The Impact of a New Grading System on the Beef Cattle Industry: The Case of Canada

Abstract

Changes in the grading systems of agricultural commodities will lead to considerable adjustment costs. In 1972 Canada introduced a change in its grading system for beef. The period of adjustment for beef producers has been in excess of ten years. The observed pattern of adjustment for one of Canada's cattle-producing areas is discussed and the costs associated with the adjustment process estimated. Some measures to reduce the costs of adjustment are outlined. Changes in the specifications for any agricultural commodity's grading system may have an impact on all components of the food chain from consumer through retailer to processor and, ultimately, to primary producers. As well, government regulatory agencies and the suppliers of inputs to both the processing industry and primary producers may be affected. Any change in the grading system may be to the benefit of only some of these groups, while others may incur considerable costs, especially in the short run. One group which will be affected by a major change will be beef producers, yet little work has been done to discern the net effect of a major change in the grading system for such producers. In 1972 the Canadian government implemented a new beef-grading system. The second section of this study outlines the background to the beef grade change in Canada. In the third section a brief theoretical discussion of grading and grade changes is presented. The effect of the Canadian grading change on the physical makeup of cattle marketings in one of the Canadian cattle-producing regions is reported in