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Abstract
This article investigates the premium and discount incentive mechanisms in the fed cattle grid
pricing system. A pooled cross-sectional dataset containing carcass information on 598 fed steers
evaluated weekly on the AMS publically reported price grid was constructed for the years 2001 to
2008 (226,000 observations). Empirical evidence suggests that premiums and discounts associated
with specific carcass-quality attributes have been adjusting over time and that the market value
of carcass quality declined by $0.50/cwt during periods of packer cooperative behavior in the
fed cattle market. Additionally, the average market value of carcasses meeting industry quality
standards exhibited a positive time trend.