@article{Graff:285726,
      recid = {285726},
      author = {Graff, Jennifer L. and Schroeder, Ted C.},
      title = {Cattle Basis Risk and Grid Pricing},
      address = {1998-04},
      series = {NCCC-134 Applied Commodity Price Analysis, Forecasting,  and Market Risk Management},
      year = {1998},
      abstract = {The beef industry is increasingly moving towards a more  value-based pricing system in an attempt to send  appropriate signals to producers. Beef packers have  responded by developing grid pricing systems which value  each carcass separately based on its own merit, as opposed  to one price for an entire pen of cattle. This study  estimates how the level of variability in basis is affected  when cattle are sold on a price grid compared to  traditional live and dressed weight pricing. In addition,  we determine how basis risk is affected by general spatial  price variability, uncertainty regarding cattle quality,  variation in dressing percentage, and movement in the  Choice-to-Select price spread. Weekly basis is evaluated  using six alternative pricing methods over an eight-year  period. Live-weight pricing has the lowest basis  variability of the six pricing methods examined. Cattle  sold using grids have greater basis variability primarily  because of uncertainty regarding cattle quality and to a  lesser extent, changes in grid premiums and discounts over  time.},
      url = {http://ageconsearch.umn.edu/record/285726},
      doi = {https://doi.org/10.22004/ag.econ.285726},
}