Live, In-the-Beef, or Formula: Is there a “Best ” Method for Selling Fed Cattle?

Descriptions of grid pricing, formula pricing, and marketing alliances for fed cattle are provided. These pricing methods are compared with traditional live-weight and in-the-beef pricing. Expected revenue and revenue variability are compared as well as determining what type of cattle are most profitable under each pricing method. Live, In-the-Beef, or Formula: Is there a “Best ” Method for Selling Fed Cattle? Historically, most fed cattle were sold on a live-weight basis. Prior to the 1970’s, much of the fed cattle trade occurred at terminal auction markets. As cattle feeding moved westward out of the cornbelt and into the southern plains, terminal auction market volume declined and direct selling to packers increased. Much of the direct selling continued to be done on a live-weight basis. Ward reported that in 1979, 98 % of the cattle in the southern plains and 82 % of the cattle in the western corn belt were sold on a live-weight basis. In 1990, live-weight pricing still accounted for 72 % of the southern plains trade and 55 % of the cornbelt trade (Packers and Stockyards Administration). A disadvantage to live-weight pricing is that it is based on averages; all cattle in a pe