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The current beef grading system is mainly affected by marbling in meat. This study analyzes the impacts of consumers’ demand shift over marbling or grading on domestic producer welfare. Based on a vertically differentiated market, the simulation analysis shows that if the domestic consumers’ demand shifts to less marbling or lower graded beef, then the producer welfare can be worse off. The degree of welfare loss of domestic producers relies on how much demand shifts toward less marbling or lower graded beef.