RTI Study Proves "Grade & Steal"

May 24, 2007

For years, many cattle producers have mockingly referred to it as "grade and steal.” Now, the study conducted by RTI International has confirmed it. The practice is often called "selling on the grid,” or "grade and yield” where quality, yield, and other factors determine a final price for cattle after slaughter and inspection and the application of premiums and discounts for those factors are calculated from a base price.

According to the RTI study, after correcting for quality, cattle sold on a grid brought $13.50 per head less than cattle sold "on the hoof.” A few feeders have already figured this out and refuse to sell on the grid. Are feeders really stupid? Perhaps so. We might also cynically suggest that many feeders take less on reportable grid sales as an offset to getting more on unreportable sales. In any case, the lower price on grid cattle is a fact.

What's more intriguing is that fact that this practice is likely a violation of the Packers and Stockyards Act. How could the RTI study confirm the practice exists and yet determine that the market is not broken? We could suggest bias, and that is perhaps the case. But also, there was no legal counsel involvement in the study. Academics with little or no knowledge of the law performed the study.

But GIPSA also has failed to discover this problem. For this particular analysis, the RTI study used USDA data, data that has always been easily available to GIPSA. It sound like GIPSA needs a better legal focus (as OIG has also confirmed) to force them to see the violations of law that are right in front of their face. Senator Harkin's S. 622, the Competitive and Fair Agricultural Markets Act of 2007, and companion bill HR 2135, introduced in the House by Congressman Boswell, would take care of this problem. It doesn't matter whether GIPSA (and RTI) are guilty of incompetence or worse, this legislation is absolutely necessary.