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Pricing efficiency of marketing beef cattle in South Florida

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Title:
Pricing efficiency of marketing beef cattle in South Florida
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Dixon, Louis Vernon, 1927-
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English
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viii, 128 leaves : ill. ; 28 cm.

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Subjects / Keywords:
Bees ( jstor )
Emus ( jstor )
Meats ( jstor )
Oars ( jstor )
Prisoners of war ( jstor )
Sows ( jstor )
Te ( jstor )
Tin ( jstor )
Toes ( jstor )
War ( jstor )
Agricultural Economics thesis Ph. D
Beef cattle ( lcsh )
Dissertations, Academic -- Agricultural Economics -- UF
Meat industry and trade -- Florida ( lcsh )
City of Miami ( local )
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bibliography ( marcgt )
non-fiction ( marcgt )

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Thesis:
Thesis (Ph. D.)--University of Florida, 1959.
Bibliography:
Includes bibliographical references (leaves 125-128).
General Note:
Typescript.
General Note:
Vita.
Statement of Responsibility:
by Louis Vernon Dixon.

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Full Text


* I


PRICING EFFICIENCY OF MARKETING

BEEF CATTLE IN SOUTH FLORIDA












By
LOUIS VERNON DIXON


A DISSERTATION PRESENTED TO THE GRADUATE COUNCIL OF
THE UNIVERSITY OF FLORIDA
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE
DEGREE OF DOCTOR OF PHILOSOPHY












UNIVERSITY OF FLORIDA
June, 1959




PRICING EFFICIENCY OF MARKETING
BEEF CATTLE IN SOUTH FLORIDA
By
LOUIS VERNON DIXON
A DISSERTATION PRESENTED TO THE GRADUATE COUNCIL OF
THE UNIVERSITY OF FLORIDA
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE
DEGREE OF DOCTOR OF PHILOSOPHY
UNIVERSITY OF FLORIDA


ACKNOWLEDGMENTS
At this point in ths course of his education and experience the
writer has been exposed to the thoughts and ideas of many individuals.
Same readers may encounter passages or statements that resemble
strikingly their own formulations. However, all readers should realise
the impossibility of recognizing all persons upon whom the writer has
drawn.
Special gratitude is duet W. K. McPherson, for his sincere
friendship and his guidance of the dissertation through all of its
phases! H. G. Hamilton, J. R. Greenman, R. H. Blodgett, and J. M.
DeGrove, ths writer's advisory committee, for their personal interest
and constructive criticism! Rachel Schlichting for typing the pre
liminary drafts and drafting the illustrations! and Gerald Dagelman,
of the Agricultural Marketing Service.
Finally, the writer wishes to thank his wife and children,
for their sacrifices and willingness to endure hardships during six
long years of graduate study.
it


TABLE OF CONTENTS
Flag*
ACKNOWLEDGMENTS 11
LIST OF TABLES
LIST OF ILLUSTRATIONS Til
Chapter
I.INTRODUCTION . . 1
The Situation and Problem
The national situation _
Beef production in Florida
Bef consumption in Florida
The problem area
Rypothesis and Plan of Study
II.A CONCEPTUAL-PRICE FOR BEEF AND CATTLE IN THE MIAMI
MARKETING AREA 1?
III.THE NATURE OF COMPETITION FOR CATTLE IN THE MIAMI
MARKETING AREA 33
Characteristics of the Marketing Situation
Numbers of buyers and sellers
Volume or els* of firm
Possession of knowledge
Differentiation of product
Evaluation of competition in the area
IV.THE VALID ITT OF PRICE COMIARISONS US
Variation of Errore-of-Estimate in Grading live
Animals
Review of literature
Comparisons of errors-of-estimate among live-
graders
The effect of grading errors on price comparisons
ill


TABLE OF CON TEN TSContinued
Page
V.PRICING EFFICIENCY IN THE MIAMI MARKETING AREA .... 58
Byproduct Recovery
Estimated Competitive Prices vs* Prices Reported
F*0*B* Plant
Prices of U* S. Choice grade
Prices paid at the ranch
Prices of U. S. Good grade
Prices of other U. S. grades
Prices Paid at the Belle Glade Auction
VI.IMPLICATIONS 89
Economic Significance of Price Differences
Problems IfocoveredResearch Needed
VII.SUMMARY, CONCLUSIONS, AND CONJECTURES 95
APPENDIX 100
BIBLIOGRAPHY 125


LIST OF TABLES
Tabla Page
1. Annual Average Retail Coat of the Market Basket of Farm
Food Products, 19lB-58. 2
2. Per Capita Meat Consumption, by Type of Meat, in Ten
Selected Countries, 1957* * 3
3. Estimates of Selected Segments of Production and Con
sumption of Beef and Veal in Florida and the United States,
1957 7
U. An Index of Physical Efficiency in Production of Cattle
and Calves 19ii8 and 1956, Per Cent Change in Total Live-
weight Production, and Per Cent Change in the Index 19U8
to 1956, by States Ranked According to Change in the Index 11
5* Percentages of Total Commercial Slaughter by Four leading
Meat Packers, by Classes of Livestock, for Selected Tears,
United States 20
6. Sales by Packer Branch Houses and Independent Wholesalers,
195U, and Percentage Changes in Sales by Regions, 1939-5U 22
7* Arrays of Mean Errors-of-Estimate and Standard Deviations
of Errors-of-Estimate, for Twenty-six Selected Live-
Qraders, cm Selected Lots of An* ele 53
8. Uve to Wholesale Price Spreads, U. S. Choice Grade
Steers by Quarters, 1956-56 65
9. Differentials Between Selected Prices of Live Animals and
Liveweight Equivalents of Estimated Competitive Prices
for Carcasses, U. S. Choice Steers, August, 1957, to
October, 1958 67
10.Comparison of Estimated Competitive Prices F.O.B. Plant
Miami and Selected Prices Paid at Ranch Adjusted to
Approximate F.O.B. Plant, for U# S. Choice Steers . 72
11* Differentials Between Selected Prices of Live Animals and
Liveweight Equivalents of Estimated Competitive Prices
far Carcasses U. S. Good Steers, August, 1957 to December,
1958 75
v


LIST OF TABLESContinued
Table flags
12. Combined Receipts of Slaughter Cattle and Calves at
Thirteen Florida Auctions, Percentages by U. S. Grades,
1956 79
Appendix
Table
1. Analyses of Variance of the Actual Estimates and the Errors-
of-Estmate, and the Associated Duncan's Test for 128
Steers, by Five Live-Graders 107
2. Analysis of Variance of Errors-of-Estiiaate, and the Assoc
iated Duncan's Test, Among Five Graders, by Each of Eight
Grades. . 112
3* Analysis of Variance of Errors-of-Estimate and the Assoc
iated Duncan's Test, Among Five Graders, by Each of Six
Breeds. Hit
U. Analysis of Variance of Errors-of-Estimate, Among Eight
Grades of Animals, by Five Live-Graders 117
5. Kramer's Extension of Duncan's Multiple Range Test of
Significance Among the Mean Errors-of-Estimate for Eight
Carcass Grades of 126 Steers, by Each of Four Graders ... 118
6. Analyses of Variance of Errors-of-Estimate and Associated
Duncan's Test, Among Six Breeds of Animals, for Two Live-
Graders * 121
7. Values of t from the Test of (X 0 Using the Mean
Error-of-Estimate, fay Bach Grader, for All Animals in a
Specified Carcass Grade 123
vi


LIST OF ILLUSTRATIONS
Fig. Fags
X. Density of Numbers of Cattle and Calves on Farms* by
Counties* Florida* 195U* and Four General livestock
Marketing Areas. 5
2. Liveweight Production of Cattle and Calves in Florida*
19UO-57 . 9
3* Selected Marketing Channels for Beef Animals and Beef
with Six Areas of Competition (Roman Numerals) and
Five Levels of Price Discovery (Arabic Numbers), and
Points of Sals (Arrowheads) 23
U. Frequency Distributions of Errors-of-Estimate in IAve-
Grading* for Five Selected Live-Graders, on 128
Animals* by Thirds of . S Grades 51
5 U. S. Choice Steers at Miami i Estimated Competitive
Price F.O.B. Plant* the Low of the Price Range Re
ported* in Dollars Par live Hundredweight* August*
1957, to March* 1959 61*
6. U. S. Good Stesrs at Miami t Estimated Competitive
Price F.O.B. Plant and Market News Pries Quotation
F.O.B. Plant* the Low of the Price Range Reported*
in Dollars Per live Hundredweight, August* 1957* to
March, 1959. . . 7U
7. U. S. Good Steers at Balls Glade* Direct Sale Prices
F.O.B. Miami Adjusted to their Equivalent at Belle
Glade* and Belle Glade Auction Prices* the Low of the
Price Range Reported* in Dollars Per live Hundredweight*
August* 1957* to October* 1958 .............. 82
8. U. S. Standard Steers at Balls Glade i Direct Sale Prices
F.O.B. Miami Adjusted to their Equivalent at Belle Glade*
and Belle Glade Auction Prices* the Low of the Price
Range Reported* in Dollars Per live Hundredweight*
August* 1957* to October* 1958 8U
9. U. S. Utility Steers at Belle Glade* Direct Sale Prices
F.O.B. Miami Adjusted to their Equivalent at Belle Glade*
and Belle Glade Auction Prices, the Low of the Pries Range
Reported* in Dollars Per Live Hundredweight* August, 1957#
to October* 1958 85
vii


LIST OF ILLUSmTIONSContinuad
Pig. Page
10. U. S. Canner-Gutter Cows at Belle Gladei Direct Sale
Prices F.O.B. Miami Adjusted to their Equivalent at
Belle Glade, and Belle Glade Auction Prices, the Loe
of the Mice Range Reported, in Dollars Per Live Hundred-
Height, August, 1957, to October, 1958* .... 86
Appendix
Pig.
1. A Symmetrical Distribution of Errors-of-Estimate by Thirds
of U. S. Grades, for a Hypothetical Grader, with Theoreti
cal Frequencies Derived by Fitting a Normal Curve to a
Set of 119 Observations Having an Assumed Mean and
Variance 105
Y1


CHAPTER I
INTRODUCTION
The Situation and Problem
The national situationFew would deny that in the liiited
States today meat is given a prominent place in the diet* In terms
of dollars, consumers spend more money for meat than for any other
general category in the "market basket of farm foods" (Ifeble 1). As
their incomes rise, consumers tend to spend more for red meats, and
particularly beefLivestock producers have responded to increases in
consumer expenditures for meat by increasing the volume produced. In
1956 production of red meat reached a record of 28,053 million pounds,
and civilian per capita consumption reached 166*7 pounds*^ bore than
half of the 1956 production, or 16,09U pounds, was beef and veal.3
Although people in the United States do eat comparatively large
quantities of meat, their consumption per capita is not the largest in
the world* United States per capita meat consumption of 159 pounds in
1957 was exceeded by four other countries (Table 2) Consumption of
^U* S* Department of Agriculture, "Consumption Patterns for
beat," AMS 21*9 (Washington! Government Printing Office, May, 1956)
pp. 17-35.
2
U* S* Department of Agriculture, The Livestock and Meat Situa
tion, LMS-99 (Washington: Government Printing Office, November, 1958)*
p. 6.
3Ibid.


TABLE 1
ANNUM AVERAGE RETAIL COST OF THE MARKET BASKET OF FARM FOOD PRODUCTS, 191*8-58*
Tear
Market
Basket
Meat
Fruits and
Vegetables
Dairy
Bakery
and
Cereal
Poultry
and
Eggs
Fats
and
Oils
Miscel
laneous
1958
$1064.43
$292.02
$233.67
$194.04
$159.84
$ 96.50
$44.90
$43*46
1957
1007.1*1
259.15
218.72
191.35
156.69
93.92
45.36
42.23
1956
972.21
233.49
219.80
185.48
150.72
97.66
43.44
41.59
1955
974.93
246.67
208.12
181.21
150.00
104.72
42.88
41.33
1951*
992.79
271.09
205.61
181.73
147.65
100.87
44.30
41.54
1953
1002.01*
264.64
206.96
187.43
143.69
U5.95
41.93
41.44
1952
1026.19
269.86
211.75
190.29
141.17
112.84
41.51
40.77
1951
1026.15
299.85
197.09
182.55
138.01
118.49
49.02
41.14
1950
924.31
265.06
185.48
162.65
126.90
104.03
42.33
37.86
191*9
938.99
253.88
197.39
165.88
124.78
115.21
43*80
38.05
191*8
993.60
278.88
194.16
178.25
125.60
121.68
56.56
38.47
Source i U. S. Department of Agriculture, The Marketing and Transportation Situation
(Washington* Government Printing Office, January, 1959, 1958, 1957, 1956, 1955, February, 1954,
November, 1953 supplement).


3
TABLE 2
PER CAPITA MEAT CONSUMPTION, BT TYPE OF MEAT,
IN TEN SELECTED COUNTRIES, 1957a
Class of Meat
Country
Total
Beef sod
Veal
Pork
Ta-mh apd
Mutton
Canned
Meat
(Pounds)
(Pounds)
(Povnds)
(Founds)
(Pounds)
Arpptltt*
21*2
210
19
33
b
Australia
223
129
16
71*
1*
Nee Zealand
220
112
31
76
b
Uruguay
168
130
12
26
b
United States
159
93
62
1*
b
Denmark
lk2
5U
87
d
b
137
81*
1*5
3
5
united Kingdom
13U
55
1*2
22
15
France
122
61*
1*8
6
b
last Germany
107
39
66
1
b
^Source* U. S. Dept, of Agriculture, Foreign Agricultural
Circular. FLM 11-58 (Washington* Government Printing Office, October
5ITw55), p. h.
bIncluded with other types,
cIncludes horsemeat.
dLess than one-half pound.


u
meat and particularly beef in the United States might expand somewhat
if meat and meat products were priced lower in relation to other foods.
Beef production in Florida.-Setae cattle are produced in all
sections of the state, but commercial production is concentrated
largely in the central and southern areas (Fig. 1). The central and
southern portions of Florida are part of a lower-lying coastal plain
and are more like the sub-tropics.^ host of the large expanses of
native range land are situated within the lower half of the peninsula
and here, on both improved and native pastures, cattle production is
dominated by a cow-calf operation. Conditions in northeastern and
northwestern Florida are more typical of the rolling coastal plains of
Southeastern Uhited States .5 Com and other grain crops are better
adapted to this area and many small dry lot feeding operations ars found
here as pert of diversified farming.
Of course, cattle raising must compete with citrus and vegetable
production, but ae yet this is not e serious threat to the cattle in
dustry. Florida producers contribute s large portion of the national
supply of citrus and winter vegetables. Expansion of citrus groves and
vegetable acreage is undertaken at a risk of creating oversupply and
the accompanying lower prices, (hi the other hand, since beef production
in the state represents only approximately 1 per cent of the national
l*U. S. Department of Agriculture, Soil, The 1957 Yearbook of
Agriculture (Washingtoni Government Printing Office, 1957) PP* 579-597.
5lbid.


Nor thwes t
0
- 20
I 1
21
- 40
m
41
1
O'
o
1
1
61
- over
m
Fig. 1.--Density of Numbers of Cattle and
Calves on Farms, by Counties, Florida, 1954,* and
Four General Livestock Marketing Areas.
Northeast
Source: . S. Bureau of Census, United States Census
of Agriculture, Vol. I, Part 18, Florida (Washington: Govern
ment Printing Office, 1956), pp. 103-108.
U1
This line is
approximately
150 miles
from
Miami
South


6
supply (Table 3), producing more beef in Florida would have an imper
ceptible effect upon price
Florida farmers and ranchers produced approximately 33k million
pounds liveweight of beef in 1957.^ This represented slightly more
than 1 per cent of the national total of approximately 27,000 million
pounds liveweight.? Eighty-one per cent of the 1,93U,000 cattle and
calves on farms and ranches in Florida on January 1, 1958, were kept
for other purposes than milk production. Since most dairy cattle
eventually are slaughtered for meat, they too must be considered part
of the beef potential.
Total liveweight production of cattle and calves in Florida
has doubled since 19U8 (Fig. 2). In the period 19U8-58, beef cattle
and calves on farms and ranches in Florida increased from 961,000 to
1,559,000 head, a gain of 62 per cent.? These increases in production
appear to be substantial, but, they do not necessarily mean increased
efficiency.
The number of pounds of beef produced per n-tmal on hand
January 1 is one measure of physical efficiency in livestock produc-
6U. S. Department of Agriculture, Agricultural Marketing Ser
vice, Livestock and Meat Statistics. Statistical Bui. No. 230 (Wash
ington Government Printing Office, July, 1958), pp. 1*1, 283-289.
7Ibid.
8Ibid., p. 15.
^Florida State Marketing Bureau, Annual Agricultural Statisti
cal Summary (Jacksonville 1, Florida* Florida State Marketing Bureau,
November, 1957 and 1958), p. 159 (1957) and p. 170 (1958).


TABLE 3
ESTIMATES OF SELECTED SEGMENTS OF PRODUCTION AND CONSUMPTION OF
BEEF AND VEAL IN FLORIDA AND THE UNITED STATES, 1957
Production (Pounds)
Consumption (Pounds)
United States
Liveseight*
Total
Carcass Weight*
Total*
Per Capita*
2 ,058,050,000
15,739,000,000
15,716,000,000
93.3
Florida
Total Per Capital
llveeeight* Carcass Weight** High Lem
33U,250,000 $7,993,025 93-3 (U. S. Avg.) 58.5 (Southern
Region Arg.)
Llveeeight production In Florida la
1.23% of U. S. total.* Total
High ham
395,1*21*,060 21*7,93U, 700
Fresh Meat8 55*771,820
Production la 28% of loe level consumption.
Processed Meat* 102,222,005
Production Is 129% of high level consumption.
High
316,339,1*28
High
79,081*,812
Freah Meat*
Loe
198,31*7,760
Processed Meat*
Loe
1*9,586,91*0
Source* U. S. Department at Agriculture, Agricultural Marketing Service, livestock and


¡ABLE 3.Continued
Meat Statistics. Statistical Bul. No* 230 (Washington Government Printing Office, July, 1958),
pp. 1*1 and 23-289.
bSource i U. S. Department of Agriculture, Agricultural Marketing Service, Consumption
Patterns for Meat. AMS-2l*9 (Washington* Government Printing Office, May, 1958), p. 2.
cJohn N. Webb, Preliminary Estimates of tbs Population of Florida Counties* July 1,
1957," Bureau of Economic and Business Research Population Series Bul. No. U (Gainesville*
University of Florida, January, 1958), p. 1 (mimeographed). Population in Florida, July 1, 1957*
estimated at 1*,238,200. Population multiplied by per capita consumption is an estimate of total
consumption.
^Estimate based on an average U7.3 per cent dress-cut or yield. A weighted average yield
as computed from the dress-out percentages obtained from a reliable pecker for the several
grades of cattle and calves, weighted by the proportions of the several grades sold at fourteen
auctions in 1957.
iiveweight figures for Florida are official U.S.DJL. estimates, whereas carcass weight
figures are not. Percentage based on carcase weights is only 1 par cent.
About half of the U. S. Utility grade and nearly all of the lower grades of cattle and
calves are used far processed meat. The other half of U. S. Utility and all higher grades are
sold as fresh meat. In 1956 80 per cent of U. S. beef production wee in the fresh meat grades.
These estimates are published in (1) U. S. Department of Agriculture, Marketing Margins for Beef
(Washington* Government Printing Office, December, 1953)* P* 9 end (2) U. S. Department of
Agriculture, The livestock and Meat Situation, LMS-9* (Washington* Government Printing Office*
March, 1958),' p. 1.
^Florida State Marketing Bureau, Annual Agricultural Statistical Summary, (Jacksonville*
Florida State Marketing Bureau, November, 195#;, pp. 176-177, 183. It is estimated that in Florida
one-half of the Utility and all the lower grades would include 72 per cent of the slaughter cattle
azul 30 per cent of the slaughter calves. A weighted average of these two percentages, using live-
weight volumes of commercial slaughter as weights, yields an estimated combined percentage of 61*.7
in the grades sold for processing.


9
Calendar Year
Pig. 2.Llvewelght Production* of Cattle and Calves in Florida,
1940-57.b
Production equals weight of marketings and farm slaughter, less
inshipments, plus or minus inventory changes during the year.
bSource: U. S. Department of Agriculture, Meat Animals, Farm
Production, Disposition, and Income 1924-57 (Washington: Government
Printing Office, 1947 and annually).


10
tian.3-0 The ratio of the number of animals on hand to the amount of
beef produced (In hundredweight) can be used as an index of production
efficiency. The index is an input-output ratio relating total pro
duct to only one factor of production, the animal.^ Since the number
of animals is smaller than the number of pounds produced, the ratio
ill be less than one to one and the index expressed in terms of
decimals, A small index indicates relatively high physical efficiency
in beef production per unit of animal resource.
The index of beef production efficiency for the Lhited States
in 19U8 as 0.U2 (Table h). Among forty-eight states the index
ranged from 0.32 in Kansas to 0.83 in Rhode Island. Florida, 1th
an index of 0.7U, ranked forty-seventh. From 19U8 to 1956 total
liveweight production of beef in the United States increased 51 par
cent (Table U). In the same period the index of production decreased
t <
from 0.U2 to 0.35 indieating an average 17 per cent gain in physical
efficiency at the national level.
Total liveweight beef production in Florida by 1956 had in
creased 100 per cent from 19U8 (Table U). Along 1th Florida, the
*% K. McPherson, Initial Results of livestock Marketing
Study," The Herida Cattleman (Kissimmee, Floridas Cody Publications,
Inc., September, 9>). This approach considera the number of cattle
and oalves on hand on any January 1 as the source from which that
year*a production must come.
^Alternative measures of physical efficiency could be ex
pressed in tens of other resources, such as feed per pound of gain.
Soma of the factors that influence the index are discussed in a
succeeding paragraph.


11
TABLE l*
AN INDEX OF PHYSICAL EFFICIENCT IN PRODUCTION OF CATTLE AND CALVES
191*8 AND 1956/ FER CENT CHANCE IN TOTAL UVEWEIGHT PRODUCTION, AND
PER CENT CHANGE IN THE INDEX 19U8 TO 1956, BY STATES
RANKED ACCORDING TO CHANGE IN THE INDEX*
3
$
ja-
g
2
I
IS 1
lal i
I
J£L
as a
S-3S SS
If, II
Ohio
.59
.38
38
36
Mont.
.31*
.30
52
12
Texas
.1*8
31*
39
29
Colo.
31*
.30
28
12
FLA.
.71*
51*
100
27
S. D.
.36
.32
1*0
12
Miss.
.63
.1*6
126
27
Del.
.56
.1*9
29
12
Ga.
.66
.1*9
95
26
Ark.
1*6
.ia
70
11
Va.
.55
.ia
76
26
Idaho
.37
.33
72
11
La.
62
.1*7
103
21*
Wise.
.51
.1*6
28
10
Ill.
.37
28
76
21*
Conn.
.60
51*
12
10
Neb.
.35
.27
59
23
N. H.
.61
.55
11
10
Arlz.
.1*7
.37
50
22
N. M.
J*Q
.36
21
10
Iowa
31*
.27
61*
21
Utah
.1*2
.38
50
10
Ala.
.53
.1*2
100
21
Tenn.
.1*8
1*1*
36
8
Minn.
.1*1
.33
53
20
N. J.
.53
1*9
29
8
S. C.
.66
.53
119
20
Vt.
.73
.68
19
7
Ind.
.38
.31
56
18
Ml.
.60
.56
12
7
Md.
.56
.1*6
53
18
W. Va.
.51
.1*8
15
6
Okie.
.36
.30
55
17
yo.
31*
.32
15
6
Kan.
.32
.27
50
16
Ore.
39
.37
50
6
N. C.
61*
51*
71
16
Ky.
ia
.39
25
5
Wash.
.1*3
.36
68
16
N. I.
.59
.57
u*
1*
Mich.
1*8
ia
29
15
Mass.
.63
.62
- 2
2
N. D.
.38
.33
50
11*
Not.
ia
.1*0
21
2
Mo.
.37
.32
58
11*
R. I.
.83
.88
-12
.6
Cal.
.37
.32
00
U*
Pa.
.1*6
.51
36
- 10
U. S.
.1*2
.35
51
17
* Index: Number of Cattle and Calves on hand Januaxy 1, per one
hundred pounds annual total llveeeight production.
^Sources U. S. Department of Agriculture, Meat Animalsi Farm
Production. Disposition, and Income, by States (Washingtoni Government
Printing fficeV 'J^, ig2,"aKa April, 1957).


12
otter Southern states of Louisiana, Mississippi, Alabama, Georgia, and
South Carolina exhibited large increases in liveweight production
during this period* The index of production far Florida in 1956, 0*5U,
showed a 27 per cent gain in physical efficiency from that in 191*8*
There can be several reasons for differences among the forty
eight states in average production per animal* Grass fed cattle may gain
less than grain fed cattle* Feeder cattle and calves having different
grade potentials are likely to vary in the rate at which they gain, or
in their total gain during a specified period of feeding* The several
breeds may respond differently to various types of feed* In some states
animals are marketed at comparatively young ages, while in otters the
animals marketed are more mature* The proportion of calves marketed
to cattle marketed varies from state to state* The weights of dairy
cattle sold for slaughter may be somewhat different from weights
attained by beef animals* In a dairy cattle state, compared with a
beef cattle state, the number of animals slaughtered is likely to be a
smaller percentage of the total number on hand* These and a host of
other factors will affect the magnitude of the index of production ex
pressed above*
Changes in the indices summarize the accomplishments made in
beef production in recent years* But, since the index measures physical
production, it cannot be used to compare the economic efficiency^ of
the cattle industries in the several states car regions* To date,
^E* 0* Heady, Economics of Agricultural Production and Resource
Use (New fork City* Prentice-Hall, Inc*, 1952), pp* 90-101*.


13
research in the economics of beef product!cm has not produced enough
input-output data to describe the many production surfaces needed to
quantitatively evaluate the efficiency of beef production*
Beef consumption in Florida*The population in Florida has
grown steadily to over four million people*^ This is a sizeable base
for potential beef consumption* The 1955 per capita consumption data
have been used to estimate beef and veal consumption in Florida for
1957 at approximately 395 million pounds (Table 3)*^ Of this 395 mil
lion pounds, approximately 80 per cent was purchased as or prepared from
fresh cuts of meat and the remaining 20 per cent was consumed as pro
cessed meat* Consumption of 395 million pounds represents only 2-1/2
per cent of the national total* Thus, changes in the consumption
pattern for the state would have an insignificant affect upon national
price*
Compared with state production estimates, the consumption of
fresh meat far exceeds the locally-produced supply* On the other hand,
the supply of locally-produced meat for processing is more than suffi
cient to satisfy this portion of meat consumption. Thus, the con
sumption-production balance for the state exhibits both surplus and
deficit (Table 3).
The problem area.Development of a surplus of one kind of
beef and a deficit of another has been particularly rapid in South
13john N* Webb, op. cit*
^U. S. Department of Agriculture, "Consumption Patterns for
Meat," AMS 2i*9 (Washingtons Government Printing Office, liay, 1958).


Florida* Much of Central and Southern Florida enjoys an enviable posi
tion in the production of grase* Cattle production provides an effective
means of marketing the forage, but the particular combination of re
sources has in the past encouraged production of lower grade cattle*^
Few other areas in the United States have the unique combination
of climate, soil profile, level topography, and abundant water supply
that is found in this section of Florida. These factors have permitted
the development of two-way water control* irrigation and drainage on
the same piece of land, both using open ditches to manipulate the water
table* Hth respect to production of forage grasses, it appears
South Florida can claim some comparative advantage*
Many of the same resources and geographical features that provide
a favorable environment for the cattle industry have produced a distinct
pattern of urban development* The coastal areas have tended to became
thickly populated, and the interior, except for Isolated spots, is only
sparsely inhabited* A large area of consumption has built up along the
lower east coast of the peninsula in the three southernmost counties of
Palm Beach, Broward, and Dads* The total population in these three
^Use of the term "lower grade" is common in the livestock
industry* It refers to the quality of meat not usually sold for con
sumption as fresh cuts* The U* S* grades of beef and beef animals in
which this quality of meat is found are Utility, Conner, and Cutter*
In contrast the term "higher grade11 refers to U* S* grade.? Standard,
Good, Choice, and Prime*
^Water is pumped out of or into a network of large dual-purpose
feeder-drainage canals* The canals are part of a flood control program
administered by the Central and Southern Florida Flood Control District,
whose jurisdiction embraces 15,570 square miles*


35
counties as of July 1, 1957* was estimatad at 1,269,000.^7
On the basis of 1955 par capita consumption, 1,269*600 people
in the tri-county area would consume annually an estimated 116,800,000
pounds of beef and veal.^ Of this* approximately 80 per cant or
93*000*000 pounds would be fresh non-processed msat (Table 3* footnote
f). Production in Florida of beef and veal for fresh meat consumption
is estimated for 1957 at 55*781,820 pounds (Table 3)* This quantity
cannot fill even the lcnter east coast consumption requirement*
The counties within a radius of 100-150 miles from Miami contain
Borne of the most dense cattle populations in the state (Fig* 1)* How
ever, these cattle are marketed largely as grass-fed animals* Although
some producers strive to put a degree of finish on their cattle* the
bulk of the marketings to slaughterers are lower grade animals generally
used in the manufacture of processed meat products* Very little loner
grade beef is demanded by the fresh meat trade, so in this respect the
local supply far exceeds the demand (Table 3)* Low grade cattle must
be absorbed by meat processors, but here a large supply of animals or
beef must be shipped long distare es to eastern markets* On the other hand,
3-7John N* Webb, op* olt*
^U.S.D^A*, "Consumption Patterns for Meat," op* clt. Because
of the pattern of migration and tourism from northern Industrial areas
to the loner east coast of Florida, meat-eating habits of people in the
lower east coast area are more likely to be those of people living in
the urban Northeastern Uhl ted States* In 1955 annual beef and veal
consumption in the urban northeast was estimated at approximately 92
pounds per capita* At 92 pounds per capita annual consumption for
1,269,600 people would total 116,800,000 pounds.


16
the supply of locally produced higher grade beef animals is short of
the demand (Table 3) To fill their needs the packers and wholesalers
suet ship In fresh asst from surplus-producing areas such as the Mid
west*
The problem.Packing plants In Malnd are the main outlets for
slaughter animals produced in South Florida* liilike the midwest cities
with major livestock markets* there is no appreciable outshipmant of
fresh beef from MLand.1? This indicates that virtually all higher
grade beef animals slaughtered In Maim! are consumed there*
Among cattlemen in South Florida ia the general opinion or
belief that they do not receive equitable prices for cattle which they
estimate to be in gradee sold for fresh meat consumption*20 Ideas of
what constitute equitable prices are extremely varied* However with
a wide dissemination of prices prevailing at various marketing centers
today* producers are likely to think of equity in terms of how prices they
21
receive compare with prices quoted elsewhere*
In our society equit&bility of price is judged subjectively and
evaluated within the framework of existing institutions* Undoubtedly
^Boned meat and occasionally same loser grade carcasses and
cuts are shipped out-of-state* particularly to the Northeast*
2QWebster,a New Collegiate Dictionary* 1953 edition* defines
opinion ss implying having been thought out* yet open to dispute*
Belief implies acceptance and intellectual assent*
21Practioally every generation of farmers has voiced, an opinion
that they were not receiving equitable prices for their products* Cf
H. 0* Halcrow* Agricultural Policy of the Ifaited States (New York*
Prentice-Hall, Inc** 19f&)* pp* Z&-23U* and H* F* Williamson (ed*)*
The Growth cf the American Economy (New York* Prentice-Hall, Inc.,
wy:


17
tl is disagreement among produc as to what constitutes an
squitabls pries. Neverthslasa, the premies of a competitive price
constituting the ultimate in equity is generally accepted.
Assuming a purely competitive price as a standard of equity
the problem then becomes one of estimating to what extent cattle prices
in Miami deviate from the standard. The geographical isolation of a
meat consumption center at the tip of a peninsula bordered and insulated
by an area producing a surplus of loner grade beef animals, provides an
ideal situation in which to observe tbs effects of location on the
prices of higher grads beef animals. The tendency toward beef price
equalisation in apace should be easier to detect in the Miami market
who competing products flow in from only one direction, the North.
hypothesis and Flan of Study
The broad objective of this dissertation is to evaluate the
assertion that in South Florida prices paid for higher grade cattle
a unequitable.22 In general, the analysis will appraise the lative
pricing efficiency of marketing slaughter cattle in the well-defined
mo or lees homogeneous production area of South Florida, lio specifi
cally, the hypothesis to be tested is that prices of higher grade
slaughter cattle sold into the greater Ulead, area a lower than would
22
The evaluation of matte of opinion is a legitimate role far
economic analysis. Cf. Geoffrey Shepherd, "What Can a Research Man Do
in Agricultural Price Policy?", JFE, May, 1955, PP* 305-lU. "A persons
belief. .can be objectively judged to be true or false and mo or
less complete. .The essence of scientific inquiry is to test
(verify or disprove) beliefs."


18
be expected in a competitive marketing situation. This approach provides
the latitude for a useful analysis, and at the same time restricts the
area of inquiry enough so that results are probable within a reasonable
period of time.
The method used to test the hypothesis will be tot
(1) develop a conceptual-price or competitive price model
for beef carcasses and live cattle sold in the Miami
market areaj23
(2) describe the nature of competition for cattle in
the Miami marketj
(3) compare the conceptual-prices with prices received
by oattls producers
(a) at the packing plant, F.Q.B.,
(b) at the aution,
(c) at the farm or ranch.
^unfortunately these is no wholesale meat price quotation
available publicly for any market in the Southeast. Such a quotation
would be of inmensurable value to cattlemen and persons in agricultural
research and extension work who strive to keep informed on prices in
their respective areas.


CHAPTER II
A CONCEPTUAL-PRICE FOR BEEF AND CATTLE
IN THE mu MARKETING AREA
The market for meat and livestock is nationwide and is composed
of many geographical marketing areas. Except for requirements per
taining to sanitation and health, there are no interstate trade barriers
to free movement of meat animals and meat. Thus the forces of supply
and demand functioning through modern facilities for training contin
ually adjust the flow of products in a manner tending towards a balance
among marketing areas.
Facilities for trading meat were revolutionized in the per
fection of food preservation by freezing, and the development of freezer
railroad care and motor trucks. With an extensive system of communica
tion, market news reports of trading in animals and meat are distributed
over the entire country. Instantaneous communication between buyer and
seller separated by great distances is now a reality. An isolated
marketing area of any consequence is virtually a thing of the past.
Competition in the market for livestock and meat varies from
the empirical approximation of pure competition among cattle producers
to the oilgopsonistic-oligopolietic position of peckers. However, con
centration in the meat packing industry today is lees than at any time
during the past fifty years (Table 5)* Sales by independent wholesalers
in the United States increased 108 per cent from 1939-5U, compared with
19


20
TAJ LE 5
PERCENTAGES OF TOTAL COMMERCIAL SLAUGHTER BY
POUR LEADING MEAT PACKERS, BY CUSSES OF
LIVESTOCK, FOR SELECTED YEARS,
UNITED STATES*
Year
Cattle
Caires
Sheep and
Lambs
Hogs
1916
53.9
32.1
70.2
51.2
1921*
50.5
1*0.1
66.1*
1*1*.7
1929
U9.9
1*6.9
70.7
1*0.2
1935
1*6.6
1*6.3
70.5
1*1.1*
19U7
38.3
39.6
67.8
1*0.1*
1955
30.8
31*.7
58.5
36.1*
aSource: W. F Williams, "Structural Changes in the Meat
Wholesaling Industry," JF2, May, 1958, p. 319*


21
a 5*5 per cent decrease for packer branch houses (Table 6).
The meat wholesaling industry is comprised of many types of
firms.Modern integrated packing plants not only slaughter animals,
but are equipped with adequate cold storage facilities and provide
distribution services to their customers. Many of them sell boned
beef and manufacture processed meats. Some may also break higher grade
carcasses into primal cuts for sale to retailers or into cute demanded
by hotels and restaurants. Packers may operate branch houses in several
cities. In providing these many services the packer functions as a
wholesaler (Fig. 3).
Chain store organizations buy carcasses or primal cuts in large
volume and provide storage, wholesaling, and distribution services for
member stores. In doing so they may buy carcasses directly from local
slaughterers or compete actively with other buyers in the major whole
sale markets far carcasses and primal cuts (Fig. 3)*
The firms engaged primarily in wholesaling activities usually
have some cold storage space, and prepare the particular cuts of meat
for their specified trade. Such firms are known in the trade as in
dependent wholesalers or Jobbers (Fig. 3). Among these are "hotel
supply houses," "institutional Jobbers," "truck Jobbers," "breakers,"
"fabricators," and "retail supply houses."2- Firms that buy carcasses
^Willard F. Williams, Tfoolesale Meat Distribution in the San
Francisco £ay Area, U. S. Department of Agriculture Marketing Research
iieport No. (Washington: Government Printing Office, 1957), pp. 7-12.
25Ibid.


22
TABLE 6
SALES El PACKER BRANCH HOUSES AND INDEPENDENT WHOLESALERS,
1951*, AND PERCENTAGE CHANGES IN SALES BT REGIONS,
1939-5U*
Wholesale Distributor
195U
u
Percentage Change
and Region
Sales
1939-1*8
191*0-51*
1939-51*
Packinghouse Branches!
Northeast
1*000
(dollars)
1,098,209
-29*9
U*.8
-19.6
North Central
500,989
-23*0
9.2
-15.9
South
871**527
- 1**U
25.1
19.6
West
223,758
12.2
22.1
37.0
United States
2,697,1*83
-19.5
17.1*
-5.5
Independent Wholesalers*
Northeast
1,359,289
23.9
5U.0
90.8
North Central
690,356
6.3
82.1*
93.9
South
U25,127
33.0
119.1
191.3
West
391,1*21
21*.2
92.5
139.1
United States
2,866,193
20.3
72.8
106.0
aSource: W. F. Williams et_al., Economic Effects of U. S.
Grades for Beef, U. S. Dept* of Agriculture Marketing Research Report
No* 298 (Washington* Government Printing ffice, 1959)* p* 28*
t>All sales adjusted to 195 U levels of price* prior to calcula
tion of percentages*


23
I
II
III
IY
Y
YI
Fig. 3.--Selected Marketing Channels for Beef Animals and
Beef, with Six Areas of Competition (Roman Numerals), and Five
Levels of Price Discovery (Arabic Numbers), and Points of Sale
(Arrowheads).


2h
of con and other lower grade beef anmala and bone the meat are called
"boners." still other firma buy carcasses and prepare a variety of
frozen meat products* They sell primarily to independent retailers
or independent grocery distributors*2^
In addition to the specialized types of activities of firms
described above* some marketing is carried on by vertically integrat
ing two or mare of these specialized operations* For example* a chain
store organization may contract with a feedlot to have animals fed*
then custom slaughtered and have the carcasses delivered directly to
their cold storage plant (Fig* 3)* Packers may contract to have animals
fed to grade* or contract with wholesale buyers for definite quantities
and grades of carcasses at specified times of delivery* The net effect
of these arrangements alters the price discovery mechanism by removing
some of the uncertainty element for the parties involved* it the same
time it reduces the number of traders who are active participants in
the areas of competition (Fig* 3)*
tbder conditions of pure competition* differences between prices
of specific forms of products in surplus and deficit areas tend to equal
ize in space and time to the extent of differences in transfer costs
between the areas and the costs of storage from one period to another.^
However* this tendency towards equalization is not limited to conditions
of pure competition.
26Ibid.
27g* S. Shepherd* Marketing Farm Products (Ames* Iowa* Iowa
State College Press, 19U7)* P?. 339-U10*


25
From the standpoint of numbers of buyers and sellers, and size
of firm, competition in a marketing situation might be considered im
perfect. But, if other conditions of pure competition are approximated
reasonably sell, the tendency towards equalization of price sill not
be hindered* The tendency towards price equalization depends heavily
upon the characteristics of the product and facilities for tradings
nearly all those things for which there is a very
side market are in universal demand, and capable of being
easily and exactly described * commodities must
be such as sill bear a long carriages they must be some
what durable
In the meat industry today, numbers of buyers and sellers and
size of firm are characteristic of imperfect competition* The prices
discovered for livestock and meat very likely are different from those
expected under more highly competitive conditions* But other market
ing conditions in the industry are such that spatial and temporal
equalization in price can occur* There is voluminous market informa
tion circulated by a rapid communications system* There are no trade
barriers to the movement of meat and animals over a modem system of
railroads and highways* Meat and animals can be graded, transported,
and stored*
Meat packers have been under close scrutiny by the Federal
Trade Commission since the early 1900s, and there has been evidence
of market sharing among the major firms* However, no evidence has
been presented to indicate that meat packers use a baaing-point price
pO
Alfred Marshall, Principles of Economics (8th ed., New forks
The MacMillan Co., 1921), pp* 325-26*


26
system charging false freight. On the contrary, chain store buyers
purchase carcasses from packers in the major trading centers at prices
F.O.B. the slaughter plant. Apparently then, no attempt is made to
interfere with the tendency of prices of specific products to equalize
in space and time.
Both livestock and meat may be transported and stored. But
over long distances, the freight rate structure makes it more profit
able to ship meat instead of live animals.2^ In addition to the
freight rate, other transfer costs are encountered with shipping live
stock. For example, the costs of feeding and mitering, weight shrink
age, and losses from deaths and crippling must be considered, laughter
cattle are shipped long distances from surplus to deficit areas only
when a temporary marketing phenomenon brings about an abnormally high
price of meat in the deficit area or an abnormally low price of cattle
in the surplus area. Since meat is transported more easily and at
lower cost than cattle, the prices of carcasses and cuts are more
likely to reflect the spatial equalisation between surplus and deficit
areas.
In any geographical area where marketing la concentrated,
such as Miami, the wholesale prices of meat are discovered at two
levels of trading. First, there is the wholesale selling price at
2?In May, 1957 the freight rate per hundredweight from Chicago
to Miami was $2.03 for meat and $1.U9 for livestock. If a live steer
shipped from Chicago yielded 58 per cent, the freight cost of shipping
the carcass in form of a live animal would have been $2.57 or 5U cents
more than for dressed carcasses.


27
which firms providing wholesaling services sell to retailers and eating
establishments (level U, Fig* 3)* Secondly, there is the wholesale
buying price at which wholesalers and chain stores buy or at which
slaughterers and packers sell (level 3 Fig* 3)*
The wholesale selling price will differ fren the wholesale
buying price by the value of the type of wholesaling services provided
by the wholesale firm or branch house* However, today with independent
packers and chain stores performing more and more of the wholesaling
services for themselves, the whole Bale-selling price (level U, Fig* 3)
30
is becoming less discernible. Sines chain stores handle s consider
able portion of the fresh beef sold in urban areas, the wholesale sell
ing prices that could be identified in an area like Miami would re
present a minor portion of the total volume traded*^1 Therefore, in
the analysis that follows, the wholesale selling price is not examined*
Because traders in all parts of the country are in such close
communication with each other, the level of wholesale meat prices is
national in character* The national and large regional chain stores
and national packers have their own price reporting services in addi
tion to public market news reports* Some traders use teletype and
leaeed-wire services* Practically all buyers and sellers make eoc-
competition from independent packers at the wholesale selling
level plus chain store buying practices has forced the abandonment of
many national packer branch houses in Florida*
3^The percentage of meat sold by chains varies among regions and
cities, but no recent estimates are available* In 19U8, chains in the
U* S*, with five or more stores, sold 35 per cent of the meat* Since
then, this percentage is almost certain to have increased*


26
tensiva use of the telephone* In any one area prices at the wholesale
buying level can get out of line with the national situation only-
temporari ly. The competitive adjustment in meat prices between sur
plus and deficit areas occurs most directly at the wholesale buying
level*
In the smaller as well as the larger marketing areas local
packers who produce and sell carcasses and cuts to chain stores and other
wholesale buyers compete directly with supplies available from other
areas. As a seller, the local packer campetee with not only other
local packers but national and regional packer branch houses serving
the area, and with more distant sources of supply available to whole
sale buyers* As a buyer of cattle, the local packer often is one of
only several buyers in an area* When an individual firm contemplates
a change in pricing policy, it is somewhat easier to anticipate the
reaction of a few rather than many competitors* With only a few
competitors an individual firm probably can learn from experience to
anticipate competitors' reactions quite accurately* In this respect,
the market into which packers sell meat is mare competitive than the
market in which they buy animals* Price changes in the national market
for meat will be reflected back quickly to the livestock producers in
any particular area only if a high degree of competition exists among
the livestock buyers in the area*
The conceptual price .Florida is deficit in the production of
higher grades of beef (Table 3)* To meet retail demand the chain


29
stores, neat packers, and other wholesale traders must turn to out-of-
state supplies. The general areas where fecattle are produced in
large numbers are located at great distances from Miami and all of
Florida.^2 Thus, wholesalers must pay transfer costs in obtaining the
fresh-meat grades of beef from the western surplus areas. These
transfer costs include brokerage fees, and service and handling charges,
in addition to transportation charges.
Miami packers operating their own slaughtering and cold storage
facilities can either purchase carcasses from surplus areas or produce
them in their plants. Packers can calculate readily the total ooet of
carcasses purchased from surplus areas. This total cost is the whole
sale buying price referred to previously. Under varying degrees of
competition in the market, the wholesale buying price in a deficit
area tends to equal the price in the surplus area plus costs of
transfer to the deficit area. This relationship is expressed in
equation (1) ass
(1) Pw ?, Td
where Pw is the competitive wholesale buying pricej Ps is the price
in the surplus area; and Tj. is the transfer costs from surplus to
^The thirteen major states from which the U.S.DJL. reports
cattle and calves on feed are Ohio, Indiana, Illinois, Minnesota, Iowa,
Missouri, South Dakota, Nebraska, Kansas, Tazas, Colorado, Arisons, and
California.
^The conceptual price is presented as applying to beef car
casses in full realisation that trading in the wholesale market also
concerns primal cute or wholesale cuts of beef. It was not considered
desirable to synthesise a carcase price from a composite of prices of
primal cuts.


30
deficit area. For lack of a better estimate of transfer costs the
freight rate from Chicago to Miami is substituted into the equation
to estiaate the competitive wholesale buying price of carcasses in
Packers producing carcasses in their plants incur costa of
production, but the value of byproducts frost the slaughtering operation
partially or completely offsets these costs (Including returns to all
factors.)^ If the byproduct value covered the packer's costa and
returns, local suppliers of cattle delivered to Miami packing plants
would axpsot to receive a price F.O.B. plant (either carcass grade and
weight or its liveweight equivalent) equal to the competitive whole
sale-buying price. If packers costs exceed byproduct value, the price
F.O.B. plant would be smaller by that amount. If byproduct value
increased while costs and returns were unchanged, the price F.O.B.
plant would be larger by that amount. Therefore, the price model
or conceptual pries paid F.O.B. plant far livestock purchased on a
^Florida packers assert that their pricing policies are guided
by the wholesale prices of carcasses and cuts quoted in the National
Provisloner Chicago daily trade report, plus transportation charges
from Chicago to their plants.
35 unique example of a short-term loes operation has developed
recently in Florida as a consequency of cattle being withheld from the
market to build up herds. Beckers found themselves with crews of workers
highly trained to handle their kill floors, but forced to operate below
profitable capacities because of a shortage of animals. Rather than
terminate the employment of the skilled workers, packers have retained
their crews, presumably at a loss and at the same time have bid up the
prices of cattle in short supply in an attempt to maintain volume even
at some loss.


31
carcase grade and weight basis is defined as:
The competitive wholesale-buying price, adjusted for the net
difference between the value of byproducts and the plant cost
of producing a dressed carcass from a live animal.
Expressed in symbols the conceptual price may be written as in equa
tion (2) i
(2) CPp Pw S E
where CPp is the conceptual price per unit at the plant; Pw is the com
petitive wholesale-buying price per unit of carcass; S is the cost of
slaughtering and dressing per unit of carcass; and B is the byproduct
value per unit of carcass.
Equation (2) is expressed in units of carcasses. The conceptual
price for live animals or the liveweight equivalent of the carcass price
is obtained fren the multiplication together of the conceptual carcass
pries and the estimated dressing percentage or yield of live animals,
as in equation (3)i
(3) LCPp (CPp)
The conceptual price for animals sold with the point of delivery at
the ranch is obtained easily by subtracting transfer costs for live
animals from the price at the plant, as in equation (U) *
(10 LCPr LCPp LT
where LCPr is the liveweight unit conceptual price at the ranch, LCPp
is as defined in equation (3) and LT is the liveweight unit cost of
transferring animals from the ranch to the plant. Transfer costs
include a loading and unloading charge, and handling (such as feed
£a8aBfeSB8gaMg


32
and water), in addition to transportation* Similar calculations may
be made to estimate the conceptual price at an auction.
Whether or not the conceptual-price in a deficit area is paid
for cattle depends upon the nature of competition among packing plants,
and upon the selling practices of cattle producers* In Chapter III
the degree of competition among plants in Miami will be evaluated*


CHAPTER III
THE NATURE OF COMPETITION FOR CATTLE IN THE MIAMI MARKETING AREA
Characteristics of the Marketing Situation
Conditions observed in any marketing situation really defy
meaningful description unless they can be expressed in terms of some
specified standard or form. The seals or yardstick of competition
ranges between perfect monopoly at one end and perfect competition cm
the otherUse of the competitive model is solely for the purpose
of estimating at shat point along the scale of competition the market
pricing observed in an area seems to lie*
To qualify under the concepts of pure competition, a marketing
situation must approximate six general requisite*:-5
(1) The number of buyers and sellers must be so large
that the activities of any single individual can
not affect the market price*
^Ry referring to a pre-deterained model, the analyst can guide
his observations in an organized manner, thus concentrating on those
things that are important for his purpose and not wasting time on
irrelevant material*
3?Xhe term "perfect competition" envisions the ultimate in pure
competition as defined below* The necessary conditions are specified
as existing in a "perfect" degree, rather than in a reasonable or some-
what-less-than-perfect degree* The same degree of perfection in
necessary conditions applies to "perfect monopoly."
3%, H* Blodgett, Our Expanding Economy (New York* Rinehart
and Company, Inc*, 1955)# p* 1*1*
33


(2) All parties concerned must have a reasonable amount
of knowledge about the conditions prevailing in the
market.
(3) Buyers and sellers must operate independently with
out agreements and other forms of collusion.
(ii) Freedom of entry or exit to the buying or selling
side of the marketing situation must prevail,
(5) The good being traded must be undifferentiated as to its
source from a particular seller,
(6) There must be no governmental interference with the
forcee of supply and demand operating freely to
determine price,
No empirical marketing situation has all of the requisites
of pure competition. In fact the interplay of social forces in the
United States has established rather clearly that pure competition as
such does not fully attain all the broad objectives of society. These
broad objectives are always in a state of change, and in some respects
are so nebulous they defy definition. However, they are congealed
enough to enable the appropriate regulatory agencies and officials
of government to use them in making day to day decisions. The requi
sites of competition thus are held as ideals from which practical
situations are allowed to deviate if society can accrue more benefit
from the deviation than from adherence to the ideal.
Deviations from the prescribed pattern for pure competition


35
111 be found in any empirical marketing situation.-^ Thus marketing
firms operate as buyers and sellers under seme form of imperfect compe
tition, while marketing conditions among agricultural producers as
sellers are somewhat less imperfect!
conditions of perfect competition in pricing are be
coming even rarer* Formerly, those conditions were more
nearly approximated in pricing agricultural products.
But, one by one, farm commodities have come under the in
fluence of government price supports Many fruits and
vegetables are marketed and priced under public or private
arrangements Meat animals have seen a marked
trend away from central marketing, which presents a reason
able replication of perfect competition, to direct marketing,
which bears little resemblance**4^
Even though they may have many buyers offering to purchase
their products, individual producers often develop preferences for a
particular buyer over hie rivals.^ Such preferences may be due to
location, personality, reputation, or even community pride* When
producers' preference exists, buyers have certain control of their
supply* Since each buyer is in this sense a monopsonist yet has
competitors, the phenomenon is called "monopsonistic competition."
Similarly, on the selling side, when consumers prefer certain
sellers, each seller has some degree of monopoly control* But there
is still the competition of more-or-leas imperfect substitute products
3?W* H* Nichols, Imperfect Competition within Agricultural
Industries (Ames, Iowa* The Iowa' State College Press, 19U1), pp. 13-16*
kH* F. Breimyer, "Price Determination and Aggregate Price
Theory," JFE, August, 1957, pp* 677-78*
^The following two paragraphs have been taken largely from
W. H* Nichols, op. cit* pp* 1U-15*


36
available from other sellers. This phenomenon Is called "monopolistic
competition.n The blending of elements of monopsony, monopoly, and
competition is typical of the real world.
The characteristics of the South Florida livestock marketing
situation will be examined in order as follows t (1) the number of
buyers and sellers, (2) the effect of volume or size, (3) the posses
sion of adequate knowledge about market conditions, and (U) the degree
of product differentiation.
Numbers of buyers and sellers.The South Florida market for
cattle is comprised of many sellers and few buyers. From the eleven-
county area designated as South Florida (Fig. 1), 1,5U2 farms and
ranches reported 353*166 cattle and calves on hand in 195U.**2 From
this total of 1,5U2 farms 1,058 of them reported having sold 155*876
cattle and calves.^ In contrast, there are eight slaughtering finis
under Federal or State inspection in the greater Miami area, and one
in Lake Worth, sixty miles to the north.^ Probably at least two-
thirds of the cattle and calves sold are slaughtered in Miami
^U. S. Department of Commerce, Bureau of the Census, United
States Census of Agriculture 195U* Vol. I, part 18 (Washingtoni
Government Printing Office, 1955)* Table 7* PP* 103-111*. With all due
respect for the integrity of Florida citizens, persons well informed
aa the livestock industry suggest these figures are underestimates.
tlbld.
^Florida Stats Marketing Bureau, Annual Agricultural Sta
tistical Summaryj op. cit., p. 188.
^Data available on total slaughter in the area are for 1956
and thus are not strictly comparable with producers' sales of two years


37
The ratio of buyers to sellers existing in South Florida could
result in oligopsonistic competition among buyers Yet in itself
this ratio is no guarantee that non-competitive trading exists* Fur*
thermore, a dozen buyers dealing with several hundred sellers may dis
cover purely competitive prices, providing they meet the other criteria
of pure competition* Certainly, in times when some grades of cattle
are relatively scarce, active competition among the fee buyers would be
expected* Conversely, with supplies abundant there might be some in
centive for the few buyers to conspire to keep market prices dawn* On
the other hand, when the volume of cattle offered for sale exceeds the
volume that can be sold at current prices, this might indicate unwise
marketing practices on the part of producers*
Hth tbs exception of those instances when circumstances fores
a sals, most producers have considerable discretion in deciding when
to sell. Marketings of range cattle are seasonally heavy in the fall.
producer who is prepared to carey his cattle a few weeks longer on
supplemental feed may profit from higher selling prices. When receipts
at a particular auction are relatively light, producers in the area
might expect direct sale buyers to be unusually aggressive for a few
days following* The informed producer can use this improved bargain-
previous. Approximately 9U,000 cattle and calves were slaughtered in
state inspected plants in Miami in 1956* These figures do not include
one federally inspected plant, the Lake Worth plant, and several ma.n
slaughterers not subject to state inspection. Data obtained from the
Florida Livestock Board, Tallahassee, Florida*
^W. H. Nichols* op* cit.


38
ing position to advantage. Extreme variation in the quantity of cattle
offered for sale in any week, or perhaps any day, probably could be
reduced if producers gave more careful attention to prevailing market
ing conditions.
Volume or size of firm.Closely related to the ratio of buyers
to sellers in South Florida is the proportion of the total product
handled by any individual firs. In South Florida many producers of
cattle operate relatively large enterprises.^ In a particular mar
keting period one of these individual sellers could offer for sale a
grade of animal in quantity large enough to affect price for the re
mainder of that period.^ The one large sale may be made at a price
acceptable to all sellers, but after the first sale buyers no longer
are silling to pay this price. Other sould-be sellers must then decide
whether to hold their cattle until the succeeding period when the price
effect of the large sale has deteriorated.
Data on the number of cattle slaughtered by individual packing
firme in South Florida are confidential. Observations of the physical
plante suggest the potential of some variation in handling capacities,
however, the possibility of a dominating firm seems slight. Certain
finos specialising in processed meats, buy primarily lower grade cattle,
^The development of our economy reflects a general satis
faction with the type of competition that accompanies the efficiencies
of large-scale production from a email number of firms.
^smaller producers in the area assert this does take place,
and that buyers dwell on this point when chaffering over price.


39
while others handle all grades. The effect these preferences have on
the competitive atmosphere is difficult to estimate. Certainly when
a producer wishes to sell a small number of animals in a grade not
regularly demanded by all buying firms, he can expect limited bidding.
On the other hand, an offer of a large number of this same grade animal
would likely provoke bids from all buyers. In no way is this phenome
non a detrimental reflection upon specialization in the industry, rather
it is simply a market condition to be recognized.
Possession of knowledge.livestock auctions approximate many
of the requisites for purely competitive trading more closely than
other types of market places. Presumably, each auction individually
conducts salee in a competitive manner, however, competition at times
may be only "skin deep. In the auction circuit, buyers who travel
from sals to sale acquire superior knowledge and are marketing spe
cialists of a sort. Producers are more likely to give marketing only
minor attention. The difference in knowledge of maziest conditions
results in an imbalance in bargaining power, and as such is a market
impediment. It can be argued that auctions overcome this impediment
since many buyers are competing with each other at a sale. But with
auctions now handling primarily lower grade animals, the highly competi
tive buying attributed to auctions may be confined only to these grades
Uth many cattle sales in South Florida consummated at the
1>%. K. McPherson, "How Well Do Auctions Discover the Price of
Cattle?" JFE, February, 1956, pp* 30-U3.


1*0
ranch,5 a single individual is hard-pressed to keep informed of pre
vailing market conditions, particularly price*
The distinguishing feature of determination of price in
person vs. person bargaining, as direct sale of livestock,
is the absence of other buyers and sellers so numerous and
so immediately accessible as to make a given transaction
negligible in the market and to convert all pricing into
an aggregative process. In its barest essentials person
vs. person sale comes close to that of barter There
are in feet an infinite number of potential contracts in
barter
The area of indeterminateness, i. e., the range over which
pricing is subject to the bargaining skill of negotiators,
varies widely according to conditions such as the geographic
nearness of an organised market, the degree of differentia-
tion of product, and the knowledgeabillty of each bargainer .5^
To help compensate for the producers' lack of knowledge, the
Florida State Marketing Bureau publishes weekly in addition to auction
prices by gradas, the range of direct-sale prices by U. S. grades of
cattle. These direct-sale prices are obtained from packers in the
Miami area.^2 However, to keep strictly current in regard to the
country-buying segment of the market, producers must rely on the
grapevine method of passing information along. Even though inform
tica transmitted through this medium is subject to the personal ad-
£H. L. Castle, "The Direct Marketing of livestock in Florida"
(Unpublished M. S. Dissertation, Department of Agricultural Economics,
Ooiv. of Florida, 1956), p. 35* In 1955 twelve South Florida ealughter-
lng firms purchased $2 per cent of their cattle and calves directly
from producers.
5%. f. Breimeyer, op. cit. pp. 679-61.
^Similar prices are quoted for Jacksoovllle-Taapa packs
The reliability of all price quotations is dependent upon the integ
rity of the buying firms in reporting them.


ia
justment of each link in the chain, the grapevine is a realistic
source of market information and is a genuine part of the overfall
marketing picture.
Cattlemen do have some opportunity to avail themselves of
information on local market prices. Much of the price data for
individual auctions, that is summarised weekly by the State Marketing
Bureau, appears in local newspapers a day or two following the auction.
Many auctions mail out flyers publicising their prices. While auctions'
prices seem to be adequately covered, the direct sale price quotations
may be as much as a week old. This emphasizes the need for more
adequate coverage of market information on direct sales. Producers
can help compensate for the lack of current information by inviting
several bidders on direct sales.
Obtaining alternative bids on a lot of cattle is not as simple
as it may seem. Some buyers will quote only carcass grade and weight
bids over the telephone, while others will not quote a price without
inspecting the cattle. After inspecting the cattle many buyers will
not make a firm bid but offer a price for only immediate sale. If a
cattleman calls in one bidder after another he may be unable to obtain
two or more firm bids for comparison. Smaller producers are more
likely than larger producers to encounter this problem.
It appears that the distribution of knowledge about conditions
prevailing in the marketing area in South Florida ia not equal among
all parties concerned, and constitutes a deviation from that expected
under a purely competitive situation.


1*2
Differentiation of product.-At for the goods traded in the
market being undifferentiated this facet becomes somewhat elusive
when referring to cattle* Cattle may be differentiated by breed and
sex* Generally speaking, a particular grade of cattle such as U* S*
Good is relatively homogeneous, enough so that juries quotations by
grades are not misconstrued, if there has been no inaccuracy in esti
mating the live-animal grade* it a particular market place however,
anmala are identifiable by cattlemen's brandmarks* In the minds
of buyers and sellers, some producers are associated with certain
breeds or cross-breeds* Thus sos degree of identification is possible,
for instance in an auction ring, and buyers ere able to discriminate
if they so choose* In direct sales the product is differentiated "ex
cept when terms of sale provide for carcass grading on the rail*"^
Considering the cattle market as a whole this deviation from an ideal
is not too serious and furthermore would be difficult to overcome*
The important point is for market-wide prices by grades to be associated
with relatively homogeneous types of animals*
Evaluation of competition in the area*Conditions observed
in the marketing situation for cattle in ItLaai are fairly typical of
the markets for many agricultural products* In the production area
farmers and ranchers are considerably scattered geographically* Thus
there is some probability of a limited number of buyers available to
any one seller desiring to make direct sale of cattle at the ranch*
^H* F. Breimeyer, op* cit, p* 6?8.


U3
At the same time the spatial dispersion of producers might induce
buyers to share the buying territory in some fashion*
The size of operation of son cattle producers at least creates
a potential for some degree of control over market supply and hence
price. However, apparently this element of bargaining power is not
often used. On the buying side no one fins appears to have a great
enough capacity to exert dominance in the industry*
The availability of market information is not perfect, particu
larly regarding direct sales* However, producers can try to overcame
this disadvantage somewhat by being more aggressive in using what
information is available in calling for bids from several buyers*
Only one auction serves the general area, and this is an outlet
for primarily- lower grade cattle* With the extremely email volume of
high grade cattle sold at auction, it ie unlikely that there are enough
buyers of high grade cattle attracted to the sale to attain a fully
competitive price* On the other hand, prices of lower grade cattle
at the auction probably arc discovered under active competitive
bidding*
Producers of higher grade cattle for the Miami market sell
largely by direct sale* In this type of negotiation unequal bargaining
power between buyers and seller make the marketing situation quite
imperfect* Prices discovered in this sort of competitive environment
might well differ from those expected under purer competition* But
before examining the difference between the market price quotations and


uu
the conceptual prices expected, it is necessary to know something
about the validity of such comparisons*


CHAPTER IV
THE VALIDITY OF PRICE COMPARISONS
If buyers and sellers are to use price quotations as one of the
principal bases for making marketing decisions of when and where to
trade, they must be sure of the kinds of products to which the prices
refer. To this end many products are divided into grades, and prices
ej.
quoted accordingly. when the attributes specified in the grades
can be measured or evaluated with reasonable objectivity, for example,
by sise, weight, or laboratory test, differences in prices of grades
among regions can be observed with a high degree of validity* Converse
ly, when the grade attributes are measured in large part by subjective
judgment, there is a realistic but indeterminate probability that some
of the grade designations are incorrect*
It is general knowledge in the livestock and meat industries
that all graders of meat and animals perform with some inaccuracy in
their judgment of grades* The question of inaccuracy in judgment takes
on particular significance where public a genciee employ liveetock and
meat graders, because the bulk of market news circulated is based on
the federal grades designated by these men* Incorrect grading leads
51*W. K* McPherson, L. V. Dixon, and H* L. Chapman, Jr*, An
Economic and Statistical Analysis of Grading Cattle, Florida Agricul-
tural Experiment Station (bainesvills'* Universityof Florida, 1959),
pp. 1-11, (bulletin manuscript)*


1)6
to inaccurate price quotations in market reports and is a source of
market imperfection* To the extent that market reports compiled by-
public agencies differ from market reports compiled by private firms
the bargaining power of individuals using one or the other reports will
be out of balance* In any case the validity of price comparisons is
dependent on the assumption that market-wide prices by grades are
associated with relatively homogeneous types of animals*
The bargaining powers of buyers and sellers of cattle are to a
considerable degree dependent also upon their relative abilities to
55
estimate the carcass grades of live animals* When this ability of
human beings plays such an important role in the livestock marketing
system, accuracy in estimating grade cannot be overemphasized* Thus
initially attention was focused on the ability of men to grade live
animals*
Variation of Errors-of-Estimate in (heading Uve Animals'^
Review of literature.One of the earliest statistical studies
of grading performance analyzed the errors-of-estimate made by one packer
buyer who estimated the grades and yields of 1)00 slaughter animaIs.57
'-Although the live animal grade is referred to as a "grade,"
it is really an estimate of the meat grade of the carcass produced
after slaughter*
5^An error-of-estimate is the difference between the official
U. S. grade of a carcass, as designated by a federal meat grader, and
an estimate of this grade* live-graders estimate the carcass grade
by observing the characteristics of live animals*
57a* a* Dowell et. al. Marketing Slaughter Cattle by Carcase


U7
The data were subsorted into groups by class of cattle, end by final
carcass grade, and the variance of the errors-of-estimate calculated
for each grouping* Using Snedecor'a F test-* the many combinations
of pairs of variances ware tested for significant differences* The
physical errors in grade and yield were converted to price errors
using 1937-Ul average prices at Chicago* Variances in units of value
were calculated and tested for significant differences* When the
individual animal records wars combined to form lots, overestimates
tended to cancel underestimates and errors-of-estimate were reduced*
Another study focused on a comparison of pricing accuracies
among three methods of marketing butcher hogst the liveweight method
in use at that time (1953) a proposed live-weight and grade method,
and a proposed carcase weight and grade method.^ Pricing error was
defined as the difference between cut-out value and price paid for
the hog*
The performance of live-graders has bean compared also in
terms of percentage of correct estimates and percentage of estimates
Weight and Grade, Minnesota Agricultural Experiment Station, Technical
feul. No*' 181 (Minneapolis* University of Minnesota, 191*9).
58qs W. Snedecor, Statistical Methods (U ed*| Amesj Iowa
Stats Collage Press, 19l|6), p* 2k9 (5 cd.j Ames* Iowa State College
Frese, 1956), p* 96*
59oerald Engelman et al., Relative Accuracy of Pricing Butcher
Hogs on Foot and by Carcase Weight and Grade, Minnesota Act. Exp. Sta.
KcHnical fedleOn MoY2Ptf '(E^apollst (diversity of Minnesota,
1953).


U8
within plus or minus one grading unit of correct.^ ^2, ^
The analysis of variance in a linear regression of carcass
grades on the estimated grades in another technique stemming from the
Minnesota data.^* In this approach the differences between mean
errors-of-estimate associated with the various classes of cattle, and
the differences between sample regression coefficients and a parameter
of one, were tested for indications of randomness.
Comparisons of errors-of-estimate among live-gradersNone
of the studies cited above dealt with the performance of more than one
live-grader. To explore the nature of variation in errors-of-estimate
among several graders of live cattle, preliminary grading trials were
conducted at the Everglades Experiment Station in the spring of 1957
and 1958. Additional data were obtained from a grading trial conducted
^Early studies set the precedent for using one-third of a
federal grade as the preferred grading unit, apparently on the assump
tion that human judgment could make no finer breakdown.
61C.D. Phillips and James L. Pearson, Accuracy of the Pre
sent Methods of Pricing Veal Calves, Slaughter Cows, and Lamp's", Ken-
,uo>7 Agricultural Experiment Station Bulletins 10, 611, (Lax-
ingtoni University of Kentucky, 195U).
^2E. S. Clifton, Pricing Accuracy of Slaughter Cattle. Veal
Calves and Lambs. Indiana Agricultural Experiment Station Bulletin
lo. 11, North Central Regional Publication No. 53 (Lafayette* Purdue
University, 195L).
^J. J. Naive et_al., Accuracy of Estimating Live Grades and
Dressing Percentages oi Slaughter Hogst Indiana Agricultural Experi
ment Station Bulletin 650 (Lafayette* Purdue University, 1957)*
6kg. h. Jebe and E. S. Clifton, "Estimating Yields and Grades
of Slaughter Steers and Heifers," JFE, May, 1956, pp. 58U-96.


1*9
by the Louisiana Experiment Station in 1955 ^
The live-graders made independent estimates of the slaughter
grade on each animal individually* Most of the live-graders had pre
vious experience in grading live cattle and checking their estimates
against the grades of the carcass. Forty-eight hours after slaughter
the official government meat grades of the carcasses were designated
by a federal meat grader. The grade designation after slaughter is in
the judgment of an official meat grader representing the U. S. Depart
ment of Agriculture*
For purposes of calculating error-of-estimate in live-grading,
the meat grader's judgment is assumed to be correct or final* The meat
grader's subjective judgment must be taken as correct or final, other-
%
wise the function of the grading system as an arbitrator in trading
negotiations would fail*66 The preceding assumption is not intended
to imply an infallibility of tbe meat grading system. Since meat
graders are human, certainly they must make some errors in their
judgment of grade, but as long as the final grade of any carcass is
designated subjectively, there can be no real measurement of this
error.6?
This trial was conducted in connection with regional re
search project Slf-7, "Marketing livestock in the South."
^Its failure would reflect the unwillingness of individuals to
accept and adhere to the referee powers of the federal government in
matters of internal trade. It is characteristic of the people of the
Uiited States that they accept without violence the edicts of Congress.
Generally, this acceptance is with reluctance on the part of some*
67The federal meat grading service defends the accuracy of


50
To evaluate the differences among live-grading performances of
several individuals some method of summarising the observations is
necessary The aggregation of errors-of-estimate made by an individual
grading a lot of live animals can be considered as a frequency distri
bution (Fig* U) In this way a mean and a standard deviation of the
distribution will describe a grader's performance. The mean and
standard deviation are particularly relevant since they concern the
statistical concepts of accuracy and precision as used in sampling
terminology Accuracy is defined:? If a sample estimator gives
estimates which average very close to the true value being estimated,
the estimator is said to be relatively accurate Precision means the
ability of an estimator to give repeated estimates which are very close
together70 With reference to a grader's distribution of errors-of-
estimate on a lot of animals, the mean indicates accuracy while the
their judgment of grade on the basis of the packers' privilege to dis
pute the initial designation of grade The packers appeal on carcass
grades may be answered by examining the loin for characteristics of
grade The next higher appeal requests a referee grader to examine the
meat If necessary the appeal can be taken to higher levels of the
grading service However, most disputes are settled by examining the
loin Uhtil grade attributes of meat can be measured objectively, the
correct grade and thus the accuracy of meat grading is indeterminate
^Another measure of performance describes the variation of the
estimates around their corresponding meat grades, much like the measure
ment of the conventional standard error of estimate. Cf W K Mc
Pherson, et al., op. cit., pp.
^Bernard Ostle, Statistics in Research (Ames: Iowa State
Press, 195U), p 8U
70Ibid,


Frequency of Occurrence Frequency of Occurrence
51
I
d -.77
sj 1.03
50 -
40 -
30 -
20 -
10 -
0 -
II
d -.47
sd 1.40
III
d -.49
d = 1.30
/
-3 -2- -I
Errors-of-Estmate by Thirds
50 I
40 -
30 ~
20
10
0 -
IV V
d -.50
sd 1.23
Errors-of-E8timates by Thirds of Grades
Fig. 4.--Frequency Distributions of Errors-of-Estimate
in Live-grading, for Five Selected Live-graders, on 128 animals,
by Thirds of U. S. Grades.


52
standard deviation (or variance) indicates precision. Perfection in
grading is indicated by a value of zero for both the mean error-or-
estimate and the standard deviation of error-of-estimate.
Only a relatively small number of observations sere available
for each live-grader.' In three separate grading trials, the mean and
standard deviation of errors-of-estimate exhibited some variation in
magnitude (Table 7). Of the combined group of twenty-six men, the moat
accurate live-grader came within .13 thirds of a U. S. grade of being
correct on the average. The least accurate live-grader was off an
average 1.83 thirds of a U. S. grade. The average estimates of five
graders were underestimates, in contrast to the overestimates of the
sixteen. Thus, the tendency of the mean error-of-estimate to over
estimate or underestimate may be interpreted as a bias in a live-
grader's judgment of the grades of cattle.
The ability of a man to estimate the grades of cattle in such
a way that his errors-of-estimate are more nearly alike or precise,
in the sense defined above, is indicated by the standard deviation or
variance of his distribution of errors-of-estimate. In the group of
twenty-six men the live-grader who was most precise or consistent in
his errors-of-estimate had a standard deviation of 1.15 thirds of a
U. b. grade (Table 7)* The inconsistent live-grader had a standard
^^Five men graded 128 steers; eleven men graded 119 steers;
ten men graded a lot of 236 animals composed ofi 86 heifers, 82 calves,
U5 cows, and 23 steers. The three groups of live-graders included
several market reporters as well aa professional animal husbandmen.


53
TABIE 7
ARRAYS OF MEAN ERRQRS-OF-ESTIMATE AND STANDARD DEVIATIONS
OF ERRQRS-0F-ESTA.TE, FOR TKENTY-flU SELECTED
LIVE-GRADERS, ON SELECTED IOTS OF ANIMALS
Mean Error-of-Estimate
Standard Deviation of
Error-of-Estimate
.13
1.15
.16
1.23
.20
1.30
.26
1.35
.30
1.391*
3U
1.3970
.36
1.3972
1*3
1.1*0
1*1*
1.1*3
- .1*7
1.15
.1*8
1.1*6
- .1*9
1.1*9
- .50
1.52
- .77
1.57
1*06
1.56
1.29
1.61
1.1*3
1.62
1.1*1*5
1.66
1.1*51*
1.671
1.51*
1.672
1.55
1.68
1.57
1.71
1.72
1.76
l.7l*
1.777
1.81
1.78
1.63
1.81


deviation of error-of-estimate of 1.81 thirds of a U# S. grade. 72
When data from a group of small samples are observed, it is
not unusual to find comparatively large differences among individual
samples. Therefore, the three grading trials should not be taken as
representative of live-grading in general, but simply as rough indica
tions of what degree of proficiency in live-grading may be possible.
With small samples, and even when grading in thirds of U. S. grades,
thirteen of twenty-six men were proficient enough that their errors-of-
estmate averaged lees than one-sixth of a full U. S. grade J* If
the men had been instructed to estimate only the full U. S. grade of
each animal, their errors-of-estimate might have been reduced con
siderably.^ a. reduction in errors-of-estimate would also be expected
if large samples of each man's grading were observed.
7^Since there are a finite number of carcass grades, distribu
tions of errors-of-estimate cannot approach normality to any high
degree. In all grades but Canner and Prime, errors-of-s tima te may be
at least as large as three thirds above or below the carcass grade.
The sample data suggest that a range in thirds of grades from minus
three to plus three will include the vast majority of errors-of-eat
mate. Therefore, assuming that errors-of -estimate tend to be distributed
symmetrically around a mean, the orthodox interpretation of the stan
dard deviation is appropriate.
7-^This does not mean it is possible to estimate to the nearest
sixth of a grade. Small averages result from overestimates offsetting
underestimates
7bfthen counting as incorrect only those estimates placing
animals in different whole grades then their carcasses, the percent
ages of correct estimates far the five men in one of the grading trials
increased as followsi 30 per cent to 69 per cent, 28 per cent to 66
per cent, 27 per cent to 63 per cent, 27 per cent to 60 per cent, and
3U per cent to 59 per cent.


55
The effect of grading errors on price comparisons.Market
reporters in a days work customarily grade hundreds of cattle and
calves in each U. S. grade* Therefore, their errors-of-estimate on
such large numbers of animals would be expected to average somewhat
differently than indicated in a small sample* Sven if market reporters'
proficiencies were no better than those in the three trials cited above,
the effect on reliability of price quotations would not be serious
enough to discredit market reports* Nevertheless, any improvement in
the accuracy of grading leads to a more accurate reflection of market
price and is a gain in the efficiency of the livestock marketing
system*
Simple observation of the arrays of the two measures of grading
ability (Table 7) suggests that bias tends to vary more among live-
graders than does consistency* These tendencies can be tested statis
tically if the data approximate the assumptions of the appropriate
tests* Unfortunately the data from the three grading trials were not
obtained in a manner to permit statistical testing* Essentially, the
statistical approach examines the differences among mean errorsof
estimate for indications of significant or real differences among the
abilities of men to grade cattle* One possible method of testing,
employing analysis of variance, la illustrated in Appendix I*
Variations observed in the grading errors of the men in three
preliminary grading trials are mute testimony to the human element in
marketing cattle* It is an impediment in the marketing system that
probably can never be eliminated, but its effects may be reduced if


56
(1) the grade standards are revised to Include attributes that can be
measured objectively,^ and (2) graders employed by public agencies are
carefully selected and trained to confine their errors-of-e s tima te
within acceptable limits* With the aid of the measures of ability
discussed in this chapter, the acceptable degrees of grading proficiency
can be specified*^ Private firms can also establish standards of
performance for the graders they hire* When reliable estimates have
been calculated for the sizes of errors made by both live animal
graders and meat graders in the various segments of the industry,
this will permit traders to inject into their negotiations more
realistic adjustments for the errors in grading*
As far as current price reporting is concerned, an error of
a third of a grade in livegrading may not reflect any economic sig
nificance unless it places an animal in a different whole grade than
that designated by the meat grader* For instance, a price report
based on an estimate of high U* S* Good on a lot of animals whose
carcasses actually graded low U* 3* Choice would be an inaccurate
reflection of the real situation and a source of misinformation for
traders* If the same lot actually graded middle or low U* 3* Good,
the prices as now reported would not reflect the error*
^To date, no such attributes have been identified, however,
a sonic device measuring thickness and density of fat, muscle, and
bone is being tested* Perhaps other electronic devices, and chemical
tests will some day be developed*
^McPherson et_al., op* eit*, pp* 55-57*


SI
Much larger samples and many more samples of the performance
of each live-grader would have been more desirable* Yet the evidence
available supports the assumption that in a population or universe
sense a grader's errors-of-estimate are symmetrically distributed*
Furthermore, the magnitudes of the sample mean errors-of-estimate
suggest that for many graders the mean of their populations of errors
of-estimate may be close to zero* The samples also show a tendency
for a grader's overestimates to offset hie underestimates*
Thorough testing of the hypothesis and assumptions suggested
in the available data will not be possible until adequate samples of
grading performance are drawn from the population of live-graders
upon whose estimates market price reports are based* However, on the
basis of available evidence, the accuracy of market price reports can
be assumed to be within acceptable limits*


CHAPTER V
PRICING EFFICIENCY IN THE MIAMI MARKETING AREA
The efficiency of pricing cattle in the Miami marketing area
will be evaluated by comparing the price quotations for the area with
the estimated competitive wholesale buying prices derived as outlined
in Chapter II. However, the existence of any difference whatsoever
between the quoted price and the estimated competitive price will
not in itself be considered bona fide evidence of inefficiency. Sven
with effective competition among buyers the price paid for a live
animal may be less than the liveweight equivalent of its carcass
price if byproduct value does not cover the packer's costs.77 This
relationship is discussed below in connection with the problem of
byproduct recovery in the Miami area.
National averages of the liveweight equivalent of U. S. Choice
carcass prices and the prices of U. S. Choice steers can be compared
quarterly. Since Florida in general and Miami in particular must rely
on the surplus areas for higher grade beef, the relationship between
carcass prices and live prices in Miami would be expected to follow
more or less the national pattern. Deviations from the national
77k live price less than the carcass price could also arise
from the superior bargaining position of buyers acting in imperfect
competition and securing wider margins.
58


5 9
pattern of differences between carcass prices and live prices, after
making an allowance for the byproduct situation in Miami, will be the
basis for Judging the efficiency of cattle prices in the Miami mar
keting area.
Byproduct Recovery
The total value of an animal includes salable meat plus animal
offal. When the packer sells the meat and byproducts from an animal,
he hopes to receive prices sufficient to pay for the live animal and
all costs and returns involved.An estimate of the marketing mar
gin retained by the packer can be obtained by subtracting the price
paid for a live animal from the wholesale value of the meat and by
products^?
(5) Meat + byproducts Live Animal Cost and Margins0
If equation (5) is rearranged as
(6) Meat Live Animal Costs and Margins byproduct
it can be seen that the difference between the live animal price and the
liveweight equivalent of the meat price would Ideally reflect the dif
ference between byproduct value and packers costs and margins.
^Costs and returns include payments to land, labor, capital,
and entrepreneurship.
??U.S.D.A., Beef Marketing Margins and Costs, Mise. Pub. No.
710 (Washington* Government Printing Office, 1956), p. 10.
S^The figures to be substituted into the left side of the
equation must all be expressed in the same units of product, that is,
per pound, per hundredweight, and so forth. They can be in terms of
carcass weight or liveweight.


60
The byproduct situation in Land differs from many other areas
in that no complete rendering plant is located near enough to provide
an outlet for all this material, With the exception of hides and
what offal is sold to a soap maker, the rest is hauled away to dump.^
Some packers have argued that the value of byproducts recovered at
Miami is only sufficient to pay for hauling the waste away, thus the
packer must deduct the full amount of costs in arriving at his price
of live animals. Others are of the opinion that the byproduct value
per hundredweight of live animals at Miami is roughly a dollar below
that realized by the rest of the packing industry in Florida.2
Cattleman are inclined to feel that they are being deprived of
additional income because the Miami packers have not seen fit to
develop rendering facilities.
Evidently the estimated profitability from operating a
rendering plant in or near the greater Miami area has not yet been
attractive enough to any business enterprisers. Furthermore, cattle
producers in South Florida are at somewhat of a locational disad
vantage in trucking to other outlets. The plants either operating or
served by more complete rendering facilities, and which are the al-
^Y/ith the volume of animals slaughtered in Miami it is
strange indeed that even a small rendering plant has never been
built. At least one packer in the state, smaller than most of those
in Miami, operates his own rendering cookers on a very profitable
basis.
82
This figure was suggested in interviews with several packers
located in central Florida who represent the nearest alternative out
lets far South Florida cattle.


61
tema tira outlets to South Florida cattlemen, are not located near
enough to overcame the transportations! advantage of Ml and buyers*
Therefore, the forces of competition have not encouraged MLami packers
to build a more complete rendering plant* liitll a thorough study has
been made of the economic feasibility of rendering in the Miami area,
the existing byproduct situation cannot be evaluated objectively*
Estimated Competitive Prices Vs* Prices
Reported F*0*fi* Plant
If reliable estimates mere available in the Miami area for
all four factors in equation (6), an evaluation of the equitability
of live animal prices would be relatively simple* Live animal prices
are reported at many points in the nation, while carcass prices are
available only from reports for a few marketing areas outside the
Southeast* byproduct prices are reported only at Chicago, and the
information on packers costs is published by the meat-packing in
dustry as national averages.^
Nevertheless, although lack of complete knowledge makes it
difficult, it does not preclude making some judgment aa to what
differences between the live animal price and its estimated competi
tive level would be expected at Misal In the major wholesale meat
^3In 1957 each dollar of meat packers' sales was distributed
as follows 7U cents paid for livestock and raw material; 13 cents
for wages and salaries; one cent for taxes; 11*3 cents for other
expenses; and *7 cent total net earnings* American Meat Institute,
Financial Facts About the Meat Packing Industry (Chicago > American
Mast institute, 1958), inside cover page.


62
markets located near surplus producing areasf buyers far large chain
stores compete -with buyers serving Florida packers* Florida packers
selling carcasses and meat to chains and other wholesale buyers could
not expect to receive more than it would cost these customers to buy
in the surplus area and ship to their point of delivery* The com
petitive wholesale buying price equation presented in Cahpter II
expresses this relationship as the surplus area price plus transfer
costs*
When dealing with smaller buyers lacking the purchasing
advantage of chains the packer might sell at a higher price* Also,
Miami area packers providing wholesale services for a clientele of
hotel and restaurant customers might receive somewhat higher prices
for the higher-priced grades and cuts of beef* Thus in this respect
the midwest price plus freight underestimates the wholesale buying
price locally*
On the other hand to meet competition, national packers
operating in the area conceivably might ship carcasses in from parent
plants in the midwest at prices below quotations in public market
news reports* If, in turn, they sell st a lower price, the inde
pendent packer must meet this competition as best he can* In this
respect the midwest pries quotation plus freight overestimates the
wholesale buying price locally*
Prices of * S* Choice Grade*In the analysis that follows,
the lows of the pries ranges are compared* It is assumed that the
lows mare nearly represent prices of comparable in the grade.


63
Pries* paid for live animals F.Q.B. plant Miami have been reported
by the State Marketing Bureau only sines August, 1957* Frost August,
1957 until March, 1959 the prioe of U. S. Choice at Miami fluc
tuated generally below its estimated competitive level (Fig* 5).
The gap mas widest late in 1957 and early in 1958 ranging from
approximately $1*75 to $3*50 below* During this period the whole
sale value of byproduets at Chicago, as reported quarterly, was rela
tively stable averaging $2*27 per hundredweight of live eteer U* S*
Choice grade (Table 8)* Thus, even if Miami packers were obtaining
full byproduct value from animals, the degree of fluctuation observed
in cattle prices at Miami would not have been attributable to a
similar variation in byproduct value*
In the three-year period from 1956-1958, with the exception
of two quarters, the national average live price of U. S. Choice
steers was consistently below the liveweight equivalent of the carcass
(Uhls 8)* This suggests the byproduct value in this period was not
sufficient to cover costs (see equation 6, p* 58), hence the full
value of the meat was not paid for the live animal*^ In the second
quarter of 1958, byproduct value and carcass value reached their
highest levels for the period (twelve quarters) and the live price
exceeded the equivalent of the meat price by U8 cents per huadred-
^However, there is no fundamental reason to believe these
oosts always fluctuate with the offal value, or vice versa* In fact
from early 1951 to the fall of 1955 the byproduct values fell $2.30
while labor costs rose* U. S. Dept* of Agriculture, Beef Marketing
Margins and Costs, op* cit*, p* 9*


29 -
28 -
c
60
27
I
T3
V
W
g 26
3
a
41
$ 25
J
4)
Oh 24
u
*
o
a
4)
O
u
Cl,
23-
22 -
21-
20-
lh
estimated competitive price
market quotation
ON
-p~
T S 1 0
1957
N D
M
' A M I J~1 J
1958
1 N '
~J' P 1 M '
1959
Fig. 5.--U. S. Choice Steers at Miami: Estimated Competitive Price* F.O.B. Plant and Market News Price
Quotation F.O.B. Plant, the Low of the Price Range Reported, in Dollars Per Live Hundredweight, August, 1957,
to March, 1959.
Estimated competitive price equals (carcass price at Chicago plus freight to Miami)


65
TABLE 8
LIVE TO WHOLESALE PRICE SPREADS, U. S. CHOICE GRADE STEERS
BT QUARTERS, 1956-58*
Price
Wholesale Value
Quarter
Steers0
Carcass6
Byproducts'1
Total
Spread
(dollars per 100 pounds liveweight)
22
Jan.-Mar.
19.17
21.02
1.83
22.85
3.38
Apr.-June
20.30
20.79
2.00
22.79
2.19
July-Sept.
23.76
25.21
2.11
27.35
3.59
Oct.-Dec.
22.67
23.70
2.06
25.80
3.13
1957
Jan .-Mar.
20.18
21.18
1.92
23*10
2.56
Apr -June
22.85
23.39
2.15
25.51
2.69
July-Sept.
21.30
25.15
2.30
27.145
3*15
Oct .-Dec.
21.27
21.68
2.06
26.71
2.17
1
TanT-Mar.
27*09
27.36
2.17
29.53
2.141
Apr.-June
28.16
27.98
2.10
30.38
1.92
July-Sept.
26.39
26.6U
2.35
28.99
2.60
Oct.-Dec.
26.81
26.67
2.31
29.01
2.20
aSource i U. S. Department of Agriculture, The Marketing and
Transportation Situation. MTS-126, MTS-131 (Washingtoni Government
Printing Office, July, 1957, and February, 1959*
6Weighted average of price at 21 leading public stockyards.
Fiftynine per cent of average wholesale price of 100 pounds
of carcass beef.
I
Weighted average of prices reported in the National Pro-
visioner magazine.
Preliminary estimates.


66
weight* Again in the fourth quarter of 1958 the live price exceeded
the equivalent meat price. For these teo quarters it appears that
byproduct value was sufficient to cover costs and packers aere re
taining a narrower margin (Table 6).
/
Since 1958 was year of relatively short supply of slaughter
cattle it might be argued this factor was enough to force live prices
above meat prices* In addition the demand for feeder cattle was
exceptionally strong in the spring of 1958* No doubt both these
developments combined with the higher byproduct value in the two
quarters of 1958 to reinforce the tendency of live prioe to rise
above meat price* However, no packer could long afford to pay more
than the meat price for live animals if byproduct value was not
covering costs and returns*
To arrive at some judgment of the differences between the
price F.O.B* plant and the liveweight equivalent of the estimated
competitive wholesale buying price of carcass meat at Miami, it is
necessary to decide arbitrarily whether or not this price differen
tial at Miami should be greater than the national average* This
decision is arbitrary because of the peculiar byproduct situation in
Miami* In the following analysis it has been assumed that if offal
at Miami is worth one dollar less per live hundredweight than in
other areas, the differential between estimated competitive price and
plant price may be as much as one dollar greater than national figures
indicate (see footnote 82, p* 59)


67
Uth this assumed standard as a guide, the differential for
0. S. Cholee steers at Miami exhibits soow shortcomings on several
occasions (Table 9). Unfortunately only six weekly price comparisons
for 1957 are available, but for the first ten months in 1956, direct
ai# quotations F.O.fi. plant for U. S. Choice steers at Miami were
more frequent. No quotations on . S. Choice steers at Miami were
reported between November, 1956 and February, 1959.^ Because of
the nature of the data, average weekly differentials at Miami are
compared against average quarterly differentials nationally. In
effect the Miami differentials are viewed as weekly fluctuations
about the national quarterly averages! the national weekly fluc
tuations are masked.
In three instances during the latter half of 1957 the dif
ferential for U. S. Choice steers at Miami (Table 9, column 2) was
comparatively wide. It narrowed in December, 1957, but widened again
in January, 1956, remaining so until April, 1958. Uth this evidence
it appears that from August, 1957, to April, 1958, prices paid live-
weight at Miami for U. S. Cholee steers were below those expected
under reasonably competitive marketing conditions. From April, 1958,
through October, 1958, the differential generally remained within the
limits postulated as acceptable to reason.
**At this writing the national averages far the first quarter
of 1958 have not been released, therefore no comparisons are pre
sented for 1959 prices.


68
TABLE 9
DIFFERENTIALS BETWEEN SELECTED PRICES OF LIFE ANIMALS AND
LIVEWEIQHT EQUIVALENTS OF ESTIMATED COMPETITIVE PRICES FOR
CARCASSES, U. S. CHOICE STEERS,
AUGUST, 1957, TO OCTOBER, 1958
Week In
cluding
(1)
Miami Live Price8,
Minus Eatimated
Coops titira Carcass
Price Equivalent
(2)
National Live Price*5
Minus National Car
cass Price Equivalent
(Quarterly Averages)
(3)
National Quarter
ly Average Dif
ferential Ad
justed for Miami
Byproduct Credit0
(U)
8/8/57
10/10
(dollars per 100 pounds Uveweight)
-2.21 -0.85 -1.85
-1.18
-0.1*1
-1.1*1
10/31
-3.35
-0.1*1
-1.1*1
11/7
-2.55
-0.1*1
-1.1*1
12/12
-1.10
-0.1*1
-1.1*1
12/19
1/2/58
-0.85
-0.1*1
-1.1*1
-2.29
-0.27
-1.27
1/16
-2.58
-0.27
-1.27
1/23
-3.U
-0.27
-1.27
1/30
-1.17
-0.27
-1.27
2/6
-1.75
-0.27
-1.27
2/20
-2.1*2
-0.27
-1.27
2/27
-2.13
-0.27
-1.27
3/6
-3.52
-0.27
-1.27
3/13
-2.02
-0.27
-1.27
3/20
-2.97
-0.27
-1.27
3/27
-1.89
-0.27
-1.27
U/3
-2.39
0.1*8
-0.52
U/10
-1.10
0.1*8
-0.52
1*/21*
-0.52
0.1*8
-0.52
5/8
-0.52
0.1*8
-0.52
5/15
-0.81
0.1*8
-0.52
5/22
-*0.28
0.1*8
-0.52
5/29
-0.72
0.1*8
-0.52
6/5
-0.1*1*
0.1*8
-0.52
6/12
-0.1*1*
0.1*8
-0.52
6/19
0.36
0.1*8
-0.52
7/10
-0.11*
-0.25
-1.25
7A7
0.11*
-0.25
-1.25
9/25
-0.78
-0.25
-1.25
10/2
0.22
0.11*
-0.86
10/9
0.1*1*
0.11*
-0.86
10/16
0.11*
0.11*
-0.86
10/23
-0.06
0.11*
-0.86


69
TABLE 9.Continued
Source* U. S. Department of Agriculture, Florida Depart
ment of Agriculture, Florida Weekly Livestock Summary, Vol. mi
(1957) and Vol. Ill (1956) (Thomesvilie, Georgiai Mimeographed,
1957, 1958).
bSource* U. S. Department of Agriculture, The Marketing
and Transportation Situation. MTS-132 (Washington* Government
Printing Office, January 19^9).
ccolumn 3 plus a minus $1.00.


70
Prices paid at the ranch.-Interviews with cattlemen in South
Florida in 1958 indicated that while direct selling was a popular
method of trading, very few sales were based on carcass grade and
weight* The cattles felt that liveweight prices offered toy buyers
were just as attractive as carcass price offers* This is under
standable in a year such as 1958 since cattle were withheld to build
up herds, and buyers becaae particularly aggressive* Ordinarily the
carcass price offer would be expected to be somewhat sore attractive
than the live price offer for the ease grade, because the buyer
would not have to allow far his errors in estimating live animal
grades*
One other factor seemed to influence the cattlemen's prefer
ence for liveweight sales* Zt Involved some sort of feeling of self-
assurance that a transaction based on liveweight prices was more
satisfactory because the cattleman personally had estimated the
grade of hie animals* There was an outspoken expression of suspicion
of the integrity of packers to faithfully report the carcass grades
of animals and pay accordingly* k few respondees suggested the
possibility of collusion between packers and federal meat graders*
While it is possible for producers who sell on carcass grade and
weight to watch the actual slaughtering and grading of their animals,
this is not a very practical solution to the problem of distrust,
particularly when producers live long distances from the p^ng


71
plant In areas where carcass grade and weight selling Is preva
lent, such as the Southwest and California, apparently competition
among buyers Is keen enough to build up producers' confidence In this
method of sale. No doubt there also are instances where a personal
respect and trust between buyer and seller exists.
The grades of cattle sold by liveweight in direct sales cannot
be obtained with a very high degree of confidence from personal inter
view with producers. While cattlemen who keep no records may recall
quite accurately the prices received in previous transactions, there
is no objective way to associate these liveweight prices with the
grades of the particular animals. Furthermore, most liveweight
direct sales are consummated by a single price for loads of mixed
grades of cattle. Price by grade cannot be identified confidently
unless the sale was based on carcass weight and grade.
Interviews with cattlemen in South Florida produced only an
infinitely small amount of data on prices paid in grade and weight
sales. These data indicate that in nine sales at the ranch between
August, 1957, and January, 1958, the prices paid were somawhat higher
than the lows of the reported price ranges (Table 10). Nine observa
tions are not enough to warrant drawing any conclusions about how
actual prices paid at the ranch compare with the prices reported
QZ
The problem may eventually be resolved by producers or
ganizing cooperative slaughtering plants and selling graded car
casses to meat processors and wholesalers.


72
TABLE 10
COMPARISON OF ESTIMATED COMPETITIVE PRICES F.O.B. PUNT MIAMI
AND SELECTED PRICES PAID AT RANCH ADJUSTED TO APPROXIMATE
F.O.E. PLANT, FOR . S. CHOICE STEERS8,
Aeek
Includ
ing
Estimated
Competitive
Price F.O.B.
Plant, Miami
F.O.B. Plant
Equivalent
Price Paid
at Ranchb
Difference
National quarterly
Average Differen
tial Adjusted for
Miami Dy-Product
Credit0
(dollars per 100 pounds liveweight)
1957
8/9
2l*.?6
2U.53
0.1*3
-1.85
9/25
23.50
23.66
0.16
-1.85
10/9
23.80
23.37
0.1*3
-l.lil
10/26
2l*.o8
23.66
-0.1*2
-1.1*1
ll/ll*
21*.66
23.66
-1.00
-1.1*1
11/22
23.80
23.66
-o.n*
-1.1*1
12/12
2U.9
23.66
-1.30
-1.1*1
12/30
25.97
2U.82
-1.15
-1.1*1
1956
1/8
26.12
25.11
-1.01
-1.27
aCarcass prices paid at ranch have been converted to a live-
weight equivalent based on 58 per cent yield.
kprice paid at ranch plus allowance for trucking to plant.
cSee column U, Table 9.


73
F.O.B. plant. However, if the F.O.B. plant equivalent of these prices
paid at the ranch had been less than the lows of the reported F.O.B.
plant prices, the validity of those market report quotations would
be questionable. Perhaps the nine observations suggest that the yield
of these cattle sold at the ranch was somewhat higher than the yield
of the cattle on which the lower price quotation was based.
Prices of U S. Good grade.The lows of the price ranges
for U. S. Good reported at Miami compare much more favorably with their
estimated competitive levels than did the prices for U. S. Choice
(Fig. 6). During the period observed the price quotations for U. S.
Good steers generally exceeded their estimated competitive levels
(Table 11). Consequently, the problem of deciding whether or not a
deficit between estimated competitive price and quoted price is
justifiable does not arise. Furthermore, data on marketing margins and
price differences based on national averages are not compiled for
U. S. Good. Thus, any differences at Miami between the prices of
U. S. Good steers and the live-price equivalents of the carcass
prices cannot be compared with national averages for the corresponding
periods of time.
Judging from the frequency of price reports on direct purchases
of U. S. Good at kiami, this grade of cattle is available in South
Florida at all times of the year. Regularity of supply may have some
practical bearing on the bargaining position of producers who face an
oligopsonistic outlet for their products. The knowledge that at


1957 1958 1959
Fig. 6.--U. S. Good Steers at Miami: Estimated Competitive Price* F.O.B. Plant and Market News Price
Quotation F.O.B. Plant, the Low of the Price Range Reported, in Dollars Per Live Hundredweight, August, 1957,
to March, 1959.
*Estimated competitive price equals (carcass price at Chicago plus freight to Miami)


75
TABLE 11
DIFFERENTIALS BETWEEN SELECTED PRICES OF LIVE AN INALS AND
LIVEWEIGHT EQUIVAIENTS OF ESTIMATED COMPETITIVE PRICES
FOR CARCASSES U. S. GOOD STEERS,
AUGUST, 1957, TO DECEMBER, 1958
Week
Includ
ing
Miami live
Price8, Minus
Estimated
Coopstitive
Price
Week
Includ
ing
Miami live
Price8 Minus
Estimated
Cospetitive
Price
| Week
Includ
ing
Miami Live
Price8 Minus
Estimated
Competitive
Price
(dollars
er 100 pounds liveweightj
8/1/57
-2.98
2/13
*0.39
I 7/17
*0.95
8/6
-2.1*2
2/20
*0.33
7/21*
+1.23
9/5
-2.27
2/27
-0.17
7/31
1.51
9/12
-1.99
3/6
-1.06
8/7
1.35
9/19
-0.18
3/13
-0.39
8/21
+0.51
9/26
0.13
3/20
-1.1*5
8/28
+0.29
10/3
+0.1*1
3/27
-0.17
9/U
+0.00
10/10
-0.12
li/3
-0.1*5
9/11
1.00
10/17
*0.13
U/10
*0.33
9A8
9/25
+0.79
10/21*
*0.10
U/17
*0.39
+0.29
10/31
-0.96
U/2U
+1.11
10/2
+0.79
11/7
-0.71
5/1
+0.61
10/9
+0.51
11/11*
-0.77
5/8
+0.61
10/16
1.23
11/21
*0.07
5/15
+0.08
10/23
1.23
12/5
+0.01
5/22
+0.11
10/30
l 11/6
1.23
12/12
1.01
5/29
+0.61
1.20
12/19
1/2/58
+1.51
6/5
*0.39
11/13
+0.1*2
-0.61
6/12
*0.89
11/20
+0.95
1/9
-0.55
6/19
*0.39
11/27
*0.67
1/16
+0.1*2
6/26
7/3
1.39
12A
+0.67
1/23
-0.39
*0.39
12/11
+0.17
1/30
2/6
+0.17
+o.l*5
7/10
+0.39
12/18
+0.92
^Sources U. S. Department of Agriculture, Florida Department
of Agriculture, Florida Weekly Livestock Market Summary, Vol. XXXX
and I LI (Thomasville, Georgiat Mimeographed, 1957 1956)*


76
least some supply is available regularly night stimulate somewhat
more effective competition among oligopsonists who are not in
collusion.
The historical dominance of production of lower grade cattle
in South Florida has meant that Miami packers have had to specialise
in manufacturing processed meats. Wholesale meat buyers could not
rely on these packers as sources of meat in the higher grades. When
a packer slaughtered higher grade cattle he might have been in a
position of having to find someone to "take the carcasses off his
hands." Thus, from the wholesale buying level for meat all the way
back to the cattle producer the prices could have been below competi
tive levels. This postulated situation might explain in part the low
prices paid for U. S. Choice cattle in Miami.
On the other hand the more favorable prices of U. S. Good
cattle at Miami suggest that most packers have developed outlets for
this grade. The cyclical contraction of supply of even the dominant
lower grade slaughter cattle during the period observed may have
accelerated this development of broader outlets. Is painted out pre
viously, the cyclical effect on supply definitely has forced packers to
operate below their most profitable levels. This has resulted in more
buyers bidding on U. S. Good cattle than in previous times.
Prices of other U. S. grades.In contrast to the discovery
of prices for higher grade cattle in Florida, the situation for price
discovery of U. S. standard and lower gradea is that of production


77
in oxeaos of consumption. Sines there ere no publicly available whole
sale meat price quotations in Miami, it is impossible to evaluate the
liveweight prices of lower grade cattle by comparing them with an
equivalent of a carcass price* In this respect the comps titive as
pects of the lower grade cattle prices thus are indeterminate. However,
from the discussion in Chapter III of the general cattle marketing
situation in South Florida, it can be assumed that trading in lower
grade cattle is reasonably competitive.
Prices Paid at the Belle Glade Auction
The problem of evaluating auction prices is identical to that
encountered in evaluating prices of lower grade cattle at Miami
packing plants* There is no wholesale meat price quotation on these
grades, and the area of production is one of surplus instead of
deficit* Prices of cattle in a surplus area would tend to equal the
prices of meat in a deficit area minus the transfer costs* However,
no attempt has been made in this analysis to derive estimates of the
Miami wholesale prices of meat in the lower gradea*
An evaluation of prices quoted F.O.B. plant Miami has been
made in the preceding section* This set of prices provides s basis
for evaluating the extent to which auction prices are competitive*
The previous evaluation of the competitive level of plant prices can
be applied to auction prices in a greater or leaser degree aa sug
gested by the differences between the two sets of prices*


Auctions receive vigorous competition from direct selling of
cattle and calves* Virtually all slaughter cattle and calves in
grades above U. S* Standard are sold in direct sales (Table 12).
After considering shat it costs to sell animals through the auction,
many producers in the area feel that prices received for cattle sold
at the ranch yield a greater net return* Backers say they can pay more
at the ranch than at the auction because losses due to bruising from
handling are reduced*
On the other hand, the weight of an animal in the auction
ring is likely to represent more shrink than does the weight of an
animal weighed at the ranch* Backers allow for differences in shrink
by paying more per pound liveweight for animals that have undergone
greater shrinkage* In this respect auction prices would be expected
to be higher than direct sale prices at the ranch*
In bypassing the auction, producers destroy a reliable indi
cator of market price. This in itself is no justification for per
petuating auctions, if in other respects they are less efficient than
direct selling* On the other hand, direct selling does create the
real problem of obtaining adequate knowledge of market conditions, and
at the same time makes collusive practices more attractive to dubious
operators*
The auction at Belle Glade serves all of South Florida. Some
buyers attend from points north that are further away than l£Lami*
Theoretically, packers located to the north of Belle Glade receive


79
TABLE 12
COMBINED RECEIPTS OF SIAUGHTER CATTLE AND CALVES AT
THIRTEEN FLORIDA AUCTIONS, PERCENTAGES BY
U. S. GRADES, 1956a
U. S. Grade
Steers
Heifers
Cows
Bulls
Calves
(per cent)
Choice
0.3



.7
Good
6.2
2.U

.1
11.6
Standard
and
Commercial
29.8
15 .li
1.3
u.1
36 .U
Utility
39.3
38.3
19.2
27.6
U0.1
Cutter
18. h
3U.8
W.8
U5.2
11.2 (Cull)
Canner
6.0
9.1
3U.7
23.0

Total
100.0
100.0
100.0
100.0
100.0
Total Number
28,020
20,U98
U8,5U2
11,0QU
80,397
aSource: Florida State Marketing Bureau, Annual Agricultural
Statistical Summary (Jacksonville 1, Florida: November, 1957),
P. 77.


80
lees for their neat by virtue of being closer to the surplua produc
ing area than are Miami packers Assuming a uniformity in packing
plant operating costa, the more distant btyers can meet the price
offers of less distant buyers only by taking smaller margins On any
sale day when less distant buyers have largely filled their needs
by direct purchases, the more distant buyers can become the active
bidders, and price mill fall accordingly Such events further dis
courage would-be consignors to the auction
To encamine whether or not the auction prices have been con
sistent with the price quotations F.O.S. plant Miami, the plant
quotation mill be used to derive equivalent prices at the Belle Glade
auction In the analysis these prices mill be referred to as the
Belle Glade equivalents
First an allowance must be made for transportation from
auction to plant The Bells Glade auction is approximately eighty
miles from Miami Buyers can haul live cattle eighty miles at an
estimated thirteen oents per hundredweight7 Therefore the Belle
Glade auction price might be expected to be at least thirteen cents
below the price F.O.B. plant
Deductions must also be made for bruising, the risk of
crippling or death from handling at the auction, and for any additional
7lssume a forty-foot trailer hauls thirty 1,000 pound anjmale
at twenty-five oents per mile round trip


81
in-transit shrink from auction to plant. It is assumed in the
analysis that 3 per cent of the price F.O.B. plant sill cover these
deductions.
A price at the Belle Glade auction loser than the Belle Glade
equivalent of the price F.O.B. plant might suggest a sale day
dominated by more distant buyers. An auction price equal to or
greater than the Belle Glade equivalent mould indicate active par
ticipation by maud buyers at the sale.
Over a thirteen-month period beginning in September, 1957
the several price reports for U. S. Good steers sold at meekly
auction sales in Belle Glade fluctuated both above and belos the
Belle Glade equivalent.? U. S. Good steers sere sold at the auction
on only twenty-one sale days, during the period, and often only a
small quantity mas consigned. However, they constitute the only
price comparisons available in this grade. Auction prices for the
few months observed in 1957 sere belos the Belle Glade equivalent
while in 1958 they remained generally above (Fig. 7)*
8The price F.O.B. plant is paid for animals that have mder-
gone in-transit shrinkage before being weighed in at the plant.
Similarly, the packer's bid at auction is paid for animals that have
undergone in-transit and handling shrinkage before being weighed at
the sales ring. Assuming the shrinkage is equal in both instances,
this factor is not considered in the derivation of the auction price.
89Again the loss of the price ranges are used in the comparison
because it seems reasonable to expect that any two low-price quotations
are more likely to represent comparable cattle than are two high-price
quotations. It mould be a rare situation, particularly in Florida, to
find all the animals in a grade clustered at the upper end of the grade.
Clustering at the loser end mould be likely to occur more often.


Price in Dollars Per Live Hundredweight
1957 1958
Fig.7.--U. S. Good Steers at Belle Glade: Direct Sale Prices F.O.B. Miami
Adjusted to their Equivalent at Belle Glade, and Belle Glade Auction Prices, the Low
of the Price Range Reported, in Dollars Per Live Hundredweight, August, 1957, to
October, 1958.


83
If the price* in this comparison are reasonably close approxi
mations of the situation that existed for U. S. Good in the period
observed, there are indications that in the last four months of 1957
price depressing agents sere active at the auction. Producers who
during these months could have delivered . S. Good cattle to the
packing plant at loser transfer costs than those incurred by selling
through auction would have received greater net returns.
On the other hand, in the first nine months of 1958 apparently
Miami buyers were active participants at the sales. Furthermore, the
data indicate that in this period prices paid at auction were generally
higher than comparable prices at Miami plants. Cattle producers whose
costs of transfer to and selling through the auction were less than
the costs of transfer from farm to packing plant would have received
greater net returns from auction prices.
For the full thirteen month period, prices of U. S. Standard
steers at auction were consistently above the Bells Glade equivalents
(Fig. 8). The majority of U. S. Utility auction prices observed in
the four months of 1957 mere below the Belle Glade equivalents,
although the F.O.B. quotations fluctuated more widely (Fig. 9). In
1958 with few exceptions U. S. Utility at auction was generally at
a level somewhat above the Belle Glade equivalents (Fig. 9). Auction
prices of U. S. Canner and Cutter cows during the period were almost
always below Belle Glade equivalents, with the spread widening con
siderably in the first nine months of 1958 (Fig. 10). With U. S.


Aug Sep Oct Nov Dec Jan Feb Mar Apr May June July Aug Sep Oct
1957 1958
Fig. 8.--U. S. Standard Steers at Belle Glade: Direct Sale Prices F.O.B. Miami
Adjusted to their Equivalent at Belle Glade, and Belle Glade Auction Prices, the Low
of the Price Range Reported, in Dollars Per Live Hundredweight, August, 1957, to
October, 1958.


Aug Sep Oct Nov Dec Jan Feb Mar Apr May June July Aug Sep Oct
1957 1958
Fig. 9.--U. S. Utility Steers at Belle Glade: Direct Sale Prices F.O.B. Miami
Adjusted to their Equivalent at Belle Glade, and Belle Glade Auction Prices, the Low
of the Price Range Reported, in Dollars Per Live Hundredweight, August, 1957, to
October, 1958.
oo


Price in Dollars Per Live Hundredweight
Fig. 10.--U. S. Canner-Cutter Cows at Belle Glade: Direct Sale Prices F.O.B.
Miami Adjusted to their Equivalent at Belle Glade, and Belle Glade Auction Prices,
the Low of the Price Range Reported, in Dollars Per Live Hundredweight, August,
1957, to October, 1958.


87
Canner and Cutter com, factors depressing the auction prices to
levels far below the equivalent prices F*Q*B* plant were particularly
strong in 1958* This would not be unusual if the more distant buyers
gained a larger share of the market as local buyers became less active*
The more favorable prices quoted by direct sale buyers of low grade
cows may represent highly selective and limited buying on their part*
The comparisons in general indicate that prices paid at auction
maintained some comparative advantage over equivalent prices paid
F*0*B* plant in the U* S* Standard and Utility steer grades (and in
U* S* Good steers, if the price quotations are representative)*
However, this does not mean that producers necessarily would have
greater net returns when selling through the auction* To arrive at a
net farm price a producer must deduct from the auction price the costs
of transfer from farm to auction, the sales commission, and any
handling or yardage charges* This net farm price can then be compared
with the direct sale price F*0*B. farm to determine which method of
sale is more advantageous*
Because direct sale quotations were initiated at Miami late
in 1957 there is no long-term evidence of the auction vs* direct sale
relationship* Contrary to tbs opinion expressed by many producers,
direct sales do not always yield a net return greater than an auction
sale* A decision as to which method yields greater returns can be
made only after comparing accurate price quotations and costs of
marketing* It may be that in ccaoring their prices with auction


86
prices, direct cale sellers ere not comparing comparable cattle* On
the other hand, the direct sale bqysr may feel it Is to his advantage
to understate his prices for market news publications* Then whan his
offer to a seller is somewhat above the reported price, he may have
sane temporary advantage in gaining the sale*
Understating prices could not be accomplished market wide
without collusion* Although the number of buying firms in South
Florida is relatively small, this type of collusion among them seems
rather unlikely* But if in any reporting period only a few of the
firms actually give pries quotations to the market reporters, the
market-wide price is not representative* Basing price comparisons
on inaccurate and non-representative information can lead only to
erroneous conclusions*


CHAPTER VI
IMPLICATIONS
Economic Significance of Price Differences
The word significance is a fine example of ambiguity in mean
ing. However, for purposes of this discussion a variable is con
sidered economically significant when changes in its values cause
marketing decisions to be made differently in those particular segments
of the economy observed. Marketing decisions are made in the produc
tion, distribution, and consumption segments of the economy.
On a per pound basis, concern over a one cent difference in
price seems trivial. Price differences that are small in monetary
measure become magnified to significant levels when the unite of
product traded are large, for example, a one thousand pound animal
or a six hundred pound carcass. For a one thousand pound animal a
difference of one cent per pound amounts to ten dollars. In pricing
cattle and meat on a per pound basis, even halves and quarters of
coats are important. Consequently in the segments of production and
distribution, price differences of any magnitude may have at least
some degree of economic significance.
Of course if unpredictable circumstances have brought forth
selling prices yielding windfall profits, two or three dollars per
animal might not cause a cattleman to exert much effort in seeking out
89


90
the highest bidder. National emergencies occurring without warning,
such as the Korean conflict, or severe weather conditions are examples
that come to mind. But such cases are rare. Ordinarily a difference
of two dollars per animal or per carcass is more than sufficient to
affect the marketing decisions of buyers and sellers.
Small differences in price probably are more influential in a
cattleman's decisions of when and where or to whom to sell than in
his decisions of what and how much to produce. This is true because
of the time element involved. Increasing cattle production is a
long-term proposition for which cattle prices have to be estimated
well into the future. On the other hand once the animals have been
produced, and sale of them is contemplated, the future is much closer
at hand. Price estimation or prediction over short periods of time
can be handled with more confidence, thus smaller price differences
can be considered. When circumstances bring the time of sale extremely
close st hand, pries becomes more of a certainty.
Insofar as the meat packing business is reputed to operate at
small margins per animal unit of output, packers too will show concern
over small differences in prices.
Host market reports on livestock and meat transactions quote
prices to the nearest quarter of a dollar per hundredweight. Using
this as the criterion, differences of twenty-five cents or more per
hundredweight will be considered economically significant, ttider such
an assumption, it is implied that differences of at least a quarter


91
of a dollar per hundredweight will have an observable effect upon
marketing decisions* Thus, whenever an observed price per hundredweight
falls below its expected level by twenty-five cents or more, it is con
sidered evidence of impediments in pricing efficiency.
Pricing efficiency is variously defined as how well the price
of a product at some point in the marketing system is reflected back
through the marketing channels to the producer, after due allowances
are made for marketing costs* In essence the price at the point of
observation is taken as given and the marketing costs are evaluated
on the basis of acceptable and justifiable criteria*
The data presented in Chapter V clearly show that pricing
efficiency for U. S. Choice steers was impaired on numerous occasions
(Fig* 5 and Table 9)* The price quotations F.O.B. plant for this
grade were frequently below their expected levels by more than twenty-
five cents per hundredweight from August, 1957 until Iky, 1958* For
the remainder of 1958 the prices F.O.B* plant for U* S. Choice steers
were within the limits acceptable under the previous assumptions*
The inefficiency observed in prices of U. S. Choice steers may
well be related to the relatively small volume of fed cattle produced
in South Florida* As long as fed cattle are produced in the area only
sporadically, packers will not look to local producers as dependable
sources of supply* Tilth chain stores now contracting for meat supplies
several weeks or more in advance, the emphasis is shifting toward some
form of orderly marketing of livestock* Uatil South Florida becomes a


Full Text
SI. ^
AQUI-
CULTURAL
LIBRARY
UNIVERSITY OF FLORIDA


PRICING EFFICIENCY OF MARKETING
BEEF CATTLE IN SOUTH FLORIDA
By
LOUIS VERNON DIXON
A DISSERTATION PRESENTED TO THE GRADUATE COUNCIL OF
THE UNIVERSITY OF FLORIDA
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE
DEGREE OF DOCTOR OF PHILOSOPHY
UNIVERSITY OF FLORIDA

ACKNOWLEDGMENTS
At tide paint in the course of his education and experience the
writer has been exposed to the thoughts and ideas of many individuals.
Same readers may encounter passages or statements that resemble
strikingly their own formulations. However, all readers should realise
the impossibility of recognizing all persons upon whom the writer has
drawn.
Special gratitude is duet W. K. McPherson, for his sincere
friendship and his guidance of the dissertation through all of its
phases! H. G. Hamilton, J. R. Qreenman, R. H. Blodgett, and J. M.
DeGrave, the writer's advisory committee, for their personal interest
and constructive criticism! Rachel Schlichting for typing the pre¬
liminary drafts and drafting the illustrations! and Gerald Digelman,
of the Agricultural Marketing Service.
Finally, the writer wishes to thank hie wife and children,
for their sacrifices and willingness to endure hardships during six
long years of graduate study.
U

TABLE OF CONTENTS
Flag*
ACKNOWLEDGMENTS 11
LIST OF TABLES â–¼
LIST OF ILLUSTRATIONS Til
Chapter
I.INTRODUCTION . . . . . 1
The Situation and Problem
The national situation .
Beef production In Florida
Be«f consumption in Florida
The problem area
hypothesis and Plan of Study
II.A CONCEPTUAL-PRICE FOR BEEF AND CATTLE IN THE MIAMI
MARKETING AREA 1?
III.THE NATURE OF COMPETITION FOR CATTLE IN THE MIAMI
MARKETING AREA 33
Characteristics of the Marketing Situation
Number* of buyers and sellers
Volume or els* of firm
Possession of knowledge
Differentiation of product
Evaluation of competí tiesa in the area
IV.THE VALID ITT OF PRICE COMPARISONS US
Variation of Errore-of-Estimate in Grading live
inimala
Review of literature
Comparisons of errors-of-estimate among live-
graders
The effect of grading errors on price comparisons
ill

TABLE OF CON TEN TS—Continued
Page
V.PRICING EFFICIENCY IN THE MIAMI MARKETING AREA .... 58
Byproduct Recovery
Estimated Competitive Prices vs* Prices Reported
F*0*B* Plant
Prices of U* S. Choice grade
Prices paid at the ranch
Prices of U. S. Good grade
Prices of other U. S. grades
Prices Paid at the Belle Glade Auction
VI.IMPLICATIONS . 89
Economic Significance of Price Differences
Problems Ifocovered—Research Needed
VII.SUMMARY, CONCLUSIONS, AND CONJECTURES 95
APPENDIX 100
BIBLIOGRAPHY 125

LIST OF TABLES
Table Page
1. Annual Average Retail Cost of the Market Basket of Farm
Food Products, 19l«B-58. . • • . • 2
2. Per Capita Meat Consumption, by Type of Meat, in Tan
Selected Countries, 1957* •*••••• •• 3
3. Estimates of Selected Segments of Production and Con¬
sumption of Beef and Veal in Florida and the United States,
1957 7
U« An Index of Physical Efficiency in Production of Cattle
and Calves 19ii8 and 1956, Per Cent Change in Total Live-
weight Production, and Per Cent Change in the Index 19U8
to 1956, by States Ranked According to Change in the Index 11
5* Percentages of Total Commercial Slaughter by Four leading
Meat Packers, by Classes of Livestock, for Selected Tears,
United States 20
6. Sales by Packer Branch Houses and Independent Wholesalers,
195U, and Percentage Changes in Sales by Regions, 1939-5U 22
7* Arrays of Mean Errors-of-Estimate and Standard Deviations
of Errors-of-Estimate, for Twenty-six Selected Live-
Graders, on Selected Lots of Animals. 53
6. Live to Wholesale Price Spreads, U. S. Choice Grade
Steers by Quarters, 1956-56 • •••••••• 65
9. Differentials Between Selected Prices of Live Animals and
Liveweight Equivalents of Estimated Competitive Prices
for Carcasses, U. S. Choice Steers, August, 1957, to
October, 1958 •••••••••••••••• • 67
10. Comparison of Estimated Competitive Prices F.O.B. Plant
Miami and Selected Prices Paid at Ranch Adjusted to
Approximate F.O.B. Plant, for ü. S. Choice Steers • . . • 72
11* Differentials Between Selected Prices of live Animals and
Liveweight Equivalents of Estimated Competitive Prices
far Carcasses U. S. Good Steers, August, 1957 to December,
1958 75
v

LIST OF TABLES—Continued
Table i*ga
12. Combined Receipts of Slaughter Cattle and Calves at
Thirteen Florida Auctions» Percentages by U. S. Oradas,
1956. • 79
Appendix
Table
1. Analyses of Variance of the Actual Estimates and the Errors-
of-Estímate, and the Associated Duncan's Test for 128
Steers, by Five Live-Graders * 107
2. Analysis of Variance of Errors-of-Estimate, and the Assoc¬
iated Duncan's Test, Among Five Graders, by Each of Eight
Grades • ••••••••••••••••• 112
3» Analysis of Variance of Errors-of-Estimate and the Assoc¬
iated Duncan's Test, Among Five Graders, by Each of Six
Breeds. •••••••••••••••••••••••••• Hit
U. Analysis of Variance of Errors-of-Estimate, Among Eight
Grades of Animals, by Five Live-Graders 117
5. Kramer's Extension of Duncan's Multiple Range Test of
Significance Among the Mean Error*-of-Estimate for Eight
Carcass Grades of 126 Steers, by Each of Four Graders ... 118
6. Analyses of Variance of Errors-of-Estioate and Associated
Duncan's Test, Among Six Breeds of Animals, for Two Live-
Graders 121
7* Values of t from the Test of jU â–  0 Using the Mean
Error-of-Estimate, fay Bach Grader, for All Animals in a
Specified Carcass Grads •••••••••• • 123
vi

LIST OF ILLUSTRATIONS
Fig. Page
X. Density of Numbers of Cattle and Calves on Farms* by
Counties* Florida* 195U» and Four General livestock
Marketing Areas. 5
2. Liveweight Production of Cattle and Calves in Florida*
19UO-57 9
3* Selected Marketing Channels for Beef Animals and Beef
with Six Areas of Competition (Roman Numerals) * and
Five Levels of Price Discovery (Arabic Numbers), and
Points of Sale (Arrowheads)» ••»•••••• • 23
U. Frequency Distributions of Errors-of-Estimate in Iive-
Grading* for Five Selected Live-Graders* on 128
Animals* by Thirds of Ü. S. Grades ••»••••••••• 51
5» U. S. Choice Steers at Miami i Estimated Competitive
Price F.O.B. Plant* the Low of the Price Range Re¬
ported* in Dollars Per live Hundredweight* August*
1957, to March, 1959 . • • . 6k
6» U. S. Good Steers at Miamit Estimated Competitive
Fries F.O.B. Plant and Market News Price Quotation
F.O.B. Plant* the Low of the Price Range Reported*
in Dollars Par live Hundredweight, August* 1957* to
March, 1959. . . . . 7U
7» U. S. Good Steers at Belle Glade* Direct Sale Prices
F.O.B. Miami Adjusted to their Equivalent at Belle
Glade* and Belle Glade Auction Prices* the Low of the
Price Range Reported* in Dollars Per live Hundredweight*
August* 1957* to October* 1958 .............. 82
8» U. S. Standard Steers at Balls Glade i Direct Sale Prices
F.O.B. Miami Adjusted to their Equivalent at Belle Glade*
and Belle Glade Auction Prices* the Low of the Price
Range Reported* in Dollars Par Live Hundredweight*
August* 1957* to October* 1958 •••••••••••••• 8U
9» U. S. Utility Steers at Belle Glade < Direct Sale Price#
F.O.B. Miami Adjusted to their Equivalent at Belle Glade*
and Belle Glade Auction Prices, the Low of the Pries Bangs
Reported* in Dollar# Par Live Hundredweight* August* 1957#
to October* 1958 ••••••••••••••••••••• 85
vii

LIST OF ILLUSmTIONS—Continuad
Pig. Page
10. U. S. Canner-Gutter Cows at Belle Glade * Direct Sale
Prices F.O.B. Miami Adjusted to their Equivalent at
Belle Glade, and Belle Qlade Auction Prices, the Loe
of the Mice Range Reported, in Dollars Per Live Hundred-
Height, August, 1957, to October, 1958* .... 86
Appendix
Pig.
1. A Symmetrical Distribution of Errors-of-Estimate by Thirds
of U. S. Grades, for a Hypothetical Grader, with Theoreti¬
cal Frequencies Derived by Fitting a Normal Curve to a
Set of 119 Observations Having an Assumed Mean and
Variance ••••••••• •••••••• 105
YÜ1

CHAPTER I
INTRODUCTION
The Situation and Problem
The national situation»—Few would deny that in the Uhited
States today meat is given a prominent place in the diet* In terms
of dollars, consumers spend more money for meat than for any other
general category in the "market basket of farm foods" (Ifeble 1)* As
their incomes rise, consumers tend to spend more for red meats, and
particularly beefLivestock producers have responded to increases in
consumer expenditures for meat by increasing the volume produced. In
1956 production of red meat reached a record of 28,053 million pounds,
and civilian per capita consumption reached 166.7 pounds.^ bore than
half of the 1956 production, or 16,09U pounds, was beef and veal.3
Although people in the United States do eat comparatively large
quantities of meat, their consumption per capita is not the largest in
the world. United States per capita meat consumption of 159 pounds in
1957 was exceeded by four other countries (Table 2). Consumption of
^U. S. Department of Agriculture, "Consumption Patterns for
Meat," AMS 21*9 (Viashingtont Government Printing Office, May, 1958)»
pp. 17-35.
2
U. S. Department of Agriculture, The Livestock and Meat Situa¬
tion, LMS-99 (Washington: Government Printing Office, November, 1958)*
p. 6.
3Ibid.

TABLE 1
ANNUAL AVERAGE RETAIL COST OF THE MARKET BASKET OF FARM FOOD PRODUCTS, 191*8-58*
Tear
Market
Basket
Meat
Fruits and
Vegetables
Dairy
Bakery
and
Cereal
Poultry
and
Eggs
Fats
and
Oils
Miscel¬
laneous
1958
$1064.43
$292.02
$233.67
$194.04
$159.84
$ 96.50
$44.90
$43*46
1957
1007.1*1
259.15
218.72
191.35
156.69
93.92
45.36
42.23
1956
972.21
233.49
219.80
185.48
150.72
97.66
43.44
41.59
1955
974.93
246.67
208.12
181.21
150.00
104.72
42.88
41.33
1951*
992.79
271.09
205.61
181.73
147.65
100.87
44.30
41.54
1953
1002.01*
264.64
206.96
187.43
143.69
U5.95
41.93
41.44
1952
1026.19
269.86
211.75
190.29
141.17
112.84
41.51
40.77
1951
1026.15
299.85
197.09
182.55
138.01
118.49
49.02
41.14
1950
924.31
265.06
185.48
162.65
126.90
104.03
42.33
37.86
191*9
938.99
253.88
197.39
165.88
124.78
115.21
43*80
38.05
191*8
993.60
278.88
194.16
178.25
125*60
121.68
56.56
38.47
«Source i U. S. Department of Agriculture, The Marketing and Transportation Situation
(Washington* Government Printing Office, January, 1959, 1958, 1957," 195¿, 1955» February, 1954,
November, 1953 supplement).

3
TABLE 2
PER CAPITA. MEAT CONSUMPTION, BT TYPE OF MEAT,
IN TEN SELECTED COUNTRIES, 1957a
Class of Meat
Country
Total
Beef and
Veal
Pork
Tjt-mh
Mutton
Canned
Meat
(Pounds)
(Pounds)
(Pomds)
(Pounds)
(Pounds)
Arpptltt*
2U2
210
19
13
b
Australia
223
129
16
7U
U
New Zealand
220
112
31
76
b
Uruguay
168
130
12
26
b
United States
159
93
62
U
b
Denmark
1U2C
5U
87
d
b
137
8k
1>5
3
5
United Kingdom
13U
55
U2
22
15
France
122®
6U
U8
6
b
last Germany
107®
39
66
1
b
^Source* U. S. Dept, of Agriculture, Foreign Agricultural
Circular. FLM 11-58 (Washington! Government Printing Office, October
5ITw55), p. h.
bIncluded with other types,
cIncludes horsemeat.
dLess than one-half pound.

u
meat and particularly beef in the United States might expand somewhat
if meat and meat products were priced lower in relation to other foods.
Beef production in Florida.-—Setae cattle are produced in all
sections of the state, but commercial production is concentrated
largely in the central and southern areas (Fig. 1). The central and
southern portions of Florida are part of a lower-lying coastal plain
and are more like the sub-tropics.^ host of the large expanses of
native range land are situated within the lower half of the peninsula
and here, on both improved and native pastures, cattle production is
dominated by a cow-calf operation. Conditions in northeastern and
northwestern Florida are more typical of the rolling coastal plains of
Southeastern United States .£ Corn and other grain crops are better
adapted to this area and many small dry lot feeding operations ars found
here as pert of diversified farming.
Of course, cattle raising must compete with citrus and vegetable
production, but as yet this is not a serious threat to the cattls in¬
dustry. Florida producers contribute s large portion of the national
supply of citrus and winter vegetables. Expansion of citrus groves and
vegetable acreage is undertaken at a risk of creating oversupply end
the accompanying lower prices, (hi the other hand, since beef production
in the state represents only approximately 1 per cent of the national
l*U. S. Department of Agriculture, Soil, The 1957 Yearbook of
Agriculture (Washington! Government Printing Office, 1957)» PP* 579-597.
5lbid.

Nor thwes t
0
- 20 —
I 1
21
- 40 —
tM
41
1
O'
o
1
1
61
- over—
m
Fig. 1.--Density of Numbers of Cattle and
Calves on Farms, by Counties, Florida, 1954,* and
Four General Livestock Marketing Areas.
Northeast
U1
This line is
approximately
150 miles
from
Miami
South
♦Source: ü. S. Bureau of Census, United States Census
of Agriculture, Vol. I, Part 18, Florida (Washington: Govern¬
ment Printing Office, 1956), pp. 103-108.

6
supply (Table 3), producing more beef in Florida would have an imper¬
ceptible effect upon price»
Florida farmers and ranchers produced approximately 33k million
pounds liveweight of beef in 1957»^ This represented slightly more
than 1 per cent of the national total of approximately 27,000 million
pounds liveweight.? Eighty-one per cent of the l,93h,000 cattle and
calves on farms and ranches in Florida on January 1, 1958, were kept
for other purposes than milk production»® Since most dairy cattle
eventually are slaughtered for meat, they too must be considered part
of the beef potential»
Total liveweight production of cattle and calves in Florida
has doubled since 19U8 (Fig. 2). In the period 19U8-58, beef cattle
and calves on farms and ranches in Florida increased from 961,000 to
1,559,000 head, a gain of 62 per cent»? These increases in production
appear to be substantial, but, they do not necessarily mean increased
efficiency»
The number of pounds of beef produced per «n-tmal on hand
January 1 is one measure of physical efficiency in livestock produc¬
ed» S» Department of Agriculture, Agricultural Marketing Ser¬
vice, Livestock and Meat Statistics. Statistical Bui. No. 230 (Wash¬
ington * Government Printing Office, July, 1958), pp. 1*1, 283-289»
7Ibid.
8Ibid., p. 15.
^Florida State Marketing Bureau, Annual Agricultural Statisti¬
cal Summary (Jacksonville 1, Florida* Florida State Marketing Bureau,
November, 1957 and 1958), p. 159 (1957) and p. 170 (1958)»

TABLE 3
ESTIMATES OF SELECTED SEGMENTS OF PRODUCTION AND CONSUMPTION OF
BEEF AND VEAL IN FLORIDA AND THE UNITED STATES, 1957
Production (Pounds)
Consumption (Pounds)
United States
Liveweight*
Total
Carcass Weight*
Total*
Par Capita*
2Í ,058,050,000
15,739,000,000
$,716,000,000
93.3
Florida
Total Per Capí tab
Llveweight* Carcasa Weight*1 High Low
33U,250,000 $7,993,025 93-3 (U. S. Arg.) 58.5 (Southern
Region Arg.)
Llveireight production in Florida la
1.23% of U. S. total.* Total
High Low
395,1*21*,060 21*7,93U, 700
Fresh Meat*» 55,771,820
Production la 28% of low level consumption.
Processed Meat»* 102,222,005
Production is 129% of high level consumption.
High
316,339,1*28
High
79,081*,812
Fresh Meatf
Low
198,31*7,760
Processed Meat*
Low
1*9,586,91*0
•Source* U. S. Department of Agriculture, Agricultural Marketing Service, Live stock and

■¡ABLE 3»—Continued
Meat Stailatice» Statistical Bul. No* 230 (Washington! Government Printing Office, July, 1958),
pp. Í*Í and 26>289.
bSource i U. S. Department of Agriculture, Agricultural Marketing Service, Consumption
Patterns for Meat. AMS-2U9 (Washingtoni Government Printing Office, May, 1958), p. Í2.
cJohn N. Webb, «Preliminary Estimates of the Population of Florida Counties! July 1,
1957," Bureau of Economic and Business Research Population Series Bul. No. U (Gainesville!
University of Florida, January, 1958), p. 1 (mimeographed). Papulation in Florida, July 1, 1957*
estimated at 1*,238,200. Population multiplied by per capita consumption is an estimate of total
consumption.
^Estimate based on an average 1*7.3 per cant dress-out or yield. A weighted average yield
was computed from the dress-out percentages obtained from a reliable packer for the several
grades of cattle and calves, weighted by the proportions of the several grades sold at fourteen
auctions in 1957.
•liveweight figures for Florida are official U.S.DJL. estimates, whereas carcass weight
figures are not. Percentage based on carcass weights is only 1 per cent.
¿About half of the U. S. Utility grade and nearly all of the lower grades of cattle and
calves are used far processed meat. The other half of U. S. Utility and all higher grades are
sold as fresh meat. In 1956 80 per cent of U. S. beef production was in the fresh meat grades.
These estimates are published in (1) U. S. Department of Agriculture, Marketing Margins for Beef
(Washington! Government Printing Office, December, 1953)* P* 9 and (2) U. S. Department of
Agriculture, The livestock and Meat Situation, LMS-9U (Washington! Government Printing Office*
March, 1958),' p. 1.
^Florida State Marketing Bureau, Annual Agricultural Statistical Summary, (Jacksonville!
Florida State Marketing Bureau, November, 195#;, pp. 176-177, 183. It is estimated that in Florida
one-half of the Utility and all the lower grades would include 72 per cent of the slaughter cattle
and 30 per cent of the slaughter calves. A weighted average of these two percentages, using live-
weight volumes of commercial slaughter as weights, yields an estimated combined percentage of 61*.7
in the grades sold for processing.

9
Calendar Year
Pig. 2.—Liveweight Production* of Cattle and Calves in Florida,
1940-57.b
Production equals weight of marketings and farm slaughter, less
inshipments, plus or minus inventory changes during the year.
bSource: U. S. Department of Agriculture, Meat Animals, Farm
Production, Disposition, and Income 1924-57 (Washington: Government
Printing Office, 1947 and annually).

10
ticn.10 The ratio of the number of animals on hand to the amount of
beef produced (In hundredweight) can be used as an index of production
efficiency. The index is an input-output ratio relating total pro¬
duct to only one factor of production, the animal.^ Since the number
of animals is smaller than the number of pounds produced, the ratio
mill be lesa than one to one and the index expressed in terms of
decimals, A small index indicates relatively high physical efficiency
in beef production per unit of animal resource.
The index of beef production efficiency for the United States
in 19U8 was 0.2*2 (Table 2*). Among forty-eight states the index
ranged from 0.32 in Kansas to 0.83 in Rhode Island. Florida, with
an index of 0.72*, ranked forty-seventh. From 192*8 to 1956 total
liveweight production of beef in this United States increased 51 par
cent (Table ]*)• In the same period the index of production decreased
-i j •
from 0.2*2 to 0.35» indicating an average 17 per cent gain in physical
efficiency at the national level.
Total liveweight beef production in Florida by 1956 had in¬
creased 100 per cent from 191*8 (Table 2*). Along with Florida, the
*%. K. McPherson, "Initial Results of livestock Marketing
Study," The Florida Cattleman (Kissimmee, Florida* Cody Publications,
Inc., September, 1952). This approach considers the number of cattle
and calves on hand on any January 1 as the source from which that
year's production must come.
^Alternative measures of physical efficiency could be ex¬
pressed in terms of other resources, such as feed per pound of gain.
Soma of the factors that influence the index are discussed in a
succeeding paragraph.

11
TABLE l*
AN INDEX OF PHYSICAL EFFICIENCT IN PRODUCTION OF CATTLE AND CALVES
19U8 AND 1956/ FER CENT CHANCE IN TOTAL UVEWEIGHT PRODUCTION, AND
PER CENT CHANGE IN THE INDEX 19U8 TO 1956, BY STATES
RANKED ACCORDING TO CHANGE IN THE INDEX*
3
$
ja-
8
2
I
8
121 I
ill
I
J£L
5.» 3
iif ii
«II p
Ohio
.59
.38
38
36
Mont.
.31*
.30
52
12
Texas
.1*8
•31*
39
29
Colo.
•3U
.30
28
12
FLA.
.71*
•51*
100
27
S. D.
.36
.32
1*0
12
Misa.
.63
.1*6
126
27
Del.
.56
.1*9
29
12
Ga.
.66
.1*9
95
26
Ark.
•1*6
.ia
70
11
Va.
.55
.ia
76
26
Idaho
.37
.33
72
11
La.
•62
.1*7
103
21*
Wise.
.51
.1*6
28
10
Ill.
.37
•28
76
21*
Conn.
•60
•51*
12
10
Neb.
.35
.27
59
23
N. H.
.61
.55
11
30
Aria.
•1*7
.37
50
22
N. H.
J*0
.36
21
10
Iona
•31*
.27
61*
21
Utah
•1*2
.38
50
10
Ala.
.53
.1*2
100
21
Tenn.
.1*8
•1*1*
36
8
Minn.
.1*1
.33
53
20
N. J.
.53
•1*9
29
8
S. C.
.66
.53
119
20
Vt.
.73
.68
19
7
Ind.
.38
.31
56
18
Ml.
.60
.56
12
7
Md.
.56
•1*6
53
18
W. Va.
.51
.1*8
15
6
Okie.
.36
.30
55
17
ÉÜ—-
«yo.
•3U
.32
15
6
Kan.
.32
.27
50
16
Ore.
•39
.37
50
6
N. C.
•61*
•51*
71
16
Ky.
•U1
.39
25
5
Wash.
.1*3
.36
68
16
N. I.
.59
.57
u*
1*
Mich.
•1*8
•ia
29
15
Mass.
.63
.62
- 2
2
N. D.
.38
.33
50
11*
Nev.
•ia
.1*0
21
2
Mo.
.37
.32
58
11*
R. I.
.83
.88
-12
• .6
Cal.
.37
.32
00
U*
Pa.
.1*6
.51
36
- 10
U. S.
.1*2
.35
51
17
* Index: Number of Cattle and Calves on hand Jannaxy 1, per one
hundred pounds annual total llveeeight production.
^Sources U. S. Department of Agriculture, Meat Anímalai Farm
Production. Disposition, and Income, by States (Washingtoni Government
Printing üfficeV 'J^, 1%2,'lKa April, 1957).

12
otter Southern states of Louisiana, Mississippi, Alabama, Georgia, and
South Carolina exhibited large increases in llveweight production
during this period* The index of production far Florida in 1956, 0*5U,
showed a 27 per cent gain in physical efficiency from that in 19 L8*
There can be several reasons for differences among the forty»»
eight states in average production per animal* Grass fed cattle may gain
less than grain fed cattle* Feeder cattle and calves having different
grade potentials are likely to vary in the rate at which they gain, or
in their total gain during a specified period of feeding* The several
breeds may respond differently to various types of feed* In sane states
animals are marketed at comparatively young ages, while in others the
animals marketed are more mature* The proportion of calves marketed
to cattle marketed varies from state to state* The weights of dairy
cattle sold for slaughter may be somewhat different from weights
attained by beef animals* In a dairy cattle state, compared with a
beef cattle state, the number of animals slaughtered is likely to be a
smaller percentage of the total number on hand* These and a host of
other factors will affect the magnitude of the index of production ex¬
pressed above*
Changes in the indices summarise the accomplishments made in
beef production in recent years* But, since the index measures physical
production, it cannot be used to compare the economic efficiency^ of
the cattle industries in the several states car regions* To date,
^E* 0* Heady, Economics of Agricultural Production and Resource
Use (New York Cityi Prentice-Hall, Inc*, 1952), pp* 90-10L.

13
research in the economics of beef product!cm has not produced enough
input-output data to describe the many production surfaces needed to
quantitatively evaluate the efficiency of beef production*
Beef consumption in Florida*—The population in Florida has
grown steadily to over four million people This is a sizeable base
for potential beef consumption* The 1955 per capita consumption data
have been used to estimate beef and veal consumption in Florida for
1957 at approximately 395 million pounds (Table 3)*1^ Of this 395 mil¬
lion pounds, approximately 80 per cent was purchased as or prepared from
fresh cuts of meat and the remaining 20 par cant was consumed as pro¬
cessed meat* Consumption of 395 million pounds represents only 2-1/2
per cent of the national total* Thus, changes in the consumption
pattern for the state would have an insignificant effect upon national
price*
Compared with state production estimates, the consumption of
fresh meat far exceeds the locally-produced supply* On the other hand,
the supply of locally-produced meat for processing is more than suffi¬
cient to satisfy this portion of meat consumption. Thus, the con¬
sumption-production balance for the state exhibits both surplus and
deficit (Table 3).
The problem area.—Development of a surplus of one kind of
beef and a deficit of another has been particularly rapid in South
13john N* Webb, op. cit*
^U. S. Department of Agriculture, "Consumption Patterns for
Meat," AAS 2i*9 (Washington: Government Printing Office, liay, 1958)*

Florida. liuch of Central and Southern Florida enjoys an enviable posi¬
tion in the production of grass. Cattle production provides an effective
means of marketing the forage, but the particular combination of re¬
sources has in the past encouraged production of lower grade cattle.^
Few other areas in the United States have the unique combination
of climate, soil profile, level topography, and abundant water supply
that is found in this section of Florida. These factor* have permitted
the development of two-way water control* irrigation and drainage on
the same piece of land, both using open ditches to manipulate the water
table. Hth respect to production of forage grasses, it appears
South Florida can claim some comparative advantage.
Lany of the same resources and geographical features that provide
a favorable environment for the cattle industry have produced a distinct
pattern of urban development. Tbs coastal areas have tended to beoome
thickly populated, and the interior, except for Isolated spots, is only
sparsely inhabited. A large area of consumption has built up along the
lower east coast of the peninsula in the three southernmost counties of
Palm Beach, Broward, and Dade. The total population in these three
^Ifee of the term "loner grade" is common in the livestock
industry. It refers to the quality of meat not usually sold for con¬
sumption as fresh cuts. The U. S. grades of beef and beef animals in
which this quality of meat is found are Utility, Conner, and Cutter.
In contrast the term "higher grade" refers to U. S. grade.? Standard,
Good, Choice, and Prime.
â– ^Water is pumped out of or into a network of large dual-purpose
feeder-drainage canals. The canals are part of a flood control program
administered by the Central and Southern Florida Flood Control District,
whose jurisdiction embraces 15,570 square miles.

35
counties as of July 1, 1957* was estimated at 1,269,000.^7
On the basis of 1955 par capita consumption, 1,269*600 people
in the tri-county area would consume annually an estimated 116,800,000
pounds of beef and veal.^® Of this, approximately 80 per cant or
93*000,000 pounds would be fresh non-processed meat (Table 3, footnote
f). Production in Florida of beef and veal for fresh meat consumption
is estimated for 1957 at 55*781,820 pounds (Table 3)* This quantity
cannot fill even the lower east coast consumption requirement*
The counties within a radius of 100-150 ralles from Miami contain
some of the most dense cattle populations in the state (Fig* 1)* How¬
ever, these cattle are marketed largely as grass-fed animals* Although
some producers strive to put a degree of finish on their cattle, the
bulk of the marketings to slaughterers are lower grade animals generally
used in the manufacture of processed meat products* Very little lower
grade beef is demanded by the fresh meat trade, so in this respect the
local supply far exceeds the demand (Table 3)* Low grade cattle oust
be absorbed by meat processors, but here a large supply of animals or
beef must be shipped long distare es to eastern markets* On the other hand,
3-7John N* Webb, op* olt*
^U*8*D*A*, "Consumption Patterns for Meat," op, clt. Because
of the pattern of migration and tourism from northern Industrial areas
to the lower east coast of Florida, meat-eating habits of people in the
lower east coast area are more likely to be those of people living in
the urban Northeastern Ubited States* In 1955 annual beef and veal
consumption in the urban northeast was estimated at approximately 92
pounds per capita* At 92 pounds per capita annual consumption for
1,269,600 people would total 116,800,000 pounds.

16
the supply of lowlly produced, higher grade beef animals is short of
the demand (Table 3)« To fill their needs the packers and wholesalers
must ship in fresh meat from surplus-producing areas such as the Mid¬
vest*
The problem*—Packing plants in Maind are the main outlets for
slaughter animals produced in South Florida* ttilike the midwest cities
with major livestock markets* there is no appreciable outshipment of
fresh beef from Miami*1? This indicates that virtually all higher
grade beef animals slaughtered in Maind are consumed there*
Among cattlemen in South Florida is the general opinion or
belief that they do not receive equitable prices for cattle which they
estimate to be in grades sold for fresh meat consumption*20 Ideas of
what constitute equitable prices are extremely varied* However with
a wide dissemination of prices prevailing at various marketing centers
today* producers are likely to think of equity in terms of how prices they
21
receive compare with prices quoted elsewhere*
In our society equit&bility of price is judged subjectively and
evaluated within the framework of existing institutions* Itadoubtedly
^fioned meat and occasionally same lower grade carcasses and
cuts are shipped out-of-state* particularly to the Northeast*
2QWebstw,e New Collegiate Dictionary* 1953 edition* defines
opinion as implying having been thought out* yet open to dispute*
Belief implies acceptance and intellectual assent*
21Practioally every generation of farmers has voiced, an opinion
that they were not receiving equitable prices for their products* Cf•
H. 0* Halcrow* Agricultural Policy of the Ifaited States (New York*
Prentice-Hall, Inc** 19f&)* pp* ¿1&-23U* and H* F* Williamson (ed*)*
The Growth cf the American Economy (New York* Prentice-Hall, Inc.,
wy:

17
tl»» is disagreement among producá» as to what constitutes an
equitable price. Nevertheless, the premise of a competitive price
constituting the ultimate in equity is generally accepted.
Assuming a purely competitive price as a standard of equity,
the problem then becomes one of estimating to what extent cattle prices
in MLaai deviate from the standard. The geographical isolation of a
meat consumption center at the tip of a peninsula, bordered and insulated
by an area producing a surplus of lower grade beef animals, provides an
ideal situation in which to observe the effects of location on the
prices of higher grade beef animals. The tendency toward beef price
equalisation in apace should be easier to detect in the Ideal market
who» competing products flow in from only one direction, the North.
Rypotheais and Flan of Study
The broad objective of this dissertation is to evaluate the
assertion that in South Florida prices paid for higher grade cattle
a» unequitable.22 In general, the analysis will appraise the relative
pricing efficiency of marketing slaughter cattle in the well-defined
more or less homogeneous production area of South Florida, lio» specifi¬
cally, the hypothesis to be tested is that prices of higher grade
slaughter cattle sold into the greater Idami area a» lower than would
22
The evaluation of matte» of opinion is a legitimate role for
economic analysis. Cf. Geoffrey Shepherd, "What Can a Research Han Do
in Agricultural Price Policy?", JFE, May, 1955» PP. 305-lii. "A pe»on'e
belief. • .can be objectively judged to be true or false and mo» or
less complete. • • .The essence of scientific inquiry ie to test
(verify or disprove) beliefs."

18
be expected in a competitive marketing situation. This approach provides
the latitude for s useful analysis, and at the same time restricts the
area of inquiry enough so that results are probable within a reasonable
period of time*
The method used to test the hypothesis will be tot
(1) develop a conceptual-price or competitive price model
for beef carcasses and live cattle sold in the Miami
market areaj23
(2) describe the nature of competition for cattle in
the Miami marketj
(3) compare the c onceptu&l-prices with prices received
by oattle producers
(a) at the packing plant, F.Q.B.,
(b) at the aution,
(c) at the farm or ranch.
^unfortunately these la no wholesale meat price quotation
available publicly for any market in the Southeast. Such a quotation
would be of inmensurable value to cattlemen and persons in agricultural
research and extension work who strive to keep informed on prices in
their respective areas.

CHAPTER II
A CONCEPTUAL-PRICE FOR BEEF AND CATTLE
IN THE mm MMETING AREA
The market for meat and livestock is nationwide and is composed
of many geographical marketing areas* Except for requirements per¬
taining to sanitation and health, there are no interstate trade barriers
to free movement of meat animals and meat* Thus the forces of supply
and demand functioning through modern facilities for training contin¬
ually adjust the flow of products in a manner tending towards a balance
among marketing areas*
Facilities for trading meat were revolutionized in the per¬
fection of food preservation by freezing, and the development of freezer
railroad care and motor trucks* With an extensive system of communica¬
tion, market news reports of trading in animals and meat are distributed
over the entire country* Instantaneous communication between buyer and
seller separated by great distances is now a reality* An isolated
marketing area of any consequence is virtually a thing of the past*
Competition in the market for livestock and meat varies from
the empirical approximation of pure competition among cattle producers
to the oligopsonistic-oligopolistic position of peckers* However, con¬
centration in the meat packing industry today is less than at any time
during the past fifty years (Table 5)* Bales by independent wholesalers
in the United States increased 108 per cent from 1939-5U, comparecí with
19

20
TAJ LE 5
PERCENTAGES OF TOTAL COMMERCIAL SLAUGHTER BY
POUR LEADING MEAT PACKERS, BY CUSSES OF
LIVESTOCK, FOR SELECTED YEARS,
UNITED STATES4
Year
Cattle
Caires
Sheep and
Lambs
Hogs
1916
53.9
32.1
70.2
51.2
1921*
50.5
1*0.1
66.1*
1*1*.7
1929
U9.9
1*6.9
70.7
1*0.2
1935
1*6.6
1*6.3
70.5
1*1.1*
19U7
38.3
39.6
67.8
1*0.1*
1955
30.8
31*.7
58.5
36.1*
aSource: W. F. Willlam», "Structural Changes in the Meat
Wholesaling Industry," JF2, May, 1958, p. 319*

21
a 5*5 per cent decrease for packer branch houses (Table 6).
The meat wholesaling industry is comprised of many types of
firms.Modern integrated packing plants not only slaughter animals,
but are equipped with adequate cold storage facilities and provide
distribution services to their customers. Many of them sell boned
beef and manufacture processed meats. Some may also break higher grade
carcasses into primal cuts for sale to retailers or into cute demanded
by hotels and restaurants. Packers may operate branch houses in several
cities. In providing these many services the packer functions as a
wholesaler (Fig. 3).
Chain store organisations buy carcasses or primal cuts in large
volume and provide storage, wholesaling, and distribution services for
member stores. In doing so they may buy carcasses directly from local
slaughterers or compete actively with other buyers in the major whole¬
sale markets far carcasses and primal cuts (Fig. 3)*
The firms engaged primarily in wholesaling activities usually
have some cold storage space, and prepare the particular cuts of meat
for their specified trade. Such firms are known in the trade as in¬
dependent wholesalers or Jobbers (Fig. 3). Among these are "hotel
supply houses," "institutional Jobbers," "truck Jobbers," "breakers,"
"fabricators," and "retail supply houses."2-’ Firms that buy carcasses
^Willard F. Williams, Tiholesale Meat Distribution in the San
Francisco £ay Area, U. S. Department of Agriculture Marketing Research
iieport No. (Washington: Government Printing Office, 1957), pp. 7-12.
25Ibid.

22
TABLE 6
SALES BY PACKER BRANCH HOUSES AND INDEPENDENT WHOLESALERS,
195U, AND PERCENTAGE CHANGES IN SALES BY REGIONS,
1939-5U*
Wholesale Distributor
195U
u
Percentage Change
and Region
Sales
1939-1*8
191*0-51*
1939-5L
Packinghouse Branches!
Northeast
1*000
(dollars)
1,098,209
-29*9
11*.8
-19.6
North Central
500,989
-23*0
9.2
-15.9
South
871**527
- 1**U
25.1
19.6
West
223,758
12.2
22.1
37.0
United States
2,697,1*83
-19.5
17.1*
-5.5
Independent Wholesalers*
Northeast
1,359,289
23.9
5U.0
90.8
North Central
690,356
6.3
82.1*
93.9
South
U25,127
33.0
119.1
191.3
West
391,1*21
21*.2
92.5
139.1
United States
2,866,193
20.3
72.8
106.0
aSource: W. F. Williams et_al., Economic Effects of U. S.
Grades for Beef, U. S. Dept* of Agricultura Marketing Research Report
No* 298 (Washington* Government Printing Office, 1959)* p* 28*
t>All sales adjusted to 195 U levels of price* prior to calcula¬
tion of percentages*

23
I
II
III
IY
Y
YI
Fig. 3.--Selected Marketing Channels for Beef Animals and
Beef, with Six Areas of Competition (Roman Numerals), and Five
Levels of Price Discovery (Arabic Numbers), and Points of Sale
(Arrowheads).

2h
of con and other lower grade beef anímala and bone the meat are called
"boners." Still other firma buy carcasses and prepare a variety of
frozen meat products* They sell primarily to independent retailers
or independent grocery distributors*2^
In addition to the specialized types of activities of firms
described above, some marketing is carried on by vertically integrat¬
ing two or mare of these specialized operations* For example, a chain
store organization may contract with a feedlot to have animals fed,
then custom slaughtered and have the carcasses delivered directly to
their cold storage plant (Fig* 3)* Packers may contract to have animals
fed to grads, or contract with wholesale buyers for definite quantities
and grades of carcasses at specified times of delivery* The net effect
of these arrangements alters the price discovery mechanism by removing
some of the uncertainty element for the parties involved* it the same
time it reduces the number of traders who are active participants in
the areas of competition (Fig* 3)*
tbder conditions of pure competition, differences between prices
of specific forms of products in surplus and deficit areas tend to equal¬
ize in space and time to the extent of differences in transfer costs
between the areas and the costs of storage from one period to another.^
However, this tendency towards equalization is not limited to conditions
of pure competition.
26Ibid.
27a* S. Shepherd, Marketing Farm Products (Ames, Iowa* Iowa
State College Press, 19l*7), PP» 339-U10*

25
From the standpoint of numbers of buyers and sellers, and size
of firm, competition in a marketing situation might be considered im¬
perfect. But, if other conditions of pure competition are approximated
reasonably sell, the tendency towards equalization of price will not
be hindered* The tendency towards price equalization depends heavily
upon the characteristics of the product and facilities for tradings
• • • nearly all those things for which there is a very
wide market are in universal demand, and capable of being
easily and exactly described * * • commodities • • • must
be such as will bear a long carriages they must be some¬
what durable • • •
In the meat industry today, numbers of buyers and sellers and
size of firm are characteristic of imperfect competition* The prices
discovered for livestock and meat very likely are different from those
expected under more highly competitive conditions* But other market¬
ing conditions in the industry are such that spatial and temporal
equalization in price can occur* There is voluminous market informa¬
tion circulated by a rapid communications system* There are no trade
barriers to the movement of meat and animals over a modem system of
railroads and highways* Meat and animals can be graded, transported,
and stored*
Meat packers have been under close scrutiny by the Federal
Trade Commission since the early 1900s, and there has been evidence
of market sharing among the major firms* However, no evidence has
been presented to indicate that meat packers use a basing-point price
pO
Alfred Marshall, Principles of Economics (8th ed., New Yorks
The MacMillan Co., 1921), pp* 325-26*

26
system charging false freight. On the contrary, chain store buyers
purchase carcasses fren packers in the major trading centers at prices
F.O.B. the slaughter plant. Apparently then, no attempt is made to
interfere with the tendency of prices of specific products to equalize
in space and time.
Both livestock and meat may be transported and stored. But
over long distances, the freight rate structure makes it more profit¬
able to ship meat instead of live animals.2^ In addition to the
freight rate, other transfer costs are encountered with shipping live¬
stock. For example, the costs of feeding and watering, weight shrink¬
age, and losses from deaths and crippling must be considered, ¿laughter
cattle are shipped long distances from surplus to deficit areas only
when a temporary marketing phenomenon brings about an abnormally high
price of meat in the deficit area or an abnormally low price of cattle
in the surplus area. Since meat is transported more easily and at
lower cost than cattle, the prices of carcasses and cuts are more
likely to reflect the spatial equalisation between surplus and deficit
areas.
In any geographical area where marketing is concentrated,
such as Miami, the wholesale prices of meat are discovered at two
levels of trading. First, there is the wholesale selling price at
2?In May, 1957» the freight rate per hundredweight from Chicago
to Miami was $2.03 for meat and $1.U9 for livestock. If a live steer
shipped from Chicago yielded 58 per cent, the freight cost of shipping
the carcass in form of a live animal would have been $2.57» or 5U cents
more than for dressed carcasses.

27
which firms providing wholesaling services sell to retailers and eating
establishments (level U, Fig. 3). Secondly, there is the wholesale
buying price at which wholesalers and chain stores buy or at which
slaughterers and packers sell (level 3» Fig. 3)*
The wholesale selling price will differ fren the wholesale
buying price by the value of the type of wholesaling services provided
by the wholesale firm or branch house. However, today with independent
packers and chain stores performing more and more of the wholesaling
services for themselves, the wholesale-selling price (level U, Fig. 3)
30
is becoming loss discernible. Since chain stores handle s consider¬
able portion of the fresh beef sold in urban areas, the wholesale sell¬
ing prices that could be identified in an area like Miami would re¬
present a minor portion of the total volume traded.^1 Therefore, in
the analysis that follows, the wholesale selling price is not examined.
Because traders in all parts of the country are in such close
communication with each other, the level of wholesale meat prices is
national in character. The national and large regional chain stores
and national packers have their own price reporting services in addi¬
tion to public market news reports. Some traders use teletype and
leased-wire services. Practically all buyers and sellers make ex-
^°Ccompetition from independent packers at the wholesale selling
level plus chain store buying practices has forced the abandonment of
many national packer branch houses in Florida.
3^The percentage of meat sold by chains varies among regions and
cities, but no recent estimates are available. In 19U8, chains in the
U. S., with five or more stores, sold 35 per cent of the meat. Since
then, this percentage ie almost certain to have increased.

26
tensive use of the telephone* In any one area prices at the wholesale
buying level can get out of line with the national situation only-
temporari ly. The competitive adjustment in meat prices between sur¬
plus and deficit areas occurs most directly at the wholesale buying
level*
In the smaller as well as the larger marketing areas local
packers who produce and sell carcasses and cuts to chain stores and other
wholesale buyers compete directly with supplies available from other
areas* As a seller, the local packer competes with not only other
local packers but national and regional packer branch houses serving
the area, and with more distant sources of supply available to whole¬
sale buyers* As a buyer of cattle, the local packer often is one of
only several buyers in an area* When an individual firm contemplates
a change in pricing policy, it is somewhat easier to anticipate the
reaction of a few rather than many competitors* With only a few
competitors an individual fin probably can learn from experience to
anticipate competitors' reactions quite accurately* In this respect,
the market into which packers sell meat is mare competitive than the
market in which they buy animals* Price changes in the national market
for meat will be reflected back quickly to the livestock producers in
any particular area only if a high degree of competition exists among
the livestock buyers in the area*
The conceptual price .—Florida is deficit in the production of
higher grades of beef (Table 3)* To meet retail demand the chain

29
stores, moat packers, and other wholesale traders must turn to out-of-
state supplies. The general areas where f 9 ¿cattle are produced in
large numbers are located at great distances from Miami and all of
Florida.^2 Thus, wholesalers must pay transfer costs in obtaining the
fresh-meat grades of beef from the western surplus areas. These
transfer costs include brokerage fees, and service and handling charges,
in addition to transportation charges.
Miami packers operating their own slaughtering and cold storage
facilities can either purchase carcasses from surplus areas or produce
them in their plants. Packers can calculate readily the total cost of
carcasses purchased from surplus areas. This total cost is the whole¬
sale buying price referred to previously, thder varying degrees of
competition in the market, the wholesale buying price in a deficit
area tends to equal the price in the surplus area plus costs of
transfer to the deficit eres. This relationship is expressed in
equation (1) ass
(1) Pw - P, ♦ Td
where Pw is the competitive wholesale buying pricej Ps is the pries
in the surplus area; and is the transfer costs from surplus to
^Ths thirteen major states from which the U.S.DJL. reports
cattle and calves on feed are Ohio, Indiana, Illinois, Minnesota, Iowa,
Missouri, South Dakota, Nebraska, Kansas, Texas, Colorado, Arlsona, and
California.
^Ths conceptual price is presented as applying to beef car¬
casses in full realisation that trading in the wholesale market also
concerns primal cuts or wholesale cuts of beef. It was not considered
desirable to synthesise s carcase price from a composite of prices of
primal cuts.

30
deficit area. For lack of a better estimate of transfer costs the
freight rate from Chicago to Miami is substituted into the equation
to estimate the competitive wholesale buying price of carcasses in
Packers producing carcasses in their plants incur costa of
production, but the value of byproducts frost the slaughtering operation
partially or completely offsets these costs (Including returns to all
factors.)^ If the byproduct value covered the packer's costs and
returns, local suppliers of cattle delivered to Miami packing plants
would axpaot to receive a price F.O.B. plant (either carcass grade and
weight or its liveweight equivalent) equal to the competitive whole-
sale-buying price. If packers costs exceed byproduct value, ths price
F.O.B. plant would be smaller by that amount. If byproduct value
increased while coste and returns were unchanged, ths price F.O.B.
plant would be larger by that amount. Therefore, the price model
or conceptual price paid F.O.B. plant far livestock purchased on a
^Florida packers assert that their pricing policies are guided
by the wholesale prices of carcasses and cuts quoted in the National
Provisloner Chicago daily trade report, plus transportation charges
from Chicago to their planta.
35¿ unique example of a short-term loes operation has developed
recently in Florida as a consequency of cattle being withheld from the
market to build up herds. Backers found themselves with crews of workers
highly trained to handle their kill floors, but forced to operate below
profitable capacities because of a shortage of animals. Rather than
terminate the employment of the skilled workers, packers have retained
their crews, presumably at a loss and at the same time have bid up the
prices of cattle in short supply in an attempt to maintain volume even
at some loss.

31
carcase grade and weight basis is defined as;
The competitive wholesale-buying price, adjusted for the net
difference between the value of byproducts and the plant cost
of producing a dressed carcass from a live animal.
Expressed in symbols the conceptual price may be written as in equa¬
tion (2) i
(2) CP- P - S ♦ E
P w
where CPp is the conceptual price per unit at the plant; Pw is the com¬
petitive wholesale-buying price per unit of carcase; S is the cost of
slaughtering and dressing per unit of carcass; and B is the byproduct
value per unit of carcass.
Equation (2) is expressed in units of carcasses. The conceptual
price for live animals or the liveweight equivalent of the carcass price
is obtained from the multiplication together of the conceptual carcass
price and the estimated dressing percentage or yield of live animals,
as in equation (3);
(3) LCPp - (CPp)
The conceptual price for animals sold with the point of delivery at
the ranch is obtained easily by subtracting transfer costs for live
animals from the price at the plant, as in equation (U) *
(10 LCPr - LCPp - LT
where LCPr is the liveweight unit conceptual price at the ranch, LCPp
is as defined in equation (3) and LT is the liveweight unit cost of
transferring animals from the ranch to the plant. Transfer costs
include a loading and unloading charge, and handling (such as feed
Dre..lng^Parc«3t»g.

32
and water), in addition to transportation* Similar calculations may
be made to estimate the conceptual price at an auction.
Whether or not the conceptual-price in a deficit area is paid
for cattle depends upon the nature of competition among packing planta,
and upon the selling practices of cattle producers* In Chapter III
the degree of competition among plants in Miami will be evaluated*

CHAPTER III
THE NATURE OF COMPETITION FOR CATTLE IN THE MIAMI MARKETING AREA
Characteristics of the LSarkating Situation
Conditions observed in any marketing situation really defy
meaningful description unless they can be expressed in terms of some
specified standard or form. The scale or yardstick of competition
ranges between perfect monopoly at one end and perfect competition cm
the other Use of the competitive model is solely for the purpose
of estimating at what point along the scale of competition the market
pricing observed in an area seems to lie*
To qualify under the concepts of pure competition, a marketing
situation must approximate six general requisites:-5®
(1) The number of buyers and sellers must be so large
that the activities of any single individual can¬
not affect the market price*
^Ry referring to a pro-determined model, the analyst can guide
his observations in an organized manner, thus concentrating on those
things that are important for his purpose and not wasting time on
irrelevant material*
3?Xhe term "perfect competítian" envisions the ultimate in pure
competition as defined below* The necessary conditions are specified
as existing in a "perfect" degree, rather than in a reasonable or some-
what-less-than-perfect degree* The same degree of perfection in
necessary conditions applies to "perfect monopoly."
3%, H* Blodgett, Our Expanding Economy (New lorkt Rinehart
and Company, Inc*, 1955)» p• ¿1*1*
33

(2) All parties concerned must have a reasonable amount
of knowledge about the conditions prevailing in the
market.
(3) Buyers and sellers must operate independently with¬
out agreements and other forms of collusion.
(k) Freedom of entry or exit to the buying or selling
side of the marketing situation must prevail,
(5) The good being traded must be undifferentiated as to its
source fren a particular seller.
(6) There must be no governmental interference with the
forcee of supply and demand operating freely to
determine price,
No empirical marketing situation has all of the requisites
of pure competition. In fact the interplay of social forces in the
United States has established rather clearly that pure competition as
such does not fully attain all the broad objectives of society. These
broad objectives are always in a state of change, and in some respects
are so nebulous they defy definition. However, they are congealed
enough to enable the appropriate regulatory agencies and officials
of government to use them in making day to day decisions. The requi¬
sites of competition thus are held as ideals from which practical
situations are allowed to deviate if society can accrue more benefit
from the deviation than from adherence to the ideal.
Deviations from the prescribed pattern for pure competition

35
«111 be found in any empirical marketing situation.39 Thus marketing
firms operate as buyers and sellers under seme form of imperfect compe¬
tition, while marketing conditions among agricultural producers as
sellers are somewhat less imperfect!
• • • conditions of perfect competition in pricing are be¬
coming even rarer* Formerly, those conditions were more
nearly approximated in pricing agricultural products. • • •
But, one by one, farm commodities have come under the in¬
fluence of government price supports • • • Many fruits and
vegetables are marketed and priced under public or private
arrangements • • • • Meat animals • • • have seen a marked
trend away from central marketing, which presente a reason¬
able replication of perfect competition, to direct marketing,
which bears little resemblance
Even though they may have many buyers offering to purchase
their products, individual producers often develop preferences for a
particular buyer over his rivals.^ Such preferences may be due to
location, personality, reputation, or even community pride. When
producers' preference exists, buyers have certain control of their
supply* Since each buyer is in this sense a monopsonist yet has
competitors, the phenomenon is called "monopsonistic competition."
Similarly, on the selling side, when consumere prefer certain
sellers, each seller has some degree of monopoly control* But there
is still the competition of more-or-less imperfect substitute products
3?W* H* Nichols, Imperfect Competition within Agricultural
Industries (Ames, Iowa* The Iowa' State College Press, 19U1), pp. 13-16*
k°H* F. Breimyer, "Price Determination and Aggregate Price
Theory," JFE, August, 1957, pp* 677-78*
^â– The following two paragraphs have been taken largely from
W. H* Nichols, op. cit«* pp* 1U-15*

36
available from other sellers. This phenomenon is called "monopolistic
competition.” The blending of elements of monopsony, monopoly, and
competition is typical of the real world.
The characteristics of the South Florida livestock marketing
situation will be examined in order as follows t (1) the number of
buyers and sellers, (2) the effect of volume or size, (3) the posses¬
sion of adequate knowledge about market conditions, and (U) the degree
of product differentiation.
Numbers of buyers and sellers.—The South Florida market for
cattle is comprised of many sellers and few buyers. From the eleven-
county area designated as South Florida (Fig. 1), 1,5U2 farms and
ranches reported 353*166 cattle and calves on hand in 195U.^2 From
this total of 1,51*2 farms 1,058 of them reported having sold 155*876
cattle and calves.^ In contrast, there are eight slaughtering firms
under Federal or State inspection in the greater Miami area, and one
in Lake Worth, sixty miles to the north.^ Probably at least two-
thirds of the cattle and calves sold are slaughtered in Miami
^U. S. Department of Commerce, Bureau of the Census, United
States Census of A¿riculturei 195U* Vol. I, part 18 (Washington*
Government Printing Offioe, 1955)* Table 7* PP* 103-111*. With all due
respect for the integrity of Florida citizens, persons well informed
aa the livestock industry suggest these figures are underestimates.
tájhid.
^Florida Stats Marketing Bureau, Annual Agricultural Sta¬
tistical Summaryj op. cit., p. 188.
l^Data available on total slaughter in the area are for 1956
and thus are not strictly comparable with producers' sales of two years

37
The ratio of buyers to sellers existing in South Florida could
result in oligopsonistic competition among buyers Yet in itself
this ratio is no guarantee that non-competitive trading exists* Fur*
thermore, a dozen buyers dealing with several hundred sellers may dis¬
cover purely competitive prices, providing they meet the other criteria
of pure competition. Certainly, in timas when some grades of cattle
are relatively scarce, active competition among the fee buyers would be
expected* Conversely, with supplies abundant there might be some in¬
centive for the few buyers to conspire to keep market prices dawn* On
the other hand, when the volume of cattle offered for sale exceeds the
volume that can be sold at current prices, this might indicate unwise
marketing practices on the part of producers*
Hth the exception of those instances when circumstances force
a sale, most producers have considerable discretion in deciding when
to sell* Marketings of range cattle are seasonally heavy in the fall.
â–² producer who is prepared to carey his cattle a few weeks longer on
supplemental feed may profit from higher selling prices. When receipts
at a particular auction are relatively light, producers in the area
might expect direct sale buyers to be unusually aggressive for a few
days following* The informed producer can use this improved bargain-
previous. Approximately 9U,000 cattle and calves were slaughtered in
state inspected plants in Miami in 1956* These figures do not include
one federally inspected plant, the Lake Worth plant, and several «nail
slaughterers not subject to state inspection. Data obtained from the
Florida Livestock Board, Tallahassee, Florida*
^W. H. Nichols* op* cit.

38
ing position to advantage. Extreme variation in the quantity of cattle
offered for sale in any week, or perhaps any day, probably could be
reduced if producers gave more careful attention to prevailing market¬
ing conditions.
Volume or size of firm.—Closely related to the ratio of buyers
to sellers in South Florida is the proportion of the total product
handled by any individual firm. In South Florida many producers of
cattle operate relatively large enterprises.^ In a particular mar¬
keting period one of these individual sellers could offer for sale a
grade of animal in quantity large enough to affect price for the re¬
mainder of that period.^ The one large sale may be made at a price
acceptable to all sellers, but after the first sale buyers no longer
are silling to pay this price. Other would-be sellers must then decide
whether to hold their cattle until the succeeding period when the price
effect of the large sale has deteriorated.
Data on the number of cattle slaughtered by individual packing
firms in South Florida are confidential. Observations of the physical
plante suggest the potential of some variation in handling capacities,
however, the possibility of a dominating firm seems slight. Certain
firms specialising in processed meats, buy primarily lower grade cattle,
^The development of our economy reflects a general satis¬
faction with the type of competition that accompanies the efficiencies
of large-scale production from a small number of firms.
^smaller producers in the area assert this does take place,
and that buyers dwell on this point when chaffering over price.

39
while others handle all grades. The effect these preferences have on
the competitive atmosphere is difficult to estimate. Certainly when
a producer wishes to sell a small number of animals in a grade not
regularly demanded by all buying firms, he can expect limited bidding.
On the other hand, an offer of a large number of this same grade animal
would likely provoke bids from all buyers* In no way is this phenome¬
non a detrimental reflection upon specialization in the industry, rather
it is simply a market condition to be recognized*
Possession of knowledge.—livestock auctions approximate many
of the requisites for purely competitive trading more closely than
other types of market places* Presumably, each auction individually
conducta sales in a competitive manner, however, competition at times
may be only "skin deep.” In the auction circuit, buyers who travel
from sale to sale acquire superior knowledge and are marketing spe¬
cialists of a sort. Producers are more likely to give marketing only
minor attention* The difference in knowledge of market conditions
results in an imbalance in bargaining power, and as such is a market
impediment* It can be argued that auctions overcome this impediment
since many buyers are competing with each other at a sale* But with
auctions now handling primarily lower grade animals, the highly competi¬
tive buying attributed to auctions may be confined only to these grades
Uth many cattle sales in South Florida consummated at the
1>%. K. McPherson, "How Well Do Auctions Discover the Price of
Cattle?" JFE, February, 1956, pp. 30-U3*

líO
ranch,5° a single individual is hard-pressed to keep informed of pre¬
vailing market conditions, particularly price a
The distinguishing feature of determination of price in
person vs. person bargaining, as direct sale of livestock,
is the absence of other buyers and sellers so numerous and
so immediately accessible as to make a given transaction
negligible in the market and to convert all pricing into
an aggregative process. In its barest essentials person
vs. person sale comes close to that of barter • • • • There
are in feet an infinite number of potential contracts in
barter • • • •
The area of indeterminatenees, 1. e., the range over which
pricing is subject to the bargaining skill of negotiators,
varies widely according to conditions such as the geographic
nearness of an organised market, the degree of differentia-
tion of product, and the knowledgeabillty of each bargainer.5^
To help compensate for the producers' lack of knowledge, the
Florida State Marketing Bureau publishes weekly in addition to auction
prices by grades, the range of direct-sale prices by U. S. grades of
cattle. These direct-sale prices are obtained from packers in the
Miami area 2 However, to keep strictly current in regard to the
country-buying segment of the market, producers must rely on the
grapevine method of passing information along. Even though informá¬
tica transmitted through this medium is subject to the personal ad-
£°H. L. Castle, "The Direct Marketing of livestock in Florida"
(Ifapüblished M. S. Dissertation, Department of Agricultural Económica,
Ooiv. of Florida, 1956), p. 35* In 1955 twelve South Florida salughter-
lng firms purchased 52 per cent of their cattle and calves directly
from producers.
5%. f. Breimeyer, op. cit.« pp. 679-91.
^Similar prices are quoted for Jacksooville-Taapa packs» •
The reliability of all price quotations is dependent upon the integ¬
rity of the buying firms in reporting them.

ia
justment of each link in the chain, the grapevine is a realistic
source of market information and is a genuine part of the overfall
marketing picture.
Cattlemen do have some opportunity to avail themselves of
information on local market prices. Much of the price data for
individual auctions, that is summarised weekly by the State Marketing
Bureau, appears in local newspapers a day or two following the auction.
Many auctions mail out flyers publicising their prices. While auctions'
prices seem to be adequately covered, the direct sale price quotations
may be as much as a week old. This emphasizes the need for more
adequate coverage of market information on direct sales. Producers
can help compensate for the lack of current information by inviting
several bidders on direct sales.
Obtaining alternative bids on a lot of cattle is not as simple
as it may seem. Some buyers will quote only carcass grade and weight
bids over the telephone, while others will not quote a price without
inspecting the cattle. After inspecting the cattle many buyers will
not make a firm bid but offer a price for only immediate sale. If a
cattleman calls in one bidder after another he may be unable to obtain
two or more firm bids for comparison. Smaller producers are more
likely than larger producers to encounter this problem.
It appears that the distribution of knowledge about conditions
prevailing in the marketing area in South Florida ia not equal among
all parties concerned, and constitutes a deviation from that expected
under a purely competitive situation.

Differentiation of product»—** for the goods traded in the
market being undifferentiated this facet becomes somewhat elusive
when referring to cattle* Cattle may be differentiated by breed and
sea* Generally speaking, a particular grade of cattle such as U* S.
Good is relatively homogeneous, enough so that juries quotations by
grades are not misconstrued, if there has been no inaccuracy in esti¬
mating the live-animal grade* it a particular market place however,
animals are identifiable by cattlemen's brandmarks* In the minds
of buyers and sellers, some producers are associated with certain
breeds or cross-breeds* Thus sos» degree of identification is possible,
for instance in an auction ring, and buyers are able to discriminate
if they so choose* In direct salee the product is differentiated "ex¬
cept when terms of sals provide for carcass grading on the rsil*"^
Considering the cattle market as a whole this deviation from an ideal
is not too serious and furthermore would be difficult to overcame*
The important point is for market-wide prices by grades to be associated
with relatively homogeneous types of animals*
Evaluation of competition in the area*—Conditions observed
in the marketing situation for cattls in ItLaai are fairly typical of
the markets for many agricultural products* In the production area
farmers and ranchers are considerably scattered geographically* Thus
there is some probability of a limited number of buyers available to
any one seller desiring to make direct sale of cattle at the ranch*
^H* F* Breimeyer, op* cit*, p* 678*

U3
At the same tine the spatial dispersion of producers might induce
buyers to share the buying territory in some fashion*
The size of operation of son» cattle producers at least creates
a potential for come degree of control over market supply and hence
price* However, apparently this element of bargaining power is not
often used. On the buying side no one fina appears to have a great
enough capacity to exert dominance in the industry*
The availability of market information is not perfect, particu¬
larly regarding direct sales* However, producers can try to overcome
this disadvantage somewhat by being more aggressive in using what
information is available in calling for bids from several buyers*
Only one auction serves the general area, and this is an outlet
for primarily- lower grade cattle* With the extremely email volume of
high grade cattle sold at auction, it ie unlikely that there are enough
buyers of high grade cattle attracted to the sale to attain a fully
competitive price* On the other hand, prices of lower grade cattle
at the auction probably arc discovered under active competitive
bidding*
Producers of higher grade cattle for the Miami market sail
largely by direct sale* In this type of negotiation unequal bargaining
power between buyers and seller make the marketing situation quite
imperfect* Prices discovered in this sort of competitive environment
might well differ from those expected under purer competition* But
before examining the difference between the market price quotations and

uu
the coneeptual prices expected, it is necessary to know something
about the validity of such comparisons*

CHAPTER IV
THE VALIDITY OF PRICE COMPARISONS
If buyers and sellara are to use price quotations as one of the
principal bases for making marketing decisions of whan and where to
trade, they must be sure of the kinds of products to which the prices
refer. To this end many products are divided into grades, and prices
ej.
quoted accordingly. when the attributes specified in the grades
can be measured or evaluated with reasonable objectivity, for example,
by sise, weight, or laboratory test, differences in prices of grades
among regions can be observed with a high degree of validity* Converse¬
ly, when the grade attributes are measured in large part by subjective
judgment, there is a realistic but indeterminate probability that some
of the grade designations are incorrect*
It is general knowledge in the livestock and meat industries
that all graders of meat and animals perform with some inaccuracy in
their judgment of grades* The question of inaccuracy in judgment takes
on particular significance where public a gencies employ liveetock and
meat graders, because the bulk of market news circulated is based on
the federal grades designated by these men* Incorrect grading leads
51*W. K* McPherson, L. V. Dixon, and H* L. Chapman, Jr*, An
Economic and Statistical Analysis of Grading Cattle, Florida Agricul-
tural Experiment Station (Gainesvillet Universityof Florida, 1959),
pp. 1-11, (bulletin manuscript)*

1)6
to inaccurate price quotations in market reports and is a source of
market imperfection» To the extent that market reports compiled by-
public agencies differ from market reports compiled by- private firms
the bargaining power of individuals using one or the other reports will
be out of balance» In any- case the validity of price comparisons is
dependent on the assumption that market-wide prices by grades are
associated with relatively homogeneous types of animals»
The bargaining powers of buyers and sellers of cattle are to a
considerable degree dependent also upon their relative abilities to
55
estimate the carcass grades of live animals» When this ability of
human beings plays such an important role in the livestock marketing
system, accuracy in estimating grade cannot be overemphasized. Thus
initially attention was focused on the ability of men to grade live
animals»
Variation of Errors-of-Estimate in (heading live Animals'^
Review of literature.—One of the earliest statistical studies
of grading performance analyzed the errors-of-estimate made by one packer
buyer who estimated the gradee and yields of 1)00 slaughter animals
'’-’Although the live animal grade is referred to as a "grade,"
it is really an estimate of the meat grade of the carcass produced
after slaughter»
5^An error-of-estimate is the difference between the official
U. S. grade of a carcass, as designated by a federal meat grader, and
an estimate of this grade» live-graders estimate the carcass grade
by observing the characteristics of live animals.
57a. A. Dowell et. al», Marketing Slaughter Cattle by Carcase

U7
The data were subsorted into groups by class of cattle, and by final
carcass grade, and the variance of the errors-of-estimate calculated
for each grouping. Using Snedecor'a F test-*® the many combinations
of pairs of variances were tested for significant differences. The
physical errors in grade and yield were converted to price errors
using 1937-Ul average prices at Chicago. Variances in units of value
were calculated and tested for significant differences. When the
individual animal records were combined to fora lots, overestimates
tended to cancel underestimates and errors-af-estimate were reduced.
Another study focused on a comparison of pricing accuracies
among three methods of marketing butcher hogst the liveweight method
in use at that time (1953)* a proposed live-weight and grade method,
and a proposed carcass weight and grade method.^ Pricing error was
defined as the difference between cut-out value and price paid for
the hog.
The performance of live-graders has bean compared also in
terms of percentage of correct estimates and percentage of estimates
Weight and Grade. Minnesota Agricultural Experiment Station, Technical
feul. No.' 181 (Minneapolis* University of Minnesota, 191*9).
W. Snedecor, Statistical Methods (U ed.f Amesj Iowa
Stats College Press, 191*6), p. 219 (5 ed.j Amest lora State College
Fresa, 1956), p. 96.
59oerald Engtlman et al.. Relative Accuracy of Pricing Butcher
Hogs on Foot and by Carcass Weight and Orado. Minnesota Agr. Exp. Sta.
KcHnical Bullion Mí 2Ptf '(Mm£tpc3Is"i Uhivrsity of Minnesota,
1953).

U8
within plus or minus one grading unit of correct.^®* ^2, ^
The analysis of variance in a linear regression of carcass
grades on the estimated grades in another technique stemming from the
Minnesota data.^ In this approach the differences between mean
errors-of-estimate associated with the various classes of cattle, and
the differences between sample regression coefficients and a parameter
of one, were tested for indications of randomness.
Comparisons of errors-of-estimate among live-gradersNone
of the studies cited above dealt with the performance of more than one
live-grader. To explore the nature of variation in errors-of-estimate
among several graders of live cattle, preliminary grading trials were
conducted at the Everglades Experiment Station in the spring of 1957
and 1958. Additional data were obtained from a grading trial conducted
^°larly studies set the precedent for using one-third of a
federal grade as the preferred grading unit, apparently on the assump¬
tion that human judgment could make no finer breakdown.
61C.D. Phillips and James L. Pearson, Accuracy of the Pre¬
sent Methods of Pricing Veal Calves, Slaughter Cows, and Lamp's", Ken¬
tucky Agricultural Experiment Station Bulletins ¿10, 611, 6l2 (Lex-
ingtoni University of Kentucky, 195U).
^2E. S. Clifton, Pricing Accuracy of Slaughter Cattle. Veal
Calves and Lambs. Indiana Agricultural ExperimentStation Bulletin
lío. ¿11, North Central Regional Publication No. 53 (Lafayette* Purdue
University, 195L).
^J. J. Naive et al., Accuracy of Estimating Live Grades and
Dressing Percentages of slaughter Hogs, Indiana Agricultural Experi¬
ment Station Bulletin 650 (Lafayette* Purdue University, 1957)*
H. Jebe and E. S. Clifton, "Estimating Yields and Grades
of Slaughter Steers and Heifers," JFE, May, 1956, pp. 58U-96.

1*9
by tbs Louisiana Experiment Station in 1955
The live-graders made Independent estimates of the slaughter
grade on each animal individually* Most of the live-graders had pre¬
vious experience in grading live cattle and checking their estimates
against the grades of the carcass. Forty-eight hours after slaughter
the official government meat grades of the carcasses were designated
by a federal meat grader. The grade designation after slaughter is in
the judgment of an official meat grader representing the U. S. Depart¬
ment of Agriculture*
For purposes of calculating error-of-estimate in live-grading,
the meat grader's judgment is assumed to be correct or final* The meat
grader's subjective judgment must be taken as correct or final, other-
%
wise the function of the grading system as an arbitrator in trading
negotiations would fail*66 The preceding assumption is not intended
to imply an infallibility of the meat grading system. Since meat
graders are human, certainly they must make some errors in their
judgment of grade, but as long as the final grade of any carcass is
designated subjectively, there can be no real measurement of this
error.6?
This trial was conducted in connection with regional re¬
search project Slf-7, "Marketing livestock in the South."
^Its failure would reflect the unwillingness of individuals to
accept and adhere to the referee powers of the federal government in
matters of internal trade. It is characteristic of the people of the
lili ted States that they accept without violence the edicts of Congress.
Generally, this acceptance is with reluctance on the part of some*
67The federal meat grading service defends the accuracy of

50
To evaluate the differences among live-grading performances of
several individuals some method of summarising the observations is
necessary» The aggregation of errors-of-estimate made by an individual
grading a lot of live animals can be considered as a frequency distri¬
bution (Fig* U)• In this way a mean and a standard deviation of the
distribution will describe a grader's performance.®® The mean and
standard deviation are particularly relevant since they concern the
statistical concepts of accuracy and precision as used in sampling
terminology» Accuracy is defined:®^ If a sample estimator gives
estimates which average very close to the true value being estimated,
the estimator is said to be relatively accurate» Precision means the
ability of an estimator to give repeated estimates which are very close
together»70 With reference to a grader's distribution of errors-of-
estimate on a lot of animals, the mean indicates accuracy while the
their judgment of grade on the basis of the packers' privilege to dis¬
pute the initial designation of grade» The packers appeal on carcass
grades may be answered by examining the loin for characteristics of
grade» The next higher appeal requests a referee grader to examine the
meat» If necessary the appeal can be taken to higher levels of the
grading service» However, most disputes are settled by examining the
loin» Uhtil grade attributes of meat can be measured objectively, the
correct grade and thus the accuracy of meat grading is indeterminate»
¿^Another measure of performance describes the variation of the
estimates around their corresponding meat grades, much like the measure¬
ment of the conventional standard error of estimate» Cf• W» K» Mc¬
Pherson, et» al., op. cit«, pp»
6?Bemard Ostia, Statistics in Research (Ames « Iowa State
Press, 195U), p» 8U»
70Ibid»

Frequency of Occurrence Frequency of Occurrence
51
I
d - -.77
sj = 1.03
50 -
40 -
30 -
20 -
10 -
0 -
II
d = -.47
sd â–  1.40
III
d - -.49
»d = 1.30
/
-3 -2- -I ©
Errors-of-Estímate by Thirds
50 “I
40 -
30 ~
20 “
10 “
0 -
IV V
d - -.50
sd - 1.23
Errors-of-E8timates by Thirds of Grades
Fig. 4.--Frequency Distributions of Errors-of-Estimate
in Live-grading, for Five Selected Live-graders, on 128 animals,
by Thirds of U. S. Grades.

52
standard deviation (or variance) Indicates precision. Perfection in
grading is indicated by a value of zero for both the mean error-or¬
es tim ate and the standard deviation of error-of-estimate.
Only a relatively small number of observations sere available
for each live-grader.' In three separate grading trials, the mean and
standard deviation of errors-of-estimate exhibited some variation in
magnitude (Table 7). Of the combined group of twenty-six men, the most
accurate live-grader came within .13 thirds of a U. S. grade of being
correct on the average. The least accurate live-grader was off an
average 1.83 thirds of a U. S. grade. The average estimates of five
graders were underestimates, in contrast to the overestimates of the
sixteen. Thus, the tendency of the mean error-of-estimate to over¬
estimate or underestimate may be interpreted as a bias in a live-
grader's judgment of the grades of cattle.
The ability of a man to estimate the grades of cattle in such
a way that his errors-of-estimate are more nearly alike or precise,
in the sense defined above, is indicated by the standard deviation or
variance of his distribution of errors-of-estimate. In the group of
twenty-six men the live-grader who was most precise or consistent in
his errors-of-estimate had a standard deviation of 1.15 thirds of a
U. £>• grade (Table 7)* The inconsistent live-grader had a standard
^^Five men graded 128 steers; eleven men graded 119 steers;
ten men graded a lot of 236 animals composed of i 86 heifers, 82 calves,
U5 cows, and 23 steers. The three groups of live-graders included
several market reporters as well as professional animal husbandmen.

53
TABIE 7
ARRAYS OF MEAN ERR0RS-0F-ESTÜ5ATE AND STANDARD DEVIATIONS
OF ERRQRS-0F-ESTÃœA.TE, FOR TBENTY-SU SELECTED
LIVE-GRADERS, ON SELECTED IOTS OF ANIMALS
Mean Error-of-Estimate
Standard Deviation of
Error-of-Estimate
.13
1.35
.16
1.23
.20
1.30
.26
1.35
.30
1.391*
.31*
1.3970
.36
1.3972
.1*3
1.1*0
.1*1*
1.1*3
- .1*7
1.1*5
.1*8
1.1*6
- .1*9
1.1*9
- .50
1.52
- .77
1.57
-1.06
1.56
1.29
1.61
1.1*3
1.62
1.1*1*5
1.66
1.1*51*
1.671
1.51*
1.672
1.55
1.68
1.57
1.71
1.72
1.76
l.7l*
1.777
1.81
1.78
1.63
1.81

deviation of error-of-estimate of 1.81 thirds of a U. S. grade.
When data from a group of small samples are observed, it is
not unusual to find comparatively large differences among individual
samples. Therefore, the three grading trials should not be taken as
representative of live-grading in general, but simply as rough indica¬
tions of shat degree of proficiency in live-grading may be possible.
With small samples, and even when grading in thirds of U. S. grades,
thirteen of twenty-six men were proficient enough that their errors-of-
estímate averaged lees than one-sixth of a full U. S. grade J* If
the men had been instructed to estimate only the full U. S. grade of
each animal, their errors-of-estimate might have been reduced con¬
siderably.^ A reduction in errors-of-estimate would also be expected
if large samples of each man's grading were observed.
7^Since there are a finite number of carcass grades, distribu¬
tions of errors-of-estimate cannot approach normality to any high
degree. In all grades but Canner and Prime, errors-of-«s tima te may be
at least as large as three thirds above or below the carcass grade.
The sample data suggest that a range in thirds of grades from minus
three to plus three will include the vast majority of errors-of-eatí¬
mate. Therefore, assuming that errors-of -estimate tend to be distributed
symmetrically around a mean, the orthodox interpretation of the stan¬
dard deviation is appropriate.
7-^This does not mean it is possible to estimate to the nearest
sixth of a grade. Small averages result from overestimates offsetting
underestimates•
7bffhen counting as incorrect only those estimates placing
animals in different whole grades then their carcasses, the percent¬
ages of correct estimates far the five men in one of the grading trials
increased as followsi 30 per cent to 69 per cent, 28 per cent to 66
per cent, 27 per cent to 63 per cent, 27 per cent to 60 per cent, and
3U per cent to 59 per cent.

55
The effect of grading errors on price comparisons.—Market
reporters in a days work customarily grade hundreds of cattle and
calves in each U. S. grade» Therefore, their errors-of-estimate on
such large numbers of animals would be expected to average somewhat
differently than indicated in a small sample» Sven if market reporters*
proficiencies were no better than those in the three trials cited above,
the effect on reliability of price quotations would not be serious
enough to discredit market reports» Nevertheless, any improvement in
the accuracy of grading leads to a more accurate reflection of market
price and is a gain in the efficiency of the livestock marketing
system»
Simple observation of the arrays of the two measures of grading
ability (Table 7) suggests that bias tends to vary more among live-
graders than does consistency» These tendencies can be tested statis¬
tically if the data approximate the assumptions of the appropriate
tests» Unfortunately the data from the three grading trials were not
obtained in a manner to permit statistical testing. Essentially, the
statistical approach examines the differences among mean errors—of—
estimate for indications of significant or real differences among the
abilities of men to grade cattle» One possible method of testing,
employing analysis of variance, is illustrated in Appendix I»
Variations observed in the grading errors of the men in three
preliminary grading trials are mute testimony to the human element in
marketing cattle» It is an impediment in the marketing system that
probably can never be eliminated, but its effects may be reduced if

56
(1) the grade standards are revised to Include attributes that can be
measured objectively,^ and (2) graders employed by public agencies are
carefully selected and trained to confine their errors-of-estimate
within acceptable limits* With the aid of the measures of ability
discussed in this chapter, the acceptable degrees of grading proficiency
can be specified*^ Private firms can also establish standards of
performance for the graders they hire* When reliable estimates have
been calculated for the sizes of errors made by both live animal
graders and meat graders in the various segments of the industry,
this will permit traders to inject into their negotiations more
realistic adjustments for the errors in grading*
As far as current price reporting is concerned, an error of
a third of a grade in live—grading may not reflect any economic sig¬
nificance unless it places an animal in a different whole grade than
that designated by the meat grader* For instance, a price report
based on an estimate of high U* S* Good on a lot of animals whose
carcasses actually graded low U* 3* Choice would be an inaccurate
reflection of the real situation and a source of misinformation for
traders* If the same lot actually graded middle or low U* 3* Good,
the prices as now reported would not reflect the error*
^To date, no such attributes have been identified, however,
a sonic device measuring thickness and density of fat, muscle, and
bone is being tested* Perhaps other electronic devices, and chemical
tests will some day be developed*
^McPherson et_al., op* cit*, pp* 55-57*

SI
Much larger samples and many more samples of the performance
of each live-grader would have been more desirable* Yet the evidence
available supports the assumption that in a population or universe
sense a grader's errors-of-estimate are symmetrically distributed*
Furthermore, the magnitudes of the sample mean errors-of-estimate
suggest that for many graders the mean of their populations of errors-
of -estimate may be close to zero* The samples also show a tendency
for a grader's overestimates to offset his underestimates*
Thorough testing of the hypothesis and assumptions suggested
in the available data will not be possible until adequate samples of
grading performance are drawn from the population of live-graders
upon whose estimates market price reports are based* However, on the
basis of available evidence, the accuracy of market price reports can
be assumed to be within acceptable limits*

CHAPTER V
PRICING EFFICIENCY IN THE MIAMI MARKETING AREA
The efficiency of pricing cattle in the Miami marketing area
•will be evaluated by comparing the price quotations for the area with
the estimated competitive wholesale buying prices derived as outlined
in Chapter II. However, the existence of any difference whatsoever
between the quoted price and the estimated competitive price will
not in itself be considered bona fide evidence of inefficiency. Sven
with effective competition among buyers the price paid for a live
animal may be less than the liveweight equivalent of its carcass
price if byproduct value does not cover the packer's costs.77 This
relationship is discussed below in connection with the problem of
byproduct recovery in the Miami area.
National averages of the liveweight equivalent of U. St Choice
carcass prices and the prices of U. S. Choice steers can be compared
quarterly. Since Florida in general and Miami in particular must rely
on the surplus areas for higher grade beef, the relationship between
carcass prices and live prices in Miami would be expected to follow
more or less the national pattern. Deviations from the national
77k live price less than the carcass price could also arise
from the superior bargaining position of buyers acting in imperfect
competition and securing wider margins.
58

5 9
pattern of differences between carcass prices and live prices, after
making an allowance for the byproduct situation in Mi ami, will be the
basis for Judging the efficiency of cattle prices in the Miami mar¬
keting area.
Byproduct Recovery
The total value of an animal includes salable meat plus animal
offal. When the packer sells the meat and byproducts from an animal,
he hopes to receive prices sufficient to pay for the live animal and
all costs and returns involved.^® An estimate of the marketing mar¬
gin retained by the packer can be obtained by subtracting the price
paid for a live animal from the wholesale value of the meat and by¬
products^?
(5) Meat + byproducts - Live Animal ■ Cost and Margins®0
If equation (5) is rearranged as
(6) Meat - Live Animal â–  Costs and Margins - byproduct
it can be seen that the difference between the live animal price and the
liveweight equivalent of the meat price would ideally reflect the dif¬
ference between byproduct value and packers costs and margins.
^®Costs and returns include payments to land, labor, capital,
and entrepreneurship.
??U.S.D.A., Beef Marketing Margins and Costs, Mise. Pub. No.
710 (Washington* Government Printing Office, 1956), p. 10.
^The figures to be substituted into the left side of the
equation must all be expressed in the same units of product, that is,
per pound, per hundredweight, and so forth. They can be in terms of
carcass weight or liveweight.

60
The byproduct situation in Miami differs from many other areas
in that no complete rendering plant is located near enough to provide
an outlet for all this material, With the exception of hides and
what offal is sold to a soap maker, the rest is hauled away to dump.®^
Some packers have argued that the value of byproducts recovered at
Miami is only sufficient to pay for hauling the waste away, thus the
packer must deduct the full amount of costs in arriving at his price
of live animals. Others are of the opinion that the byproduct value
per hundredweight of live animals at Miami is roughly a dollar below
that realized by the rest of the packing industry in Florida,®2
Cattlemen are inclined to feel that they are being deprived of
additional income because the Miami packers have not seen fit to
develop rendering facilities,
Evidently the estimated profitability from operating a
rendering plant in or near the greater Miami area has not yet been
attractive enough to any business enterprisers. Furthermore, cattle
producers in South Florida are at somewhat of a locational disad¬
vantage in trucking to other outlets. The plants either operating or
served by more complete rendering facilities, and which are the al-
ith the volume of animals slaughtered in Miami it is
strange indeed that even a small rendering plant has never been
built. At least one packer in the state, smaller than most of those
in Miami, operates his own rendering cookers on a very profitable
basis,
82
This figure was suggested in Interviews with several packers
located in central Florida who represent the nearest alternative out¬
lets far South Florida cattle.

61
terna tira outlets to South Florida cattlemen, are not located near
enough to overcame the transportations! advantage of Ml and, buyers*
Therefore, the forces of competition have not encouraged MLami packers
to build a more complete rendering plant* liitll a thorough study has
been made of the economic feasibility of rendering in the Miami area,
the existing byproduct situation cannot be evaluated objectively*
Estimated Competitive Prices Vs* Prices
Reported F*0*fi* Plant
If reliable estimates mere available in the Miami area for
all four factors in equation (6), an evaluation of the equitability
of live animal prices would be relatively simple* Live animal prices
are reported at many points in the nation, while carcass prices are
available only from reports for a few marketing areas outside the
Southeast* 3yprodnot prices are reported only at Chicago, and the
information on packers costs is published by the meat-packing in¬
dustry as national averages*^
Nevertheless, although lack of complete knowledge makes it
difficult, it does not preclude making some judgment as to what
differences between the live animal price and its estimated competi¬
tive level would be expected at Miami. In the major wholesale meat
83ln 1957 each dollar of meat packers' sales was distributed
as follows * 7U cents paid for livestock and raw material; 13 cents
for wages and salaries; one cent for taxes; 11*3 cents for other
expenses; and *7 cent total net earnings* American Meat Institute,
Financial Facts About the Meat Pecking Industry (Chicago! American
Meat institute, 1958), inside cover page.

62
markets located near surplus producing areas, buyers far large chain
stores compete -with buyers serving Florida packers* Florida packers
selling carcasses and meat to chains and other wholesale buyers could
not expect to receive more than it would cost these customers to buy
in the surplus area and ship to their point of delivery* The com¬
petitive wholesale buying price equation presented in Cahpter II
expresses this relationship as the surplus area price plus transfer
costs*
When dealing with smaller buyers lacking the purchasing
advantage of chains the packer might sell at a higher price* Also,
l&anri. area packers providing wholesale services for a clientele of
hotel and restaurant customers might receive somewhat higher prices
for the higher-priced grades and cuts of beef* Thus in this respect
the midwest price plus freight underestimates the wholesale buying
price locally*
On the other hand to meet competition, national packers
operating in the area conceivably might ship carcasses in from parent
plants in the midwest at prices below quotations in public market
news reports* If, in turn, they sell st a lower price, the inde¬
pendent packer must meet this competition as beet he can* In this
respect the midwest price quotation plus freight overestimates the
wholesale buying price locally*
Prices of Ü* S* Choice Grade*—In the analysis that follows,
the lows of the pries ranges are compared* It is assumed that the
lows more nearly represent prices of comparable in the grade.

63
Prices paid far live anímale F.O.B. plant island have been reported
by the State Marketing Bureau only since August, 1957* From August,
1957» until March, 1959» the prloe of U. S. Choice at Miami fluc¬
tuated generally below its estimated competitive level (Fig. 5).
The gap was widest late in 1957 and early in 1958 ranging from
approximately $1.75 to $3*50 below. During this period the whole¬
sale value of byproducts at Chicago, as reported quarterly, was rela¬
tively stable averaging $2.27 per hundredweight of live steer U. S.
Choice grade (Table 8). Thus, even if ML and packers were obtaining
full byproduct value from animals, the degree of fluctuation observed
in cattle prices at Miami would not have been attributable to a
similar variation in byproduct value.
In the three-year period from 1956-1958, with the exception
of two quarters, the national average live price of U. S. Choice
steers was consistently below the liveweight equivalent of the carcass
(Table 8). This suggests the byproduct value in this period was not
sufficient to cover costs (see equation 6, p. 58), hence the full
value of the meat was not paid for the live animal.^ In the second
quarter of 1958, byproduct value and carcass value reached their
highest levels for the period (twelve quarters) and the live price
exceeded the equivalent of the meat price by U8 cents per huadred-
^However, there is no fundamental reason to believe these
oosts always fluctuate with the offal value, or vice versa. In fact
from early 1951 to the fall of 1955 the byproduct values fell $2.30
while labor costs rose. U. S. Dept, of Agriculture, Beef Marketing
Margins and Costs, op. cit., p. 9.

29 -
28 -
Si
60
27
I
•o
V
w
â– g 26
3
SB
«I
$ 25
•J
14
V
Oh 24
u
a)
o
a
u
CL,
23-
22 -
21-
20-
•lh
estimated competitive price
market quotation
ON
-p~
T S 1 0
1957
N ' D
M
' A ' M I J~1 J
1958
1 N '
~J—' P 1 M '
1959
Fig. 5.--U. S. Choice Steers at Miami: Estimated Competitive Price* F.O.B. Plant and Market News Price
Quotation F.O.B. Plant, the Low of the Price Range Reported, in Dollars Per Live Hundredweight, August, 1957,
to March, 1959.
♦Estimated competitive price equals (carcass price at Chicago plus freight to Miami)

65
IABI£ 8
LIVE TO WHOLESALE PRICE SPREADS, U. S. CHOICE GRADE STEERS
BT QUARTERS, 1956-58*
Price
Wholesale Value
Quarter
Steers0
Carcass®
Byproducts'1
Total
Spread
(dollars per 100 pounds liveweight)
¿22®
Jan.-Mar.
19.1*7
21.02
1.83
22.85
3.38
Apr.-June
20.30
20.79
2.00
22.79
2.1*9
July-Sept.
23.76
25.21
2.11*
27.35
3.59
Oct.-Dec.
22.67
23.70
2.06
25.80
3.13
1957
Jan.-Mar.
20.1*8
21.1*8
1.92
23.1*0
2.56
Apr .-June
22.85
23.39
2.15
25.51*
2.69
July-Sept.
2U.30
25.15
2.30
27.1*5
3*15
Oct.-Dec.
21*.27
21*.68
2.06
26.71*
2.1*7
lgge
TanT-Mar.
27.09
27.36
2.17
29.53
2.1*1*
Apr.-June
28.1*6
27.98
2.1*0
30.38
1.92
July-Sept.
26.39
26.61*
2.35
28.99
2.60
Oct.-Dec.®
26.81
26.67
2.31*
29.01
2.20
aSource» U. S. Department of Agriculture, The Marketing and
Transportation Situation. MTS-126, MTS-131 (Washingtoni Government
Printing Office, July, 1957, and February, 1959*
6 Weigh ted average of price at 21 leading public stockyards •
°Fiftynine per cent of average wholesale price of 100 pounds
of carcass beef*
l
¿Weighted average of prices reported in the National Pro-
visioner magazine.
«Preliminary estimates.

66
weight* Again in the fourth quarter of 1958 the live price exceeded
the equivalent meat price. For these teo quarters it appears that
byproduct value was sufficient to cover costs and packers aere re¬
taining a narrower margin (Table 6).
/
Since 1958 was year of relatively short supply of slaughter
cattle it might be argued this factor was enough to force live prices
above meat prices* In addition the demand for feeder cattle was
exceptionally strong in the spring of 1958* No doubt both these
developments combined with the higher byproduct value in the two
quarters of 1958 to reinforce the tendency of live prioe to rise
above meat price* However, no packer could long afford to pay more
than the meat price for live animals if byproduct value was not
covering costs and returns*
To arrive at some judgment of the differences between the
price F.O.B* plant and the liveweight equivalent of the estimated
competitive wholesale buying price of carcass meat at Miami, it is
necessary to decide arbitrarily whether or not this price differen¬
tial at MLaad should be greater than the national average* This
decision is arbitrary because of the peculiar byproduct situation in
Miami* In the following analysis it has been assumed that if offal
at Miami is worth one dollar less per live hundredweight than in
other areas, the differential between estimated competitive price and
plant price may be as much as one dollar greater than national figures
indicate (see footnote 82, p* 59)*

67
Uth this assumed standard as a guide, the differential for
0. S. Cholee steers at Miami exhibits soow shortcomings on several
occasions (Table 9). Unfortunately only six weekly price comparisons
for 1957 ere available, but for the first ten months in 1958» direct
â– ale quotations F.O.fi. plant for U. S. Choice steers at Miami were
more frequent. No quotations on ü. S. Choice steers at Miami were
reported between November, 1958» and February, 1959Because of
the nature of the data, average weekly differentials at Miami are
compared against average quarterly differentials nationally. In
effect the Miami differentials are viewed as weekly fluctuations
about the national quarterly averages! the national weekly fluc¬
tuations are masked.
In three instances during the latter half of 1957 the dif¬
ferential for U. S. Choice steers at Miami (Table 9, column 2) was
comparatively wide. It narrowed in December, 1957, but widened again
in January, 1958, remaining so until April, 1958. Uth this evidence
it appears that from August, 1957, to April, 1958, prices paid live-
weight at Miami for U. S. Choice steers were below those expected
under reasonably competitive marketing conditions. From April, 1958,
through October, 1958, the differential generally remained within the
limits postulated as acceptable to reason.
®**At this writing the national averages for the first quarter
of 1958 have not been released, therefore no comparisons are pre¬
sented for 1959 prices.

68
TABLE 9
DIFFERENTIALS BETWEEN SELECTED PRICES OF LIFE ANIMALS AND
LIVEWEIQHT EQUIVALENTS OF ESTIMATED COMPETITIVE PRICES FOR
CARCASSES, U. S. CHOICE STEERS,
AUGUST, 1957, TO OCTOBER, 1958
Week In¬
cluding
(1)
Miami Live Pries*
Minus Estimated
Competitive Carcass
Price Equivalent
(2)
National Live Price*5
Minus National Car¬
cass Price Equivalent
(Quarterly Averages)
(3)
National Quarter¬
ly Average Dif¬
ferential Ad¬
justed for Miami
Byproduct Credit0
(b)
8/8/57
10/10
(dollars per 100 pounds llveweight)
-2.21 -0.85 -1.85
-1.18
-O.bl
-l.bl
10/31
-3.35
-O.bl
-l.bl
11/7
-2.55
-O.bl
-l.bl
12/12
-1.10
-O.bl
-l.bl
12/19
1/2/58
-0.85
-O.bl
-l.bl
-2.29
-0.27
-1.27
1/16
-2.58
-0.27
-1.27
1/23
-3.U.
-0.27
-1.27
1/30
-1.17
-0.27
-1.27
2/6
-1.75
-0.27
-1.27
2/20
-2.L2
-0.27
-1.27
2/27
-2.13
-0.27
-1.27
3/6
-3.52
-0.27
-1.27
3/13
-2.02
-0.27
-1.27
3/20
-2.97
-0.27
-1.27
3/27
-1.89
-0.27
-1.27
b/3
-2.39
40.b8
-0.52
b/10
-1.10
40.b8
-0.52
b/2b
-0.52
40.b8
-0.52
5/8
-0.52
40.b8
-0.52
5/15
-0.81
40.b8
-0.52
5/22
-*0.28
40.b8
-0.52
5/29
-0.72
40.b8
-0.52
6/5
-o.bb
•K).b8
-0.52
6/12
•O .b8
-0.52
6/19
••0.36
•O.b8
-0.52
7/10
-0.1b
-0.25
-1.25
7A7
••0.1b
-0.25
-1.25
9/25
-0.78
-0.25
-1.25
10/2
40.22
40.1b
-0.86
10/9
••O.bb
40.1b
-0.86
10/16
40.1b
40.1b
-0.86
10/23
-0.06
40.1b
-0.86

69
TABLE 9 «-—Continuad
^Source* U. S. Department of Agriculture, Florida Depart¬
ment oí Agriculture, Florida Weekly livestock Summary, Vol. XXXI
(1957) and Vol. XLI (1956) (Thoeasville, Georgiai Mimeographed,
1957, 1958).
bSource* U. S. Department of Agriculture, The Marketing
and Transportation Situation. MTS-132 (Washington* Government
Printing Office, January 1959).
ccolumn 3 plus a minus $1.00.

70
Prices paid at the ranch.—Interviews with cattlemen in South
Florida in 1958 indicated that while direct selling was a popular
method of trading, very few sales were based on carcass grade and
weight. The cattleman felt that liveweight prices offered by buyer*
were just as attractive as carcass price offers. This is under¬
standable in a year such as 1958 since cattle were withheld to build
up herds, and buyers bacane particularly aggressive. Ordinarily the
carcass price offer would be expected to be somewhat more attractive
than the live price offer for the same grade, because the buyer
would not have to allow far his errors in estimating live animal
grades.
One other factor seemed to influence the cattlemen's prefer¬
ence for liveweight sales. It involved some sort of feeling of self-
assurance that a transaction based on liveweight prices was more
satisfactory because the cattleman personally had estimated the
grade of his animals. There was an outspoken expression of suspicion
of the integrity of packers to faithfully report the carcass grades
of animals and pay accordingly, k few respondees suggested the
possibility of collusion between packers and federal meat graders.
While it is possible for producers who sell on carcass grade and
weight to watch the actual slaughtering and grading of their animals,
this is not a very practical solution to the problem of distrust,
particularly when producers live long distances from the

71
plant In areas where carcass grade and weight selling Is preva¬
lent, such as the Southwest and California, apparently competition
among buyers Is keen enough to build up producers' confidence In this
method of sale. No doubt there also are instances where a personal
respect and trust between buyer and seller exists.
The grades of cattle sold by liveweight in direct sales cannot
be obtained with a very high degree of confidence from personal inter¬
view with producers. While cattlemen who keep no records may recall
quite accurately the prices received in previous transactions, there
is no objective way to associate these liveweight prices with the
grades of the particular animals. Furthermore, most liveweight
direct sales are consummated by a single price for loads of mixed
grades of cattle. Price by grade cannot be identified confidently
unless the sale was based on carcass weight and grade.
Interviews with cattlemen in South Florida produced only an
infinitely small amount of data on prices paid in grade and weight
sales. These data indicate that in nine sales at the ranch between
August, 1957, and January, 1958, the prices paid were somawhat higher
than the lows of the reported price ranges (Table 10). Nine observa¬
tions are not enough to warrant drawing any conclusions about how
actual prices paid at the ranch compare with the prices reported
QZ
°°The problem may eventually be resolved by producers or¬
ganizing cooperative slaughtering plants and selling graded car¬
casses to meat processors and wholesalers.

72
TABLE 10
COMPARISON OF ESTIMATED COMPETITIVE PRICES F.O.B. PLANT MIAMI
AND SELECTED PRICES PAID AT RANCH ADJUSTED TO APPROXIMATE
F.O.E. PLANT, FOR U. S. CHOICE STEERS*
Aeek
Includ¬
ing
Estimated
Competitive
Price F.O.B.
Plant, Miami
F.O.B. Plant
Equivalent
Price Paid
at Ranchb
Difference
National quarterly
Average Differen¬
tial Adjusted for
Miami ^-Product
Credit0
(dollars per 100 pounds liveweight)
1957
8/9
2l*.?6
2U.53
-0.1*3
-1.85
9/25
23.50
23.66
0.16
-1.85
10/9
23.80
23.37
-0.1*3
-1.1*1
10/26
2l*.o8
23.66
-0.1*2
-1.U1
ll/li*
21*.66
23.66
-1.00
-1.1*1
11/22
23.80
23.66
-0.11*
-i .ia
12/12
21*.96
23.66
-1.30
-1.1a
12/30
25.97
2U.82
-1.15
-1.1a
1956
1/8
26.12
25.11
-1.01
-1.27
aCarcass prices paid at ranch have been converted to a live-
weight equivalent based on 56 per cent yield.
kprice paid at ranch plus allowance for trucking to plant.
cSee column l*, Table 9.

73
F.O.B. plant. However, if the F.O.B. plant equivalent of these prices
paid at the ranch had been less than the lows of the reported F.O.B.
plant prices, the validity of those market report quotations would
be questionable. Perhaps the nine observations suggest that the yield
of these cattle sold at the ranch was somewhat higher than the yield
of the cattle on which the lower price quotation was based.
Prices of U« S. Good grade.—The lows of the price ranges
for U. S. Good reported at Miami compare much more favorably with their
estimated competitive levels than did the prices for U. S. Choice
(Fig. 6). During the period observed the price quotations for U. S.
Good steers generally exceeded their estimated competitive levels
(Table 11). Consequently, the problem of deciding whether or not a
deficit between estimated competitive price and quoted price is
justifiable does not arise. Furthermore, data on marketing margins and
price differences based on national averages are not compiled for
U. S. Good. Thus, any differences at Miami between the prices of
U. S. Good steers and the live-price equivalents of the carcass
prices cannot be compared with national averages for the corresponding
periods of time.
Judging from the frequency of price reports on direct purchases
of U. S. Good at ilami, this grade of cattle is available in South
Florida at all times of the year. Regularity of supply may have some
practical bearing on the bargaining position of producers who face an
oligopsonistic outlet for their products. The knowledge that at

Price in Dollars Per Live Hundredweight
1957 1958 1959
Fig. 6.--U. S. Good Steers at Miami: Estimated Competitive Price* F.O.B. Plant and Market News Price
Quotation F.O.B. Plant, the Low of the Price Range Reported, in Dollars Per Live Hundredweight, August, 1957,
to March, 1959.
*Estimated competitive price equals (carcass price at Chicago plus freight to Miami)

75
TABLE 11
DIFFERENTIALS BETWEEN SELECTED PRICES OF LIVE AN INALS AND
LIVEWEIGHT EQUIVAIENTS OF ESTIMATED COMPETITIVE PRICES
FOR CARCASSES U. S. GOOD STEERS,
AUGUST, 1957, TO DECEMBER, 1958
Week
Includ¬
ing
Miami Live
Price4 Minus
Estimated
Competitive
Price
Week
Includ¬
ing
Miami live
Price4 Minus
Estimated
Cosipetitive
Price
| Week
Includ¬
ing
Miami Live
Price4 Minus
Estimated
Competitive
Price
(dollars
er 100 pounds liveweightj
8/1/57
-2.98
2/13
*0.39
I 7/17
*0.95
8/6
-2.1*2
2/20
*0.33
7/21*
+1.23
9/5
-2.27
2/27
-0.17
7/31
♦1.51
9/12
-1.99
3/6
-1.06
8/7
♦1.35
9/19
-0.16
3/13
-0.39
8/21
+0.51
9/26
■♦0.13
3/20
-1.1*5
8/28
+0.29
10/3
■•0.1*1
3/27
-0.17
9/1*
+0.00
10/10
-0.12
li/3
-0.1*5
9/11
♦1.00
10/17
•*0.13
U/10
*0.33
9A8
9/25
+0.79
10/21*
■♦0.10
1*/17
*0.39
+0.29
10/31
-0.96
U/2U
+1.11
10/2
+0.79
11/7
-0.71
5/1
+0.61
10/9
+0.51
11/11*
-0.77
5/8
+0.61
10/16
♦1.23
11/21
•*0.07
5/15
+0.00
10/23
♦1.23
12/5
+0.01
5/22
+0.11
10/30
l 11/6
♦1.23
12/12
♦1.01
5/29
+0.61
♦1.20
12/19
1/2/58
+1.51
6/5
*0.39
11/13
+0.1*2
-0.61
6/12
+0.89
11/20
+0.95
1/9
-0.55
6/19
*0.39
11/27
*0.67
1/16
+0.1*2
6/26
7/3
♦1.39
12A
+0.67
1/23
-0.39
*0.39
12/11
+0.17
1/30
2/6
+0.17
+o.l*5
7/10
+0.39
12/18
+0.92
^Sources U. S. Department of Agriculture, Florida Department
of Agriculture, Florida Weekly Livestock Market Summary, Vol. XXXX
and I LI (Thomasville, Georgiat Mimeographed, 1957» 1956)*

76
least some supply is available regularly might stimulate somewhat
more effective competition among oligopsonlsts who are not In
collusion.
The historical dominance of production of lower grade cattle
in South Florida has meant that Miami packers have had to specialise
in manufacturing processed meats. Wholesale meat buyers could not
rely on these packers as sources of meat in the higher grades. When
a packer slaughtered higher grade cattle he might have been in a
position of having to find someone to "take the carcasses off his
hands." Thus, from the wholesale buying level for meat all the way
back to the cattle producer the prices could have been below competi¬
tive levels. This postulated situation might explain in part the low
prices paid for U. S. Choice cattle in Miami.
On the other hand the more favorable prices of U. S. Good
cattle at Miami suggest that most packers have developed outlets for
this grade. The cyclical contraction of supply of even the dominant
lower grade slaughter cattle during the period observed may have
accelerated this development of broader outlets, is painted out pre¬
viously, the cyclical effect on supply definitely has forced packers to
operate below their most profitable levels. This has resulted in more
buyers bidding on U. S. Good cattle than in previous times.
Prices of other U. S. grades.—In contrast to the discovery
of prices for higher grade cattle in Florida, the situation for price
discovery of U. S. standard and lower gradea is that of production

77
In ocoufl of consumption. Sines there are no publicly available whole-
â– ale meat pries quotations in Miami, it la impossible to evaluate the
livewsight prices of loser grade cattle by comparing them with an
equivalent of a carcass price* In this respect the comps titive as¬
pects of the loser grade cattle prices thus are indeterminate. However,
from the discussion in Chapter III of the general cattle marketing
situation in South Florida, it can be assumed that trading in lower
grade cattle is reasonably competitive.
Prices Paid at the Belle Glade Auction
The problem of evaluating auction prices ia identical to that
encountered in evaluating prices of loser grade cattle at Miami
paoking plante. There is no wholesale meat price quotation on those
grades, and the area of production ie one of surplus instead of
deficit* Prices of cattle in a surplus area would tend to equal the
prices of meat in a deficit area minus the transfer costs* However,
no attempt has been made in this analysis to derive estimates of the
Miami wholesale prices of meat in the lower grades*
An evaluation of prices quoted F.O.B. plant Miami has been
made in the preceding section* This set of prices provides s basis
for evaluating the extent to which auction prices are competitive*
The previous evaluation of the competitive level of plant prices can
be applied to auction prices in a greater or lesser degree as sug¬
gested by the differences between the two sets of prices*

Auctions receive vigorous competition from direct selling of
cattle and calves* Virtually all slaughter cattle and calves in
grades above U. S* Standard are sold in direct sales (Table 12)*
After considering shat it costs to sell animals through the auction,
many producers in the area feel that prices received for cattle sold
at the ranch yield a greater net return* Backers say they can pay more
at the ranch than at the auction because losses due to bruising from
handling are reduced*
On the other hand, the weight of an animal in the auction
ring is likely to represent more shrink than does the weight of an
animal weighed at the ranch* Backers allow for differences in shrink
by paying more per pound liveweight for animals that have undergone
greater shrinkage* In this respect auction prices would be expected
to be higher than direct sale prices at the ranch*
In bypassing the auction, producers destroy a reliable indi¬
cator of market price* This in itself is no justification for per¬
petuating auctions, if in other respects they are less efficient than
direct selling* On the other hand, direct selling does create the
real problem of obtaining adequate knowledge of market conditions, and
at the same time makes collusive practices more attractive to dubious
operators*
The auction at Belle Glade serves all of South Florida. Some
buyers attend from points north that are further away than l£Lami*
Theoretically, packers located to the north of Belle Glade receive

79
TABLE 12
COMBINED RECEIPTS OF SIAUGHTER CATTLE AND CALVES AT
THIRTEEN FLORIDA AUCTIONS, PERCENTAGES BY
U. S. GRADES,
1956a
U. S. Grade
Steers
Heifers
Cows
Bulls
Calves
(per cent)
Choice
0.3
—
—
—
.7
Good
6.2
2.U
—
.1
11.6
Standard
and
Commercial
29.8
15 .li
1.3
u.1
36 .U
Utility
39.3
38.3
19.2
27.6
U0.1
Cutter
18. h
3U.8
W.8
U5.2
11.2 (Cull)
Canner
6.0
9.1
3U.7
23.0
—
Total
100.0
100.0
100.0
100.0
100.0
Total Number
28,020
20,U98
U8,5U2
11,08U
80,397
aSource* Florida State Marketing Bureau, Annual Agricultural
Statistical Summary (Jacksonville 1, Florida: November, 1957),
P. Í77.

80
less for their neat by virtue of being closer to the surplus produc¬
ing area than are Miami packers* Assuming a uniformity in packing
plant operating costs, the more distant buyers can meet the price
offers of less distant buyers only by taking smaller margins* On any
sale day when less distant buyers have largely filled their needs
by direct purchases, the more distant buyers can become the active
bidders, and price mill fall accordingly* Such events further dis¬
courage would-be consignors to the auction*
To encamine whether or not the auction prices have been con¬
sistent with the price quotations F.O.S. plant Miami, the plant
quotation will be used to derive equivalent prices at the Belle Glade
auction* In the analysis these prices will be referred to as the
Belle Glade equivalents*
First an allowance must be made for transportation from
auction to plant* The Belle Glade auction is approximately eighty
miles from Miami* Buyers can haul live cattle eighty miles at an
estimated thirteen oents per hundredweight*®7 Therefore the Belle
Glade auction price might be expected to be at least thirteen cents
below the price F.O.B. plant*
Deductions must also be made for bruising, the risk of
crippling or death from handling at the auction, and for any additional
®7lssume a forty-foot trailer hauls thirty 1,000 pound animals
at twenty-five cents per mile round trip*

81
in-transit shrink from auction to plant.®® It is assumed in the
analysis that 3 per cent of the price F.O.B. plant sill cover these
deductions.
A price at the Belle Glade auction loser than the Belle Glade
equivalent of the price F.O.B. plant might suggest a sale day
dominated by more distant buyers. An auction price equal to or
greater than the Belle Glade equivalent mould indicate active par¬
ticipation by Miami buyers at the sale.
Over a thirteen-month period beginning in September, 1957»
the several price reports for U. S. Good steers sold at meekly
auction sales in Belle Glade fluctuated both above and belos the
Belle Glade equivalent.®? U. S. Good steers sere sold at the auction
on only twenty-one sale days, during the period, and often only a
small quantity was consigned. However, they constitute the only
price comparisons available in this grade. Auction prices for the
few months observed in 1957 sere belos the Belle Glade equivalent
while in 1958 they remained generally above (Fig. 7)*
®®The price F.O.B. plant is paid for animals that have mder-
gone in-transit shrinkage before being weighed in at the plant.
Similarly, the packer's bid at auction is paid for animals that have
undergone in-transit and handling shrinkage before being weighed at
the sales ring. Assuming the shrinkage is equal in both instances,
this factor is not considered in the derivation of the auction price.
89Again the loss of the price ranges are used in the comparison
because it seems reasonable to expect that any two low-price quotations
are more likely to represent comparable cattle than are two high-price
quotations. It mould be a rare situation, particularly in Florida, to
find all the animals in a grade clustered at the upper end of the grade.
Clustering at the loser end mould be likely to occur more often.

Price in Dollars Per Live Hundredweight
1957 1958
Fig.7.--U. S. Good Steers at Belle Glade: Direct Sale Prices F.O.B. Miami
Adjusted to their Equivalent at Belle Glade, and Belle Glade Auction Prices, the Low
of the Price Range Reported, in Dollars Per Live Hundredweight, August, 1957, to
October, 1958.

83
If the prices in this comparison are reasonably close approxi¬
mations of the situation that existed for U. S. Good in the period
observed, there are indications that in the last four months of 1957
price depressing agents sere active at the auction. Producers who
during these months could have delivered Ü. S. Good cattle to the
packing plant at loser transfer costs than those incurred by selling
through auction would have received greater net returns.
On the other hand, in the first nine months of 1958 apparently
Miami buyers mere active participants at the sales. Furthermore, the
data indicate that in this period prices paid at auction were generally
higher than comparable prices at Miami plants. Cattle producers whose
costs of transfer to and selling through the auction were less than
the costs of transfer from farm to packing plant would have received
greater net returns from auction prices.
For the full thirteen month period, prices of U. S. Standard
steers at auction were consistently above the Belle Glade equivalents
(Fig. 8). The majority of U. S. Utility auction prices observed in
the four months of 1957 mere below the Belle Glade equivalents,
although the F.O.B. quotations fluctuated more widely (Fig. 9). In
1958 with few exceptions U. S. Utility at auction was generally at
a level somewhat above the Belle Glade equivalents (Fig. 9). Auction
prices of U. S. Canner and Cutter cows during the period were almost
always below Belle Glade equivalents, with the spread widening con¬
siderably in the first nine months of 1958 (Fig. 10). With U. S.

JS
60
f-4
1
a)
Vj
T3
C
3
*
V
>
V
cm
<0
u
to
o
Q
u
Oi
Aug Sep Oct Nov Dec Jan Feb Mar Apr May June July Aug Sep Oct
1957 1958
oo
•P*
Fig. 8.--U. S. Standard Steers at Belle Glade: Direct Sale Prices F.O.B. Miami
Adjusted to their Equivalent at Belle Glade, and Belle Glade Auction Prices, the Low
of the Price Range Reported, in Dollars Per Live Hundredweight, August, 1957, to
October, 1958.

Aug Sep Oct Nov Dec Jan Feb Mar Apr May June July Aug Sep Oct
1957 1958
Fig. 9.--U. S. Utility Steers at Belle Glade: Direct Sale Prices F.O.B. Miami
Adjusted to their Equivalent at Belle Glade, and Belle Glade Auction Prices, the Low
of the Price Range Reported, in Dollars Per Live Hundredweight, August, 1957, to
October, 1958.

Price in Dollars Per Live Hundredweight
Fig. 10.--U. S. Canner-Cutter Cows at Belle Glade: Direct Sale Prices F.O.B.
Miami Adjusted to their Equivalent at Belle Glade, and Belle Glade Auction Prices,
the Low of the Price Range Reported, in Dollars Per Live Hundredweight, August,
1957, to October, 1958.

87
Canner and Cutter coirs, factors depressing the auction prices to
levels far below the equivalent prices F*Q*B* plant were particularly
strong in 1958* This would not be unusual if the more distant buyers
gained a larger share of the market as local buyers became less active*
The more favorable prices quoted by direct sale buyers of low grade
cows may represent highly selective and limited buying on their part*
The comparisons in general indicate that prices paid at auction
maintained sane comparative advantage over equivalent prices paid
F*0*B* plant in the U* S* Standard and Utility steer grades (and in
U* S* Good steers, if the price quotations are representative)*
However, this does not mean that producers necessarily would have
greater net returns when selling through the auction* To arrive at a
net farm price a producer must deduct from the auction piles the costs
of transfer from farm to auction, the sales coomission, and any
handling or yardage charges* This net farm price can then be compared
with the direct sale price F*0*B. farm to determine which method of
sale is more advantageous*
Because direct sale quotations were initiated at Miami late
in 1957 there is no long-term evidence of the auction vs* direct sale
relationship* Contrary to tbs opinion expressed by many producers,
direct sales do not always yield a net return greater than an auction
sale* A decision as to which method yields greater returns can be
made only after comparing accurate price quotations and costs of
marketing* It may be that in comparing their prices with auction

86
prices, direct cale sellers are not comparing comparable cattle* On
the other hand, the direct sale bqysr may feel it is to his advantage
to understate his prices for market news publications* Then whan his
offer to a seller is somewhat above the reported price, he may have
some tempoxary advantage in gaining the sale*
thderstating prices could not be accomplished market wide
without collusion* Although the number of buying firms in South
Florida is relatively small, this type of collusion among them sesma
rather unlikely* But if in any reporting period only a few of the
firms actually give pries quotations to the market reporters, the
market-wide price is not representative* Basing price comparisons
on inaccurate and non-representative information can lead only to
erroneous conclusions*

CHAPTER VI
IMPLICATIONS
Economic Significance of Price Differences
The word significance is a fine example of ambiguity in mean¬
ing. However, for purposes of this discussion a variable is con¬
sidered economically significant when changes in its values cause
marketing decisions to be made differently in those particular segments
of the economy observed. Marketing decisions are made in the produc¬
tion, distribution, and consumption segments of the economy.
On a per pound basis, concern over a one cent difference in
price seems trivial. Price differences that are small in monetary
measure become magnified to significant levels when the unite of
product traded are large, for example, a one thousand pound animal
or a six hundred pound carcass. For a one thousand pound animal a
difference of one cent per pound amounts to ten dollars. In pricing
cattle and meat on a per pound basis, even halves and quarters of
coats are important. Consequently in the segments of production and
distribution, price differences of any magnitude may have at least
some degree of economic significance.
Of course if unpredictable circumstances have brought forth
selling prices yielding windfall profits, two or three dollars per
animal might not cause a cattleman to exert much effort in seeking out
89

90
the highest bidder. National emergencies occurring without warning,
such as the Korean conflict, or severe weather conditions are examples
that come to mind. But such cases are rare. Ordinarily a difference
of two dollars per animal or per carcass is more than sufficient to
affect the marketing decisions of buyers and sellers.
Small differences in price probably are more influential in a
cattleman's decisions of when and where or to whom to sell than in
his decisions of what and how much to produce. This is true because
of the time element involved. Increasing cattle production is a
long-term proposition for which cattle prices have to be estimated
well into the future. On the other hand once the animals have been
produced, and sale of them is contemplated, the future is much closer
at hand. Price estimation or prediction over short periods of time
can be handled with more confidence, thus smaller price differences
can be considered. When circumstances bring the time of sale extremely
close at hand, price becomes more of a certainty.
Insofar as the meat packing business is reputed to operate at
small margins per animal unit of output, packers too will show concern
over small differences in prices.
Most market reports on livestock and meat transactions quote
prices to the nearest quarter of a dollar per hundredweight. Using
this as the criterion, differences of twenty-five cents or more per
hundredweight will be considered economically significant, ttider such
an assumption, it is implied that differences of at least a quarter

91
of a dollar per hundredweight will have an observable effect upon
marketing decisions* Thus, whenever an observed price per hundredweight
falls below its expected level by twenty-five cents or more, it is con¬
sidered evidence of impediments in pricing efficiency.
Pricing efficiency is variously defined as how well the price
of a product at some point in the marketing system is reflected back
through the marketing channels to the producer, after due allowances
are made for marketing costs* In essence the price at the point of
observation is taken as given and the marketing costs are evaluated
on the basis of acceptable and justifiable criteria*
The data presented in Chapter V clearly show that pricing
efficiency for U. S. Choice steers was impaired on numerous occasions
(Fig* 5 and Table 9)* The price quotations F.O.B. plant for this
grade were frequently below their expected levels by more than twenty-
five cents per hundredweight from August, 1957» until Iky, 1958* For
the remainder of 1958 the prices F.O.B* plant for U* S. Choice steers
were within the limits acceptable under the previous assumptions*
The inefficiency observed in prices of U. S. Choice steers say-
well be related to the relatively small volume of fed cattle produced
in South Florida* As long as fed cattle are produced in the area only
sporadically, packers will not look to local producers as dependable
sources of supply* Tilth chain stores now contracting for meat supplies
several weeks or more in advance, the emphasis is shifting toward some
form of orderly marketing of livestock* Ifatil South Florida becomes a

92
dependablef although minor, source of Choice cattle, producers in the
area probably cannot expect to receive the full price advantage of
location nearest the market center*
Instances in which prices of U. S. Good steers at Miami moved
below estimated competitive levels were not frequent enough to question
pricing efficiency* Occasional price deficiencies may result frosi
temporary marketing impediments of a local nature that do not reflect
the failure of spatial equalisation in prices*
Careful attention to breeding, better herd management, and
supplemental feeding on improved pastures have demonstrated that the
grade of primarily grass-fed cattle can be raised* Progressive cattle¬
men are marketing U. S* Good cattle in South Florida* The regularity
of price reports on direct purchases of U* S* Good cattle indicate
that the supply is regular* it the same time the quantity is likely
to be relatively small. Nevertheless, prices of U* S* Good did attain
their conceptual levels* Orderly and regular marketing can help to
build a competitive atmosphere into an existing marketing situation*
Problems tbcovered—Research Needed
Perhaps the greatest value of research of this kind is in the
light it sheds upon the broader problem from which it was abstracted*
This is precisely why researchers delineate and restrict the area of
investigation to be considered in any one study*
In the procese of exploring the ramifications associated with
inefficiency in pricing higher grade cattle, the cattle marketing net-

93
work was found lacking In several respects. In the first place the
manner in which prices in direct sales are reported from the several
market centers make comparisons difficult if not impossible. Prices
reported for mixed grades are not very informative. Homogeneous grades
facilitate price reporting and comparison. The only other source of
public information on prices is auctions where according to a recent
survey packers buy only U5 per cent of their cattle and calves for
slaughter.?0 The usefulness of the auction price as s thermometer of
market price prevailing is somewhat doubtful. At the direct sale
level, it is necessary to consistently report prices by individual
grades if tbs price information is to be more useful to producers.
Secondly, the absence of a market report on wholesale prices
of carcasses and primal cuts for the Southeast generally and Miami
particularly, means that producers cannot make well-informed evalua¬
tions of the live animal prices they receive. Their opinions are
formed upon hearsay or upon their interpretation of local retail
prices of meat. Such information is grossly misleading. The operation
of a more competitive situation for marketing livestock in South
Florida definitely is impaired through the lack of a realistic whole¬
sale meat price quotation based on trading in the Southeast.
Thirdly, the resulte of the exploratory grading trial at Salla
Olada are concrete evidence of variations among the abilities of men
?°Florida State Marketing Bureau, Annual Agricultural Statisti¬
cal Summary (Jacksonville, Florida* November, 195o), p. 1Ü5*

9U
to judge and estimate grades of steers (Appendix I), Although other
classes of cattle irere not in the trial lots, there is no reason to
believe that these men mould have performed any better on corns,
heifers, or calves. Assuming the live-graders observed had more well-
rounded grading experience than most cattle producers, one might expect
the grading performances of cattlemen to show wider variations.^1 Wide
variation in live-grading mould place cattlemen at a distinct disad¬
vantage in the bargaining transaction between buyer and seller. Ad¬
mittedly, there are some cattlemen whose live-grading is fully as
proficient as professional buyers. Further study among buyers and
sellers is needed to compare their competitive bargaining strengths
due to differences in abilities to judge the grades of cattle*
If attention is focused on the actual conduct of a grading
trial, there la much research needed to develop an experimental design
beet adapted to the measurement and analysis of grading errors.
Finally the problem of utilization of byproducts by the packing
industry in South Florida should be analyzed thoroughly and a practical
solution proposed.
?1Tha live-graders observed in the trial had previous oppor¬
tunities to check their own accuracies by following animals through
to the cooler. Although packers say producer customers are free to do
this, the practice is not generally followed. Indeed, to do so may
seem impractical for many cattlemen, but actually such a move would
strengthen their bargaining position through improving their live-
grading.

CHAPTER VII
SUMMARY, CONCLUSIONS AND CONJECTURES92
The marketing of livestock, particularly cattle, in Florida
has exhibited a change in that direct selling of animals at the farm
or ranch is gaining dominance. By moving the point of sale back to
the place of origin of the product, some savings in marketing costs
have occurred. But accompanying these cost reductions is a complica¬
tion in the availability of adequate information on market prices and
quantities. Prices at physical market centers such as auctions or
terminals no longer reflect the full range of quality or the larger
proportion of animals traded. To overcome this deficiency Florida
packers mere asked by the State ¿Marketing Bureau to report for
publication meekly the quantities, grades, and range of prices paid
on their direct purchases. This venture has been partially successful
since 1956.
In South Florida the combination of agricultural and urban
development, influenced by geographical and climatic features, has
brought about a marketing situation for livestock in which non¬
competitive trading could easily exist. This study «as undertaken in
92To "conjecture" is to base an opinion or judgment upon what
is recognised as insufficient evidence. Probably more "conclusions"
belong in this category than researchers are willing to admit.
95

96
an effort to estimate the degree of competition among buyers and
sellers of cattle slaughtered in the greater Miami area, A model of
pure competition was chosen as the standard for purposes of analysis.
In a reasonably competitive marketing situation, it was
assumed that the wholesale carcass price received by packers would be
reflected back to the producer, after deducting allowances for market¬
ing costs. How well the marketing system accomplished this reflection
was termed a measure of pricing efficiency. The analysis employed
the wholesale price of carcasses at Chicago plus freight charges to
Miami as an estimate of the Miami wholesale carcass price. Allowances
were made for the net difference between byproduct credits and the
packer's cost of procuring animals, slaughtering them, and selling
the carcasses. All carcass prices were converted to their equivalent
prices for live animal weight using assumed dress-out percentages.
In this manner was established a conceptual price for live animals,
F.O.B. plant Miami, that cattlemen would be expected to receive under
reasonably competitive marketing conditions.
Prices paid F.O.B. plant Miami as quoted by packers were
obtained from published market reports. Because of the restrictive
nature of available price data, comparisons could be made only on
U. S. Choice and U. S. Good steers. A limited amount of price data
was obtained from producers who had sold cattle direct to packers on
a carcass grade and weight basis. These prices actually paid for
cattle were compared with the estimated competitive prices. When the

97
actual price fell below the estimated competitive price by twenty-five
cents or more per hundredweight, this was considered an impediment in
pricing efficiency. Furthermore, it was considered to reflect the
existence of imperfectly competitive conditions in the marketing
system. Such conditions apparently prevailed for Ü. S. Choice steers
from August, 1957, until May, 1958» and on a few occasions between
May, 1958, and March, 1959. On the other hand, for U. S. Good steers
indications of imperfectly competitive pricing were not observed with
any regularity, but only for an occasional week or two prior to April,
1958.
With the exception of price controls and compulsory meat
grading during national emergencies, the livestock industry has been
relatively free from rather direct government participation in market¬
ing. Federal legislation in the Packers and Stockyards Act does pro-
vice a code of business ethics for those firms under its jurisdiction.
Certainly it cannot be concluded that the only solution to correcting
the ills of livestock marketing conditions lies in government adminis¬
tered pricing. On the other hand, the market does contain the basic
elements of oligopsony.
The grading trial points to a source of imbalance in bargaining
power which may be rendered ineffective or less effective by sellers*
efforts to improve their judgment of quality in cattle. This is just
as important when they are selecting animals to haul to auction as
when they are matching wits and abilities with direct sale buyers at

98
the farm. In addition, keeping abreast of current market prices is
essential to the strength of a producer's bargaining position. A.
market report of wholesale prices of carcasses and cuts representing
trading in the Southeast to uld be in the direction of satisfying the
purely competitive concept of common knowledge among buyers and sellers
regarding prevailing market conditions»
Commentators inevitably suggest orderly marketing as a device
producers could use to stabilize supply and its price.^ Orderly
marketing can also act to discourage the development of situations
where non-competitive trading might otherwise arise. However, con¬
trolled supply requires concerted efforts by producers. To this end
producers of some agricultural commodities have called upon government
to issue and supervise marketing agreements and marketing orders.
Before resorting to other methods of securing and maintaining
a bargaining position equal to the buyers o£ their products, cattle
producers can (1) improve their proficiency to estimate the grades
of live animals, (2) become better informed on the marketing situation
in their areas, and (3) consider all possible alternatives in deciding
when and where to sell.
^There are several viewpoints as to what orderly marketing is,
and what it can accomplish. Cf. F. V. Waugh, Readings on Agricultural
Marketing (Ames, Iowa* The Iowa State College JPreas, 1?Í>U;, pp. 11*5,
1U7, 337, 359, 382.


STATISTICAL COMPARISON OF ERRQRS-QF-ESTIiSATE5^
The analysis of variance technique'*'’ may be used to compare
errors-of-estimate made by one live-grader with those made by one or
more other live-graders on the same lot of animals.
’ Two or more men may be equally proficient live—graders, yet
on a s •< ngl« lot of animals their mean errors—of-estimate very likely
will be arithmetically different. A statistical test can produce
evidence supporting statements of how likely was the chance occurrence
of an observed arithmetical difference. If» after the calculations
are made, the differences between the mean errors-of-estimate of the
live-graders could occur by chance alone very rarely, say one time in
a thousand, the analyst would conclude that very likely the means
came from different populations. It follows that very likely there
would be a real difference between the grading abilities of the men.
But if the probability of the differences occurring by chance alone
was say eighty times in two hundred, the analyst would conclude that
very likely there were no real differences between the grading abilities
of the men. The results of statistical testing are interpreted only in
a probability sense, never with certainty.
^^This analysis is a further treatment of a portion of the data
presented in the manuscript by W. K. McPherson, et_al., op. cit. The
writer of thi6 dissertation is a co-author of the manuscript.
95q. w. Snedecor, Statistical ¿iethods (5th ed., Ames» The Iowa
State College Press, 1956, pp. 237-238.
100

101
To illustrate the type of analysis followed, the examples will
use data from the ¿roup of men who graded live animals at Belle Glade
in 1957•• The nature of the data confine the analysis to a discussion
of the performance of the five men observed» The type of calculations
employed may be applied to other groups as well. The reader is cautioned
to keep in mind the fact that neitherthe animals graded nor the graders
in this preliminary investigation were randomly selected as representa¬
tive samples of specified populations, nor was there a designed ex¬
periment conducted•• The presentation of a method of inferential
analysis is for the purpose of showing what can be done in this
area when suitable data are developed in an extensive experimental
design.
Although no pre-determined design was used, the actual grading
procedure did approximate that in a randomized complete block design.
An analogy to agronomic experiments requires modification. The usual
plot response to treatment is replaced by the estimated animal grade
as reflected through the treatment material, i.e., the grader. Ordin¬
arily, measurements on the treatment material itself would not or could
not be taken. The graders are considered as the treatment material.
Each animal constitutes a block. Since in a block each grader graded
the same animal, the block contains identical experimental units.
Because of this unique feature, randomization of treatments within
blocks is not necessazy.
Response to treatment may be indicated in each plot by the

102
actual acore or eatlsata made fay a particular grader on a particular
animal.^ Response aleo may be indicated fay shoeing in each plot the
difference between an estimated grade and the official carcass grade
designated after slaughter. This difference is an error-of-estimate
and is assumed to be a random variable. Assuming that the data were
generated in a randomized complete block design, the errors-of-esti¬
mate observed may be considered to be made up of several components.
In the model of the block design, a single difference or error-of-
estímate, call it djj or Xjj - Tj, has at least three components that
may be symbolized fay oc # |3 and €
In the grading procedure, the live-graders used arithmetic
numbers ranging from 3 to 17 to indicate grade i
3 - Canner
6 - High Standard
13 - Mid Choice
U - Cutter
9 - Low Good
lit - High Choice
5 - Utility
10 - Mid Good
15 - Low Prime
6 - Low Standard
11 - High Good
16 - Mid Prime
7 - kid Standard
12 - Low Choice
17 - High Prime
9?Snedecor, op. cit., 5th ed., p. 296.
9®For purposes of analysis, it is further assumed that live-
graders attempt to estimate not the true grade of the carcass, but the
grade which the federal meat-grader will place on the carcass. This
grade, that is the grade designated fay the federal meat grader, ie
known for certain and contains no error as far as the market pricing
procedure is concerned. It can be argued that since the meat grader
makes errors in Judgment, a difference based on bis designation of
grade penalises the live-grader. If it is assumed that both the meat
grader and the live grader attempt to estimate the true grade of a
carcass (which in terms of the present subjective specifications is
indeterminate), the meat grader's error is truly confounded with the
live-grader*e error. However, a test of significance can also be
applied to differences in the actual estimates among live-graders,
thus avoiding the error controversy.

103
where x
X â–  the grader's estimate on the animal;
Yj â–  the official carcass grade of the jtix animal;
¡J- ■ the over-all mean of the errors of estimate from
which the i deviations are measured;
° with all animals in the group (the treatment effect);
/3 4 â–  an effect associated with a particular animal, the
jth animal, and its estimate by all graders (the
replication or block effect);
% - a random error of the grader on the jtb animal,
and associated with unexplained and uncontrolled
factors (sampling variation) •
There may be some difficulty in reasoning how conceptually an
element of chance might enter a live-grader's error-of-estimate• It
might seem as if ary degree of error in the estimate is due entirely
to human frailty, but there are some factors, call them environmental
factors, ewer which a live-grader has no practical control regardless
of how accurate is his basic ability to judge quality of cattle. These
environmental influences will cause him to miss the grade simply be¬
cause in practice he cannot compensate for their effect. Yet, since
an arror-of-estimate can be observed only as a single quantity, it is
rather tempting to attribute all of the error to a failure in human
judgment. The person grading cattle passing quickly through the sales
ring at an auction experiences different environmental effects than
he would grading at the ranch.
On the other hand, in a controlled experiment, it might be

possible to control tbs environmental factors to an extent where
virtually no chance element could operate* In this ideal situation
any error in a live-grader's estimate would be due to something
besides chance* In effect any error-of-estimate in such experiments
is significant because there is no estimate of chance error against
which observed error may be compared*
Probably no man can become a perfect live-grader, that is,
have 100 per cent accuracy* A proficient live-grader has perfected
his ability to estimate carcass grade to the point where he can make
allowances for variation in environmental conditions and animal
characteristics, within the limits of human observation* It is assumed
that the variation in conditions and characteristics for which the
proficient live-grader cannot make conscious allowances will effect
his performance in a random fashion, and thus cause the population of
his errora-of-estimate to be symmetrically distributed in some dis¬
crete approximation of normality (Appendix Fig. 1)*^ Populations of
error8-of-estimate that are discrete approodna tiona of normality, but
are distributed around mean values other than aero may be characteris¬
tic of less proficient live-graders* Mean values other than zero
indicate biased estimatea of designated carcass grades* Less pro¬
ficient live-graders will also have distributions with comparatively
wide standard deviations*
^See footnote 72, P. 53» regarding normal approximation*

Frequency of Occurrence
105
thirds of grades
Appendix Fig. 1.--A Symmetrical Distribution
of Errors-of-Estimate by Thirds of U. S. Grades, for
a Hypothetical Grader, with Theoretical Frequencies
Derived by Fitting a Normal Curve to a Set of 119
Observations Having An Assumed Mean and Variance.

106
Since the data were generated from an approximate randomized
complete block design, double-classification analysis of variance
was used.*®0* Hie analysis of variance of the composite of all
the errors-of-estimate for all five live-graders detected the same
significant differences whether the data were expressed as actual
estimates or error-of-estimate (Appendix Table 1)* Duncan's Multiple
102
Range Test places the live-graders in three separate classes»
2, 3i and 5 are in one non-significant difference group, while live-
graders 1 and U each stand by themselves alone*
Another approach to an aggregate analysis of the data is
suggested if it is assumed that the mean and variance of the distribu¬
tion of the 128 official carcass grades are the parameters of an
approximately normal distribution*103 Thus, the distribution of the
estimates of these 128 grades by a perfect grader would be essentially
100Snedecor, op* cit«, 5th ed*, pp. 291-30U*
lOlflr. A* £• Brandt, Florida Agricultural Experiment Stations,
has suggested a modified analysis of variance using multi-classifica¬
tion that would estimate several degrees of interaction between the
variables* However, the author feels that the practical interpretation
of differences in errors-of-estimate among breeds and among grades
may be somewhat clearer using the analysis presented in this Appendix*
102D. B. Duncan, "Multiple Range and Multiple F Tests," Bio-
met rica, XI (March, 1955)# PP* 1-U2*
103fhe distribution of these particular 128 carcass grades
happens, by chance to be essentially normal with mean 8*81 and variance
3*82* A test of goodness of fit of a normal distribution to the 128
grades produces &X2 value with s U*3 per cent probability* Cf* F* C*
¿¿ills. Statistical Methods (3d* ed*; New York» Henry Holt and Co*.
1955). pp:

107
APPENDIX TABLE 1
ANALYSES OF VARIANCE OF THE ACTUAL ESTIMATES AND THE ERRORS
OF ESTIMATE, AND THE ASSOCIATED DUNCAN'S TEST*
FOR 128 STEERS, BY FIVE LIVE-QRADERS
Source
d. f.
Sum of
Squares
Mean
Square
Duncan's Test
of Differences
Among Grader's
Means
Actual
Estimates
b,c
2
Blocks (animals)
127
2,210.38
17.1rf)
U 5 3
Treatments (graders)
U
32.92
8.23*»
U1 £_3
Error
508
287.08
.57
U 1 5
Total
639
2,530.38
U 1
Errors
of Estimate
Blocks (animals)
127
7U5.80
5.87
U1 £JL
2
Treatments (graders)
h
33.61
8.1i0«*
U1 ¿ 3
Error
508
319.59
.63
U 1 5
Total
639
1,099.00
U 1
««Significant at the 1 per cent level.
*D. B. Duncan, op. cit.
bAny two means underscored by the eaiae line are not signifi¬
cantly different. Any two means not underscored by the same line are
significantly different at the 5 per cent level of probability, EXCEPT
if the two means are both contained in a subset of ti» means which
has a non-significant range, the difference cannot be declared
significant.
°The numbers refer to graders 1, 2, 3, U, and 5*

108
normal, with mean 8*81 and variance 3*82, If the distributions of the
estimates of each grader are considered samples of an approximately
normal population, their sample statistics can be tested against the
parameters 8.81 and 3*82. This is a test of the hypothesis X -¡X - 0,
where both O' and ¡X are known. The reasoning employs a broader
population concept in asking what is the probability of possible
deviations of samples drawn from the postulated population?
Standard errors describing the sampling distribution^1 of
means and standard deviations for samples size n can be calculated from
the parameter >f
standard deviation is The mean and standard deviation of a
grader's estimates are evaluated by observing where they Tall under
the appropriate gamp]ing distribution curves. For samples size 128
the percentage paints of the sampling distribution curve are obtained
from the "t" table .^5 Values falling under the tails at points
corresponding to small percentages are Judged significantly different
from the parameter. Such values cast doubt on a live-grader's ability.
In the case of the lot of 128 steers, the mean estimates of
all five graders were significantly different from ¡JL , but only one
grader's standard deviation was significantly different from suggests that the differences between the mean of the carcass grades
1(%ma, op. cit., 178-180.
^Snedecor, op. cit., 1*6.

109
and the mean of each grader's estimates are due to something more than
sampling error The practical interpretation of these tests re¬
sults would conclude that the biases of the live-graders' estimates
were so great that the live-animal grades appear to describe a differ¬
ent lot of cattle than the lot whose carcasses actually were graded.
Incompetence among the live-grade re would be strongly suspected.
The suspicion of incompetence may be reinforced if the analysis
of variance described previously is expanded to Include the meat
grader's performance. It can be argued that if in fact the meat
grader is making errors in his designation of the carcass grades,
his performance should be considered along with the live-graders.
This argument is based on the assumption that both the meat grader
and the live-graders are estimating the true (but indeterminate)carcass
grade. Therefore, as far as the interpretation of statistical tests
is concerned, the meat grader's performance is just another sample,
even though he looked at the carcass instead of the live animal. The
analysis tests the hypothesis that all six samples come from the same
population of estimates. When applied to the six samples the analysis
of variance and associated Duncan's test revealed the meat grader's
estimates to be significantly different, at the 5 per cent level,
lOó^ben the estimates of each grader were paired with their
corresponding carcass grades, animal by animal over all 128 steers,
the paired "t" test also indicated highly significant differences.
However, the data do not fit the assumptions of the paired nt” test.
Cf. Bernard Ostie, Statistics in Research (Amesi Iowa State College
Press, 195U), pp. 93-106.

no
from those of an five live-graders • The test also separated the five
live-graders into three groups, as summarized previously (Appendix
Table 1). The meat grader’s estimates appear to belong to a population
of estimates different from those of the live-graders and the live-
grader’s estimates appear to belong to three separate populations.
While the test results can suggest incompetence among the five live-
graders, the same test, assuming six of the same kind of samples mere
observed, also can suggest the incompetence of the meat grader.
Previously by the "t" test (page 108) each live-grader's
mean estimate tested significantly different from the mean of the
carcass grades (treated as a parameter). This together with Duncan’s
test now suggests that when the live-grader's estimates are viewed
over the lot as a whole, the estimates seem to have been dram from
three separate populations, different from that at the carcass grades.
The same suggestion of three populations applies also to the errors-
of-estimate, A practical interpretation in less technical language
might state that if it were impossible in live-grading to make errors-
of a8tinate other than chance errors, results similar to those re¬
ported above would occur only if live-grades 2, 3, and 5 had graded one
lot of animals, live-grader 1 a second lot, and live-grader h a third
lot.
Although the aggregate analysis comparing live-graders with
each other found significant differences among graders, did these
differences occur in all gradas of steers or was it a strong effect
in just a few grades that dominated the broad analysis? Again,

Ill
analyses of variance were run on each of the eight groups of steers
falling in a single carcass grade* These analyses found no signifi¬
cant differences among graders when they estimated animals whose
carcasses fell in High Utility, low Standard, and low Qood U* S. grades*
Significant differences among graders did occur in the five other
thirds of U* S. grades (Appendix Table 2)*
Similarly for any one breed, the errors-of-estimate may differ
among graders* This possibility was examined by analysis of variance,
and Duncan's test when called for* Significant differences in errors-
of-estimate among graders were indicated in four of the eix breeds,
Brahman and Charbrey excepted (Appendix Table 3)*
The individual live-grader*—The preceding comparisons of
errors-af-estimate and actual estimates among live-graders assumed that
in an individual's grading performance his errors-of-estimate were
homogeneous over the several classes, breeds, and grades of cattle*
While the assumption is necessary to the aggregate analysis, its
realism may be challenged* Hers again the quality of the data at hand
falls short of the ideal, but it can be used to demonstrate a method
of analysis. In the data from a controlled experiment the differences
in errors-of -estimate among the various categories would be tested
first* Then, if the differences among categories appeared to be non¬
significant, the aggregate analysis would be run on the combined observa¬
tions* Otherwise, each significantly different category would be
treated as a sample of a separate population of errors-of-estimate,

112
APPENDIX TABLE 2
ANALYSIS OF VARIANCE OF ERBDRS-OF-ESTIMATE, AND THE ASSOCIATED
DUNCAN'S TEST, A1DNO FIVE GRADERS, BY EACH OF EIGHT GRADES
Duncan's Test
Sum of
Mean
of Difference
Source
d. f.
Squares
Square
Among Grader's
MBansa
Blocks (animals)
High Utility
5
10.97
2.19
Treatments (graders)
U
3.20
.80
Error
20
7.20
.36
Total
29
21.37
Los
Standard
Blocks (animals)
10
17.78
1.78
Treatments (graders)
U
3.01
.75
Error
1*0
11.59
.36
Total
5U
35.38
Mid
Standard
Blocks
19
93.71
1.93
1* 5 1 3 2
Treatments (graders)
h
11.56
2.89**
a 5 O—
i* 5
Error
76
39.61a
.52
Total
99
lhk.91
JL-Í
High Standard
Blocks (animals)
20
87.03
1.35
U 1 5 2 3
a i 5
Treatments (graders)
U
11.U7
2.87**
Error
80
U7.73
•60
a i 5
Total
10U
11*6.23
Lost
Good
Blocks (animals)
13
66.31*
5.10
Treatments (graders)
h
3.95
.99
Error
52
37.65
.72
Total
69
107.95

113
APPENDIX TABLE 2.—Continued
Duncan*6 Test
Sum of Mean of Difference
Source d. f« Squares Square Among Grader's
Means*
Mid Good
Blocks (animals)
29
199.13
6.87
k
1 3
L_I
Treatments (graders)
h
17.06
U.26**
Error
117
61.1U
.52
U
1 3
2
Total
150
277.33
h
r~r
L
j—
High Good
Blocks (animals)
15
6U.79
U.32
h
1 3
2 5
Treatments (graders)
k
15.13
3.78**
a
1 3
2
Error
60
35.27
.59
TT
Total
79
115.19
Low Choice
Blocks (animals)
7
55.57
7.9U
2
Treatments (graders)
h
9.09
2.27**
}
U 1
5
Error
28
15.31
.55
Total
39
79.97
^^Significant at the 1 per cent level,
lumbers refer to the live-graders.

nil
APPENDIX TABLE 3
ANALYSIS OF VARIANCE OF ERRORS OF ESTIRATE AND THE ASSOCIATED
DUNCAN'S TEST, AMONG FIVE GRADERS, BY EACH OF SIX BREEDS
Source
d. f.
Sum of
Squares
Mean
Square
Duncan's Test
of Difference
Among Grader's
Meansa
He refords
Blocks (animals)
1*7
261.10
5.56
1*
3 1
** 2
5
Treatments (graders)
1*
18.65
U.66**
Error
188
12U.55
•66
1*
3 1
2
Total
239
l*0l*.30
1*
3
Brahman
Blocks (animals)
15
68.75
U.58
Treatments (graders)
ii
19.25
.1*8
*
Error
60
28.68
.1*8
Total
79
99.55
Cbarbray
Blocks (animals)
35
58.39
3.89
Treatments (graders)
U
5.05
1.26
Error
60
1*6.55
.78
Total
79
109.99
Hereford x
Brahman
Blocks (animals)
15
76.80
5.12
1*
1 2
5
Treatments (graders)
U
8.58
2.11**
1*
1 T~
5
Error
60
39.82
.66
1*
Total
79
125.20
Jl
JT“
Santa Gertrudis
Blocks (animals)
15
87.99
5.87
1
U 5
2
Treatments (graders)
k
7.88
1.97**
1
u tl
Error
60
21.32
.36
1
u T
Total
79
U7.19
Brahman x Angus
Blocks (animals)
15
109.39
7.29
1*
1 3
2
5
Treatments (graders)
1*
6.93
1.73*
1»
rr
7“
Error
60
36.67
.61
1*
Total
79
152.99
k-J-
*Numbers refer to the live graders.

115
and only the non-signifleant ly different categories could be combined*
It might seem that for each class, breed, or grade of animal,
a lire grader would spawn essentially the same array of errors-of-
estímate. While this relationship may be a valid assumption concerning
proficient live-graders (and a desirable standard of performance), for
the five live-graders observed at Belle Glade this relationship is
treated as a hypothesis to be tested* If the hypothesis is true,
then the errors-of -estimate associated with the several grades and
classes may be pooled into one over-all sample representing a live-
grader*
The data at hand contain samples of unequal sise within grades,
therefore, a single classification analysis of variance can be run on
the distribution of errors-of-estímate made by any one live-grader*
The errors-of-estimate on all animals falling in one carcass grade
constitute a sample.The simplified analysis of variance model,
where a block effect cannot be isolated, becomes djj - JJ- ♦ °< i + € ^.
Compared to the previous model, the random error term, now con¬
tains more components of an uncontrolled nature*
For a single live-grader in the group of five, the data are
represented in samples of eight grades*^°® The eight sample variances
107since in samples of this kind, the grade value being esti¬
mated is constant, the distribution of the estimates in a sample is
identical to the distribution of errors of estimate* The transforma¬
tion to errors is accomplished by subtracting the constant grade value
from each aatímate*
10better experimental design would try to insure equal

116
were tested for homogeneity by Bartlett*8 test, and for all five
graders showed non-significance. Non-homogeneity of variance would
Invalidate the analysis of variance*
The analysis of variance can test the hypothesis, "The errors-
of-estimate made by a live-grader are the same, except for random
difference, regardless of the grade of animal he observes." This
analysis of variance of the performance of each live-grader indicated
significant differences among grades of animals for live-graders Nos*
1, 2, 3, and U (Appendix Table U)* Grader No* 5 exhibited no signifi¬
cant differences of this sort.
A significant F-value indicates only that the mean error-of-
estimate for one grade is different from the mean for one other grade*
It requires a test of comparison among means, such as the Tukey or
Duncan test, to locate all the differences*^^ The number of signifi¬
cant differences among mean errors-of-estimate by grades was smallest
for Grader No* U (Appendix Table 5)* In reading Appendix Table 5, be
sure to examine every line of underscoring to detect all the non-sig-
numbere of animals in each grade, and have the full range of grades
represented. This would allow a two-way analysis providing a better
estimate of experimental error, and a more reliable test of comparisons
among group means.
10%he difference between two items is easily grasped. When
five items are considered, the problem of differences is complicated by
the many possible combinations of two. llhequal sample sise is a further
complication. Kramer's extension of Duncan's Multiple Range Teat teats
the various combinations* Cf• C. Y. Kramer, "Extension of Multiple
Range Test to Group Means with Unequal Number of Replications." Bio¬
metrics. Ill (1956), pp. 307-10*

117
APPENDIX TABLE 1*
ANALYSIS OF VARIANCE OF ERRQRS-OF-ESTBiATE, A1CNG
EIGHT GRADES OF ANINALS, BY FIVE LIVE-GRADERS
Source
Degrees of
Freedom
Sums of
Squares
Usan
Square
Live-Grader 1
Among gradee
7
36.86
5.27**
Error
118
129.99
1.10
Total
125
166.85
1
Live-Grade r 2
Among gradea
7
1*5.85
6.55**
Error
118
201.57
1.71
Total
125
21*7.1*2
IAve-Grader 3
Among grades
7
57.67
8.21***
Error
118
11*9.75
1.27
Total
125
207.1*2
Live-Grader 1*
Among gradee
7
1*8.12
6.87**
Error
118
11*1.59
1.20
Total
125
189.71
Live-Grader 5
Among grades
7
17.51*
2.51
Error
118
215.96
1.83
Total
125
233.50
«♦significant at 1 per cent level of probability.

118
APPENDIX TABLE 5
KRAuER'Sa EXTENSION OF DUNCAN'S MULTIPLE RANGE TEST OF
SIGNIFICANCE AMONG THE MEAN ERRORS-OF-£STI¿iATE FOR
EIGHT CARCASS GRADES OF 126 STEERS,
BY EACH OF FOUR GRADERS®
GRADER 1
Carcass Grade (12) ( 9) (10) (U) (8) (7) (6) (5)
Mean Error -1.50 -1.29 -1.13 - .88 - .71 - .1*0 0 + .83
GRADER 2
CarcaBS Grade (12) ( 9) (10) (11) (8) (7) (6) (5)
Mean Error -1.75 -1.21 - .77 - .56 - .19 - .10 - .36 ♦ .83
GRADER 3
Carcass Grade (12) (10) (11) (9) (7) (8) (6) (5)
Mean Error -2.00 - .90 - .81 - .79 - .30 0 ♦ .51, + .83
GRADER h
Carcass Grade (12) ( 9) (10) (11) (7) (8) (5) (6)
ivnan Error -1.75 -1.50 -1.13 -1.25 -1.00 - .86 + .17 ♦ .27
^0 Y. Kramer, "Extension of Multiple Range Test to Group Means
with Uhequal Numbers of Replications," Biometrics, XII (1956), pp.
307-10.

119
APPENDIX TABLE $•—Continued
bAny two means underscored by the same line are not signifi¬
cantly different* Any two means not underscored by the same line are
significantly different at the 5 per cent level of probability, EXCEPT
if the two means are both contained in a subset of the means which has
a non-significant range, the difference cannot be declared significant*

120
nifleant differences.^0
For any one live-grader his errors-of-estimate may differ
among breeds. Analysis of variance and the associated Duncan's test
indicated significant differences in errors-of-estimate among breeds
only for Graders Nos. 3 and U (Appendix Table 6).
On a group of animals in one carcass grade, the difference
between the live-grader's mean estimate and the carcass grade is also
an estimate of bias. In this respect, the hypothesis of no difference
among mean errors-of-estimate could be stated as no difference in
biases among grades. While tiro or more biases may be significantly
different from each other, it is possible that one or more of them
may not be significantly different from zero. There are eight esti¬
mates of bias, one for each grade, available from the scores of each
grader. Could these eight mean errors-of-estimate all have come from
sampling distributions of mean errors normally distributed with mean
zero? The hypothesis to test is JU â–  0. Expressing the bias as d,
the hypothesis is tested fcy computing for each H t
d -JJ d - 0
(7) t â–  = , where s - sH
s s 3 -2
-^For instance, with Grader No. 1, his mean error for grade 5
is not different from grades 7-12. His grade 6 is not different from
eitner 5, 7, 6, or 11, but is different from 9, 10, and 12. It may
require practice for some readers to become accustomed to this -type
of table, but there is no more concise way of presenting these results
in summary form.

121
APPENDIX TAELS 6
AMUSES OF VARIANCE OF ERRORS-OF-ESTIMATE AND ASSOCIATED
DUNCAN’S TEST,* AiDNG SIX BREEDS OF ANIMALS,
FOR TWO LIVE-GRADERS
Duncan's Test
Sum of Mean (Kramer's Extension)
Source d. f • Squares Square of Differences Among
Grader's Means
Live Grader 3
Breeds
5
30.13
6.03*«
1
6
?
2
Error
122
185.86
1.52
1
6
3d
2
Total
127
215.99
?
live
Grader U
Breeds
5
28.26
5.65«*
6
1
5
3
2 u
Errors
122
166.36
1.36
6
1
5
3
2
Total
127
191* .62
6
1
2
««Significant at the 1 per cent level.
*0.8. Duncan, op. cit.
bAny two means underscored by the same line are not signifi¬
cantly different. Any two means not underscored by the same line are
significantly different at the 5 per cent level of probability, EXCEPT
if the two means are both contained in a subset of the means which has
a non-significant range, the difference cannot be declared significant.
cThe numbers refer to breeds* 1— Hereford* 2—Brahmanj
3—eharbray) U—Brafordj 5—Santa Gertrudisj 6—Brangus.
dThe mean error was the same for breeds 3 and 5.

122
The variances of each set of eight distributions from which the d's
are computed can be tested for homogeneity by Bartlett's test* If
2
found homogeneous, all eight are pooled as an estimate of O' For
2
the eight distributions of each grader the pooled estimate of cr ^ is
obtained in the analysis of variance as the error component, s*[.
On the basis of the t-test results (Appendix Table 7} there
appears to be, for the five graders, a tendency for the mean errors-
of-estimate or bias on the lower grades of animals to be essentially
zero. In estimating the grades of the higher grades of animals, the
occurrence of definite biases appears very likely*
The analysis of variance (Appendix Table U) produced evidence
supporting non-acceptance of the hypothesis of similar errors-of-
estimate among all grades regarding live-graders Nos* 1, 2, 3, and U*
This hypothesis could not be rejected in regard to Grader No. 5*
Although Grader No* 5 is am exception, it should be clear from this
evidence that for any of the four graders, there is no justification
for combining his errors-of-estimate over all grades and computing an
over-all bias* Apparently, the means of several separate populations
of errors-of-estimate are involved *^*
Some of the avenues of approach to inferential analysis of
grading performance have been presented in this chapter* Because the
111But, by assumption in the analysis of variance and supported
by Bartlett's test, the variances of the several separate populations
representing grades are homogeneous*

123
APPENDIX TABLE 7
VALUES OF t FROM THE TEST OF /U â–  0 USING THE
MEAN SRHOR-Oi*-ESTIMATE, BY EACH GRADER,
FOR ALL ANIMALS IN A SPECIFIED
CARCASS GRADE®
GRADE
n-1
d. f.
GRADER
1
2
3
1*
5
High Utility
( 5)
1.9U
1.9U
1.91*
.1*0
.1(0
Low Standard
(10)
0
1.1U
1.71
.85
OO
CM
.
Mid Standard
(19)
1.71
•1*3
1.28
U.27**
3.63**
High Standard
(20)
3.10#*
.83
0
3.76**
2.92**
Low Good
03)
l*.6l**
U.32**
2.82*
5.36**
3.82**
Mid Good
(29)
5.92**
U.03**
U.71**
7.1*9**
2.25*
High Good
(15)
3.36**
2.11*
3.09*
1*.77**
.23
Low Choice
( 7)
li.oU**
U.72**
5.39**
lt.72**
1.67
^Significant at 5 per cent, but not 1 per cent.
^Significant at 1 per cent.
at - ^ ~M - d - 0
i
d
3

12U
data were not strictly from random samples or a designed experiment,
the validity of the particular differences showing significance here
is not predictable. This, however, was recognized at the outset of
the analysis. Nevertheless, the technique has great potential in
evaluating objectively the differences among grading abilities of
individuals.

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U. S. Department of Agriculture Marketing Research Report No.
l65• Washington» Government Printing Office, 1957*
Williams, W. F., etal. Economic Effects of U. S. Grades for Beef.
U. 5. Department of Agriculture Marketing Research Report No.
298. Washington» Government Printing Office, 1959*
Williamson, H. F. (ed«). The Growth of the American Economy. New
York» Prentice-Hall, Inc., 19li6.

BIOGRAPHICAL SKETCH
Louis Vernon Dixon was born in California, Missouri, January
17, 1927* He enrolled at the University of Connecticut in June, 19U1*.
Following a period of military service, he completed the requirements
for the Bachelor of Science degree in January, 1950. He entered
graduate school at the University of Connecticut in September, 1953»
after working with the United States Department of Agriculture, and
another period of military service. He was awarded the Master of
Science degree in June, 1955*
He has been employed as a soil conservationist by the U. S.
Department of Agriculture, and as a research assistant at the Connecti¬
cut and Florida Agricultural Experiment Stations. Since July, 1957,
he has been employed as an agricultural economist with the United
States Department of Agriculture. The analysis and conclusions in the
dissertation represent only the opinions of the writer and not those
of the Department of Agriculture.
He is a member of Gamma Sigma Delta and Phi Kappa Phi honor
societies, and the American Farm Economic Association. He was awarded
a Charles H. Hood Dairy Foundation fellowship in 1955 cud 1956.

This dissertation mas prepared under the direction of the
chairman of the candidate's supervisory committee and has been
approved by all members of the committee* It mas submitted to the
Dean of the College of Agriculture and to the Qr&duate Council and
mas approved as partial fulfillment of the requirements for the degree
of Doctor of Philosophy*
June 8, 1959
Dean, Graduate School
SUPERVISO HI COMMITTEE I

A0RI-
CULTURAL
LIBRARY
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