If packers can purchase a large number of cattle from one location at one time, they may increase their bid price to reflect reduced transactions and procurement costs. Pricing cattle on a live basis is appealing to some cattle feeders who want to maintain complete flexibility in cattle pricing until the transaction price is established. However, because meat quality and carcass dressing percentage are difficult to predict accurately on live animals, premiums and discounts paid on a live basis generally do not reflect the true value of the final product. This gives producers no incentive to invest in better genetics and produce a better product. When cattle are marketed on a dressed-weight basis, the cattle buyer does not need to estimate the dressing percentage.
Price is based upon the actual hot carcass weight.
In principle, the dressed-weight price will be comparable to a live price adjusted for dressing percentage for the same pen of cattle. Over time, across a large number of pens, the average dressed price should be greater than the average dressing percentage-adjusted live price, other things being equal. Grid Pricing Pricing cattle on a grade and yield or grid basis is essentially the same as pricing on a dressed weight basis, except that in addition to dressing percentage, the packer also bases price on the known quality grade of each animal in the pen. Many beef packers offer cattle producers the opportunity to price cattle on a carcass grid basis. An example of a typical price grid offered by beef packers is shown in Table 1.