Study Shows Grid Pricing Has Boosted Profits, Improved Beef

September 14, 2023

Kansas State University agricultural economists have completed a broad analysis of the impact of grid pricing on the cattle industry. The overarching conclusion is that producers, as well as consumers, have benefited from negotiated pricing agreements.

“Over the last 20 years, as the use of marketing agreements has increased dramatically, producers have responded resoundingly by increasing the percentage of steers and heifers that grade Choice and higher, from 55% in the early 2000s to consistently over 80% today,” said K-State agricultural economics graduate student Katy Doumit. “Producers have benefited by having higher prices for fed cattle and consumers have benefited by having higher quality beef they prefer in retail stores.” 

According to K-State livestock economist Ted Schroeder, marketing agreements and grid pricing have evolved because producers have worked to link consumer preferences for high-quality beef with “farm gate, fed cattle values.”

“The data we’ve reviewed clearly demonstrates that sending clear value signals to producers through premiums for high-quality carcasses and discounts for less desired quality has transformed the beef industry,” he said.

Schroeder did suggest those considering entering into a marketing agreement first study the array of alternative grids available and match those with their own cattle procurement, production and marketing strategies. He said the premiums and discounts summarized in the report had considerable variation across grids. Therefore, knowing the type of carcass quality traits a producer can attain relative to cost is critical.

“Launching a grid system is less about chasing targets than it is about knowing the type of cattle one has available and the feeding management system that can match the grid with the cattle,” he explained.

The full study, titled “Fed Cattle and Beef Premiums and Discounts,” is available here.