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Abstract

After controlling a variety of feeder cattle characteristics and market and sale conditions, we estimate the price premiums for preconditioning (vaccinations and minimum 30 days weaning) claims with and without third-party certification (TPC) as $6.15/cwt and $3.40/cwt, respectively, in Iowa feeder cattle auctions. These premiums differ statistically (p-value less than 0.0001) and their difference exceeds the additional participation cost of TPC ($1/cwt) on average. This indicates that the third party certification is valued in the market to credibly signal preconditioning investment under asymmetric information.

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