.

 ic hypotheses tested were ( 1) Develop-
last two decades have resulted in a nar-
 differences among grades, weights and
 slaughter cattle and (2) Developments
j,» decades have resulted in a widening of
'- among grades, weights and the market
cattle.

 is of statistical tests of the trend coeffi-
und that price differences among grades
i e have decreased and price differences
 of feeder cattle have increased. Both
‘nsistent with the hypotheses, but slight

changes which have occurred in USDA grade specifica-
tions may account for some of the trend in both cases.
If the trend of price differences between Prime and
Choice grades of slaughter cattle continues, by 1972
there will be no difference in price between the two
grades. This implies that there will be no price incen-
tive for producing feeder cattle that will grade prime
at slaughter weights. On the other hand, the price dif-
ference of Choice feeders over Good feeders is widen-
ing and is projected to be 14 cents greater in 1972 than
the estimated 1968 price difference. This implies an
increasing incentive to produce feeder calves which

grade Choice as opposed to feeder calves which grade
Good. '

For the lighter weight feeder cattle, the value of
a steer relative to that of a heifer has increased as
hypothesized; however, the trend in the price difference
between feeder steers and heifers of heavier weights
was nonsignificant, possibly because the increase in the
feeding efficiency of heavier steers and heifers has in-
creased about equally. The price differences between
slaughter steers and heifers exhibited no trend possibly
because of the use of terminal market price data in the
analysis. The slaughter animals passing through the
terminal markets are, for the most part, small lots of
farmer-produced animals, and, consequently, the risk
to the packer of excess waste associated with heifers is
unchanged over the period covered by the analysis.
-Price differences associated with weight for both feeder
and slaughter animals exhibited no trend.

Acknowledgments

The authors wish to thank Vann-Roach Cattle
Company for making data available for part of this
study and Billy W. Lockhead and Paul R. Henry of
the Livestock Division, Consumer and Marketing Serv-
ice, and U.S. Department of Agriculture for providing
other data used in this study. The authors are indebted

5 Steers minus Heifers (Medium Weight)
7
4 .
Q U
3 _ - o ' ' ‘ . o o o
¢2 _ . .
1-
o | I I I l I l | I _| I l I
1955 5 57 58 59 60 61 62 63 64 65 66 67 68

5 4 Steers minus Heifers (Light Weight)

g 1, _ . , , Figure 6. Trends in price dif-
. 3 _ . . _ _ - _ - ferences between feeder steers
; 2 . ' . and heifers at Kansas City.

 1

3 0

I | | | I I I

1955 S6 57 58 59 60 61

17

to R. A. Dietrich, R. J. Freund, C. F. Lard and C. E.
Shafer for reviewing the manuscript.

This study was a contributing project to WM-48,

"Livestock Marketing and Pricing Efficiency in the
West," Western Regional Technical Livestock Market-
ing Committee. It is based on the PhD Dissertation of
John B. James, Department of Agricultural Economics
and Rural Sociology, Texas A8zM University, December

1970.

(1)

(2)

(5)

18

References

Broadbent, E. E., A. G. Madsen and V. I. West. Pricing
Butcher Hogs at Illinois Country Markets. University of
Illinois Agricultural Experiment Station, Bulletin 714.
September 1965.

Dietrich, Raymond A. Price Information and Meat Mar-
keting in Texas and Oklahoma. U.S. Department of Agri-
culture, Economic Research Service, Report N0. 115.
June 1967.

Freund, R. J. and J. C. Purcell. Marketing Cattle and
Calues Through Southern Auctions, Influence of Market-
ing Conditions ana’ Practices on Prices. Southern Coopera-
tive Series, Bulletin 59. January 1959.

APPENDIX TABLE 1.

(4)

(5)

(6)

(7)

(8)

(9)

(10)

Appendix

UNADJUSTED MEANS OF VARI-
ABLES CLASSIFIED BY MONTHS AND AREAS — LIVE-

STOCK AUCTION DATA (1968)‘

  
   
   
   
    

Freund, R. J. and Roy G. Stout. Marketing’)
Cali/es Through Southern Auctions, Analysis‘;
Contributing to Price Variation. Southern .
Series, Bulletin 54. June 1958. A

James, John B. Factors Affecting Price D'
Cattle in the Southwest, PhD Dissertation. l/i
Agricultural Economics and Rural Sociology, t’
University, December 1970.

McPherson, W. K.  Well Do Auctions Q
Price of Cattle?" journal of Farm Economic
February 1956. ‘I

Purcell, Joseph C. Comparative Analysis of
on Georgia Auctions and Midwest Terrni 
Georgia Agricultural Experiment Station, 1i‘
June 1956. 

Suits, D. B. "Use of Dummy Variables in
Equations," journal of the American Statisti
tion, December 1957. 

U. S. Department of Agriculture, Economic R
ice, National Food Situation. February 1969.1,

Williamson, J. C., Jr. Cattle Prices at c)
Auctions. Agricultural Economic Series N0.,
Carolina State College, September 1956.

Mean of specified variables

(X4)
Num- (X2) (X3) DlS- 
Independent ber of (X1) Weight Lot tance“ Price
variable lots Grade’ (lbs) size (miles) ($/cwt)
Month
M1, January 290 .417 399 4.9 157 25.82
Ms, March 543 .538 408 4.5 156 27.82
M5, May 469 .727 401 5.2 16o 28.27
M1, July 505 .541 395 6.3 167 27.94
M», Sept. 569 .460 396 9.8 171 26.07
M10, QCf. 688 .445 400 10.4 163 26.20
M11, Nov. 592 .480 405 7.6 162 27.04
Area
A1, Eastern 1756 .509 400 8.4 181 26.90
A2, Northern 674 .518 400 7.7 153 27.09
A4, SOtIthem 541 .556 406 4.8 101 27.04
A5, Western 685 .491 400 6.3 173 27.30
Total or
average 3,656 .514 401 7.3 162 27.03
Standard deviation .50 42.3 6.89 45.1 1.52

‘Area 3 excluded.

zNumber one Okie = 1; number two Okie = 0.

“Distance from Fort Worth in miles.

Source: Calculated from Order Buyer Invoices.

 
   

 LE 2. ESTIMATES OF DIFFERENCES IN
 E #1 AND OKIE #2 FEEDER STEERS
1 E TO SPECIFIED FACTORS (SELECTED

   

  

  
   
  
  
    
  
   
  

_, - tion 2-1 Equation 2-2 Equation 2-3
éfiomplete Areas Months
ii model eliminated eliminated
———-——-Dollars per cwt—-—-——--—-
32.6643 32.6214 32.7265
1.3535 1.3516 1.6262
 (51.02) (49.81) (44.60)
‘ .0158 - .0158 - .0156
 (51.21) (50.13) (36.10)
j -.01158 - .0135 - .0408
 ( 5.61) ( 6.56) (15.01)
i .0006 .0008 .0003
(1.19) (2.85) ( .54)
.1658 - .1324
.0324 NS .0141 NS
.2837 .2299
.1521 —- .1116
1.1155 —- 1.1143
.8709 .8613
.9560 .9501
.7703 .7720
.9459 — .9207
.6958 -— .6903
.1600 .1419
.776 .795 1.092
.739 .726 .484
3656 3656 3656

;-- tern area (As) excluded.

if parentheses are t values associated with the esti-
 b value for discrete variables not statistically
 at a probability level of at least 90 percent.
i- ed variable’s coefficient was not tested as its
 was not part of the computer output. Within
 variables, the deleted variable is the last one

 from Order Buyer Invoices.

APPENDIX TABLE 3. ESTIMATES OF DIFFERENCES IN
PRICE QUOTATIONS OF FEEDER STEERS AND BULLS
DUE TO SPECIFIED FACTORS (1966-1968)

Equation Equation Equation
2-4 2-5 2-6
Independent Complete Grades Quarters
variable model eliminated eliminated
————-——Dollarspercwt-—--——--—
Constant 31.6651 52.3260 31.6807
G1, Okie #1 1.2119 1.2115
G1, Okie #2 .0420 NS .0416 NS
G5, 01:16 #3 — 1.2539 — 1.2531
X1, Weight —- .0123 —- .0137 — .0123
( 36:88) (31.82) (34.62)
Q1, ]an., Feb., Mar. .0546 NS .0473
Q1, April, May, june .3414 .3448
Q8, July, Aug., Sept. .3456 .3463
Q1, Oct., Nov., Dec. - .7416 - .7348
S 1.209 1.507 1.289
R’ .636 .434 .586
n 1497 1497 1497

The numbers in parentheses are t values associated with the esti-
mate above each.

NS indicates the b value for discrete variables not statistically
significant from zero at a probability level of at least 90 percent.
However, the deleted variables coefficient was not tested as its
standard deviation was not part of the computer output. Within
a group of discrete variables, the deleted variable is the last one
of the group.

Source: Calculated from Order Buyer Price Quotations.

APPENDIX TABLE 4. ESTIMATES OF DIFFERENCES IN
PRICES OF OKIE #1 FEEDER HEIFERS AND STEERS AND
BULLS DUE TO SPECIFIED FACTORS (1966-1968)

Equation 2-7 Equation 2-8
Independent Complete Quarters
variable model eliminated
— — -— Dollars per cwt —- — -—
Constant 29.4805 29.5142
Xhwelght — .0129 — .0129
(21.49) (19.53)
X2, 58X 3.6557 3.6558
(36.44) (33.06)
Q1, jan., Feb., Mar. —- .1060 NS
Q2, April, May, june .4540
Q8, July, Aug., Sept. .5071
Q1, Oct., Nov., Dec} -- .8551
S 1.184 1.306
R2 .773 .723
r1 558 558

The numbers in parentheses are t values associated with the esti-
mate above each.

NS indicates the b value for discrete variables not statistically
significant from zero at a probability level of at least 9O percent.
However, the deleted variable’s coefficient was not tested as its
standard deviation was not part of the computer output. Within
a group of discrete variables, the deleted variable is the last one
of the group.

Source: Calculated from Order Buyer Price Quotations.

19

APPENDIX TABLE 5. SUMMARY OF ESTIMATES OF DIF-
FERENCES IN PRICES OF FIVE GRADES OF FEEDER
STEERS AND HEIFERS DUE TO SELECTED FACTORS
(1964-68)

APPENDIX TABLE 6. SUMMARY 0F THE l
0F DIFFERENCES IN PRICES 0F GOOD - 
SLAUGHTER STEERS AND HEIFERS DUE To g
FACTORS (1964-1966) 

  

Equation Equation Equation
Independent 2-10 2- l 1 2-1 2
variable Steers Heifers Combined
—-——-———Dollarspercwt-——————-
Constant 27.0275 8.6457 _ 24.2551
G1, Prime 3.8186 3.2150 3.5954
G2, Choice 2.6171 1.9106 2.2724
Ga, Good .4718 .3182 .3860
G4, Standard — 2,0094 —1.5572 — 1.8110
G5, Utility - 4.8981 --3.8867 — 4.4428
X1, Weight - .0080 .0577 - .0072
(6.34) (4.14) (7.40)
X1’, Weight Square 00000065 — 00006383 .00000047
( .61) (4.58) ( .57) ’
ML1, Amarillo .4814 .1674 .3248
MLz, Clovis .2494 .4729 .3534
MLs, F011 Worth - .0072 NS .1028 .0545 NS
ML}, Oklahoma City .1074 — .2941 - .0865
MLs, Phoenix -— .7012 —1.0807 — .8908
M14, San Angelo .2891 — .0739 NS .0984 NS
M111, San Antonio -- .0599 NS .3862 .1683
MLs, Houston — .3590 .3194 —- .0221
Q1, _Ian., Feb., Mar. —- .2156 — .1600 — .1875
Q2, April, May, June .2495 .2661 .2533
Q8, July, Aug., Sept. .3162 .3842 .3464
Q4, Oct., N0v., Dec. — .3501 — .4503 — .4122
Yr1, 1964 — 3.8542 " —3.2508 — 3.6312
Yfa, 1965 — 2.1478 —-1.9436 -— 2.1018
Yfa, 1966 1.7209 1.4358 1.6242
Yh, 1967 1.7446 1.4513 1.6473
Yrs, 1968 2.5365 2.3073 2.4615
X2, 38X 2.4818
(62.17)
S 1.333 1.209 1.339
R2 .890 .877 .882
n 2769 V2274 5043

The numbers in parentheses are t values associated with the esti-
mate above each.

NS indicates tl1e b values for discrete variables not statistically
significant from zero at a probability level of at least 90 percent.
However, the deleted variable’s coefficient was not tested as its
standard deviation was not part of the computer output. Within
a group of discrete variables, the deleted variable is the last one
of the group.

Source: Calculated from data obtained from the Market News

Service, USDA.

20

   
     

Independent
variable Steers Heifers
— —  Dollars per cwt

Constant 17.0324 i“ 21.5194
Grade ' 1.4949 1.3012

(12.28) (8.35)
Weight .0114 .0008

( 5.10) ( 15)
Weight Square - .00000584 —— .00000055 -:

( 3.03) ( .15) _
MLi, Clovis .1090 NS .0451 NS .
MLe, Fort Worth — .2065 —- .4943 1;
MLa, Okla. City — .0939 NS - .0395 NS -~Ji
M11; San Antonio - .0198 NS - .1508 NS ~
MLe, Houston .2052 ' .3379
Q1, Jan, Feb., Mar. —— .8518 — .6476
Q2, Apr., May, june - .1106 NS .0166 NS
Q0, July, Aug., Sept. ' .7757 .6078
Q1, Oct., Nov., Dec. .1867 .0232 »_
x11, 1964 - 2.0894 - 1.8204 ._ -’-_,
n2, 1965 .3513 .0457 NS‘
Yre, 1966 1.7381 1.7767
Sex ‘
S 1.130 1.068
R’ .737 .699
n 459 381

The numbers in parentheses are t values associated h‘
mate above each. ' -  
NS indicates the b values for discrete variables M;
significant from zero at a probability level of at l 
However, the deleted variable's coefficient was .11 ti,
standard deviation was not part of the computer V“,
a group of discrete variables, the deleted variable 
of the group. 5
Source: Calculated from data obtained from the ~
Service, USDA.