The value of third-party certification of preconditioning claims at Iowa feeder cattle auctions.

摘要

This article examines if the higher cost of third-party certification (TPC) of preconditioning in Iowa, USA, is offset with a sufficiently higher premium and if the markets make a distinction between the value of uncertified preconditioning and partial preconditioning claims. To this end, a hedonic pricing equation is proposed. The model is estimated on the basis of data from 19,046 feeder cattle lots sold at auctions in Iowa between October 2005 and February 2006. After controlling a variety of feeder cattle characteristics and market and sale conditions in Iowa feeder auctions, the price premiums for preconditioning claims i.e., vaccinations and minimum 30 days of weaning, with and without third-party certification (TPC) are estimated as $6.12/cwt and $3.35/cwt, respectively. These premiums differ statistically (p<0.0001), and their difference exceeds the average participation cost of TPC ($1/cwt). In conclusion, TPC is valued in the market to credibly signal preconditioning investment under asymmetric information.