GRID PRICING FOR FED CATTLE: AN EMPIRICAL ANALYSIS

Weekly grid premium and discount price date for fed cattle have been collected over a 3-year period. The grid price data are combined with carcass data (2590 South Dakota slaughter steers) to investigate the variability in the average weekly carcass premium is affected by changes in packer-determined grid premiums and discounts on a weekly basis. The three-stage recursive model is then estimated using an autoregressive procedure. The results of the empirical analysis indicated that among all grid premiums and discounts, it is the choice-select discount that plays the dominant role in determining weekly changes in the average weekly carcass premium (discount).