Estimating live cattle value based on phenotypic characteristics in auction markets of the Southwestern United States

In recent years beef cattle producers have been met with a new challenge, the cost-price squeeze. The cost of production has continually increased while the market price of live cattle has not. The beef cattle industry has traditionally offset this increasing cost of production by improving production efficiency. Industry groups have suggested that market condition could be enhanced with the improvement of total product quality.

The National Cattleman's Association initiated research in 1991 to identify areas of lost income to the industry. Results of the National Beef Quality Audit identified four specific industry shortfalls that totaled $279.82 of lost income to the industry per head of feedlot cattle. These shortfalls include: (1) carcass waste, (2) undesirable taste, (3) undesirable management practices, and (4) undesirable carcass weight. Undesirable management practices comprised $27.26 per head of lost income that resulted from hide defects, carcass pathology or parasite damage, injection-site lesions and bruises (NCA, 1992).

A suggested tactic for overcoming the beef industry's lost income is to encourage premiums and discounts for superior and inferior characteristics of cattle, carcasses, cuts and by-products that will more accurately reflect total animal end value. However, producers are convinced that economic incentives do not presently exist to overcome the cost of replacing traditional management techniques with those practices that improve end value. Identification and validity of current market value for phenotypic characteristics, which affect total end value of beef cattie needs to be examined.

The objectives of this research were: (1) Determine the current market value for live cattle phenotypic characteristics in West Texas and Eastern New Mexico; (2) Determine if economic incentives exist for those phenotypic characteristics associated with improved end value; and (3) Develop a hedonic pricing model to accurately define market value for varied levels of quality defined by phenotypic characteristics. Phenotypic characteristics that were specifically addressed included breed type, breed characteristics, frame size, muscling score, body condition, gut fill, hide brand size, hide brand location, as well as general animal health. The samples were taken from four livestock auction facilities located in the West Texas and Eastern New Mexico region. The auction facilities were located in Amarillo and San Angelo, Texas and Roswell and Clovis, New Mexico. These auctions were chosen due to their relative location to the highest cattle population center in the United States (USDA, 1998).