Grader bias in cattle markets? Evidence from Iowa

Live cattle are increasingly priced as an explicit function of U.S. Department of Agriculture yield and quality grades. Human graders visually inspect each slaughtered carcass and call grades in a matter of seconds as the carcass passes on a moving trolley. We examine whether there is systematic bias in grade calls using a sample of loads delivered to three different midwestern packing plants during 2000-2002. Overall, results indicate that indeed there is a bias, and that grading standards vary significantly across packing plants. Results also are consistent with a behavioral model where graders are more accurate when grading relatively low-quality carcasses.