Transaction Costs and Cattle Marketing: The Information Content of Seller‐Provided Presale Data at Bull Auctions

Abstract

At sales out breeding bulls, prospective buyers have strong incentives to undertake presale measurement activities. To reduce these transaction costs, sellers often provide information on sale bulls. We examine the information content of two measures of the expected performance of the bulls and find that within a given herd, older, simpler measures of performance contain more information about prices (from buyers' perspectives) than newer, more sophisticated measures known as expected progeny differences, or EPDs. We also find, however, that buyers appear to pay considerable attention to annual changes in herd-average EPD values when comparing animals from different sellers. Copyright 2001, Oxford University Press.

Price Determinants of Performance-Tested Bulls over Time

“…A hedonic pricing model was specified to estimate the impact of phenotypic traits, performance measurements, and EPDs on bull sale price over time, which follows the modeling approach of previous studies (Bekkerman, Brester, and McDonald, 2013;Brimlow and Doyle, 2014;Chvosta, Rucker, and Watts, 2001;Dhuyvetter et al, 1996;Jones et al, 2008;Kessler, Pendell, and Enns, 2017;McDonald et al, 2010;Vanek, Watts, and Brester, 2008;Vestal et al, 2013). Hedonic pricing models have been used to determine the influence of characteristics over time (Blank, Saitone, and Sexton, 2016;Hanson, Sherrick, and Kuethe, 2018;Zimmerman et al 2012).…”

“…They found that, depending on the breed, certain EPDs were associated with bull price changes and that many phenotypic traits and performance measurements also affected bull prices. Chvosta, Rucker, and Watts (2001) used data from 1982 to 1997 for bulls sold in Montana and data from 1986 to 1996 regarding bulls sold in Nebraska and South Dakota. They found that phenotypic traits were more valuable to producers than EPD information.…”

“…Furthermore, early studies show producers' value of EPD measurements was small relative to phenotypic traits and performance measurements (Chvosta, Rucker, and Watts, 2001;Dhuyvetter et al, 1996;Irsik et al, 2008). This might be attributable to the lack of knowledge and confidence in using EPD information in their bull purchasing decision (Jones et al, 2008).…”

Association between genetic evaluation and show-ring judging for dairy and beef cattle

“…Thus, it can be inferred that selecting breeding animals based on JUD could be a complementary tool to strategies based on GE. In this regard, a number of studies have shown that EPD values influence price at traditional JUD and auction shows under several conditions (Chvosta et al, 2001;Paneto et al, 2009;Vestal et al, 2013), which means that EPD is taken into account when deciding to buy breeding animals in several places around the world. The relevant challenge is to incorporate that culture in developing countries.…”

Analysis of the relationship between performance measures and sale price among Angus bulls from two different bull providers

“…Performance programs, based on individual animal measurements, began to flourish in the 1960s. Prior to 1960, the Fort Keogh Livestock and Range Research Laboratory in Miles City, Montana, along with other research institutions, began collecting performance measures in breeding cattle (Chvosta, 2001). In 1968, the Beef Improvement Federation (BIF) was founded and began to develop guidelines for performance measurements.…”