based on the extent of their use of grid pricing. Any number of criteria could be used to create
grid pricing groups. For the remainder of the paper, two groups are compared; cattle feedlots
marketing 50% or less of their fed cattle with a grid and those using grid pricing for more than
50% of their marketings. Statistical tests and models were also applied to groups defined as
thirds, fourths, and fifths of the distribution besides halves reported here, with very similar
results.
Table 2 shows feedlot characteristic differences and marketing and pricing practice differences
between the two grid pricing groups. The percentage of custom fed cattle between the two
groups was not significantly different. Most other differences were statistically significant.
Those using grid pricing more frequently sold a higher percentage of their fed cattle to the
largest buyer purchasing their fed cattle (83.6%) compared with the other group (56.5%). Cattle
feeders using grid pricing more frequently sold a higher percentage of their fed cattle via an
agreement, contract, or as part of an alliance or cooperative (61.2%) compared with 16.8% for
the other group.
Given how the groups were created, the extent of pricing by method was not surprising. Feeders
using grid pricing more heavily priced 84.0% of their fed cattle marketings with a grid compared
with 18.4% on average for the other group. Those not using grid pricing as much, predictably
used live weight and dressed weight pricing for a higher percentage of their marketings (46.7%
and 34.7%, respectively) compared with the group using grid marketing more frequently (10.2%
and 5.2%, respectively).
How the base price in grids was determined also varied between the two groups. The most
common method of determining the base price for both groups was a formula tied to a quoted
price. Those not using grid pricing as much, used this method for 42.2% of their marketings
while the heavier users of grid pricing used it for 39.1% of their marketings. Those not using
grid pricing as much reported negotiating the base price for a higher percentage of their grid
priced trades (39.9%) compared with 23.5% for the heavier users of grid pricing. Those using
grid pricing more often reported using a formula tied to a plant average price (or packer
procurement cost) more commonly (29.6%) compared with the group not using grid pricing as
much (14.3%). No significant difference was found in their use of a formula tied to the boxed
beef market.
Factors Affecting Grid Pricing
Cattle feeders were asked to respond to thirteen statements believed to potentially affect their use
of grid pricing. The statements came from the author with input from economists listed in
footnote 1 and persons associated with the cooperating cattle organizations listed earlier. Means
and rank tests were conducted to determine similarities and differences among the two groups of
respondents, based on their prior use of grid pricing.
Mean and Rank Tests - Table 3 presents the mean rating for each of the statements by the two
groups created based on their use of grid pricing. A ranking of 1 corresponded to strongly agree