Analysis of the Impact of Beef Grading System Reform on the Price of Premium Hanwoo Beef

Abstract

Korea has been implementing a beef grading system consisting of quality and quantity grades since 1992. The quality grade consists of 1++ (highest), 1+, 1, 2, 3 (lowest) grades and is determined by marbling score (% fat content), meat color, fat color, texture, and maturity. The quantity grade consists of A, B, and C grades and is determined by back-fat thickness, eye muscle area, and carcass weight. The quality grade, mostly determined by the marbling score, is the key factor in determining the price of beef. This pricing mechanism has increased the production costs by breeding beef cattle for a long time to receive a quality grade 1 or higher. In addition, the recent trend of meat consumption in Korea is moving toward avoiding fat in the diet. Accordingly, the Korean government changed the beef grading system from December 1, 2019. In the new grading system, beef with a lower marbling score receives a higher quality grade than before. Therefore, the new system is expected to affect the price of beef, especially premium beef (a quality grade 1 or higher). This study analyzed the effect of changing the beef grading system on premium beef price. To do this, we applied DID (Differences in Differences) model to the wholesale price of beef. As a result, it was found that the real price of premium beef increased by 709~779 won per kg due to the change in the beef grading system.