Information Asymmetry in Cattle Marketing
Information asymmetry refers to a situation where one party in a transaction has more or better information than the other. When one party has more relevant, up-to-date, or detailed information it can lead to potential exploitation and unfair pricing. The less informed party may make poor decisions leading to negative outcomes. In the case of marketing cattle, the less informed party may not be willing to bid or pay fair value as a result of lack of information.
The commercial cow-calf operation serves as the initial source of product in the segmented chain of beef production. In conventional beef production weaned calves will become stockers, then go through a feedlot operation and fed to a compositional endpoint, at which time they be harvested and turned into the product of beef. Your weaned calves will likely have multiple owners and be 18 – 24 months of age by the time they are beef, the product. When marketing your weaned calves, have you ever felt at a disadvantage? Are you able to document your investment in genetics and management practices that give your calves additional value to the next owner? Can you show evidence that calves have been vaccinated, have a functional immune system, are likely to remain healthy, grow and gain efficiently through the next phases of production, and ultimately yield a carcass of value that meets consumer demand?
Documentation of health status resulting from a sound pre-weaning vaccination program has become the industry standard in marketing calves. Even in the short supplied, robust market we currently enjoy, the backgrounded, long-weaned calves sell for more than bawling, fresh weaned calves. Considering what has value to the next owner, this is logical. With regard to the genetic potential of calves for post-weaning performance through the stocker and finishing phases of production it also makes sense that the next owners would be willing to pay more for calves with documented superior genetic potential for more gain, better cost of gain, more carcass weight, more red meat yield and especially; more carcass quality. So how is this documentation achieved?
Historically, Genomic companies and breed associations offer genetic tests for commercial cattle that many commercial producers have used to understand the genetic makeup of their herds. This information can be valuable when selecting replacement heifers (maternal traits) and for marketing steers (growth and carcass traits). The sampling process is similar for seedstock or commercial operations. Typically a blood sample (or tail hair with root bulbs) is submitted for testing. After DNA from the sample has been analyzed a scorecard for calves will be received with a rating of genetic potential.
More recently, the Genetic Merit Scorecard (GMS) from the American Angus Association has been made available. The GMS has the advantage of projecting the performance potential from weaning to carcass based on the genetic values of the registered Angus sires. Accordingly, the GMS does not require any tissue sample to be submitted from calves. Starting in August 2024, producers earned premiums on the U.S. Premium Beef, LLC (USPB) Kansas grid based on the genetic merit of their cattle. The marketplace has responded to having an objective, reliable way to describe the genetic merit in a pen of feeder cattle by paying out significant premiums. To qualify for the GMS, calves’ sires must be predominantly Angus and 75% of the bull battery must be registered Angus sires. More information on the GMS and enrolling calves is available at the third link referenced at the end of this article. Longer term solutions include retaining (at least partial) ownership of calves through the stocker and finishing phase. Planning and coordinating retained ownership so that performance data on health, growth and carcass merit is made available and flows back to the cow-calf operation is a critically important step in building a reputation for your operation and the calves you produce.
•Johnson, Mark. “Information Asymmetry in Cattle Marketing” Cow-Calf Corner Newsletter, August. 2025.
•Genetics in the Genomics Era. Chapter 28. Oklahoma Cooperative Extension Service Beef Cattle Manual. Eighth Edition.
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