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Making Cattle Count

published: March 25th 2011
by: Gayle Smith
source: The Fence Post

“They're black and they've had all their shots” is not enough any more for ranchers marketing their calf crop. According to Dr. Darrell Wilkes, manager of ABS Beef Supply Systems in Parker, Colo., the cattle market is dictating more documentation. Wilkes spoke to cattle producers, feedlot operators and veterinarians at the Nebraska Classic in Kearney, Neb., during Cattle Feeders and Veterinarian's Day.

“There are fundamental, irreversible changes occurring in the beef industry,” Wilkes explained. “The cattle market is rationalizing. Some cattle are worth more than others. In the good ‘ole days, all same-class cattle sold for the same price. You might see a $5/cwt spread on calves and a 50 cent/cwt spread on fed cattle.

“Things are different today,” he continued. “After a decade of growth in demand, and a change in consumer product mindset, the price spread among same-class cattle is larger than ever. There can be a $25/cwt spread on calves and a $100/ cwt spread on fed cattle.”

Wilkes added that while the value-added market is headed upward, the commodity market is headed downward. The emergence of branded beef programs, grid marketing (electronic grading), name brand health programs, name-brand genetics, documentation and verification for export programs, and supply chain marketing have changed the way cattle are marketed.

Selling branded beef
“Most of us never thought we would see the day we would go to Burger King for Angus beef,” Wilkes said. “Burger King advertises Angus beef as a branded product.”

The branded beef programs all carry specific or implied promises such as guaranteed tender, natural beef, humanely raised, or specific stewardship practices such as grain fed or corn fed. Not all cattle will fit these brands, Wilkes said. Today beef is sold by breed-based brands, packer brands, or store brands.

To qualify for branded beef programs, producers need to know the requirements to qualify for the program ahead of time.

Selling on the grid
Another way to pay a producer for adding value to their calves is by selling them on the grid. In 2009, 45 percent of feeder cattle were sold on grids. Grid marketing allows feedlots to keep track of which cattle win and lose on “the grid,” Wilkes said. “They never forget the wrecks and they never forget the home runs,” he added. “Grid marketing increases carcass value knowledge of feeders and producers. It has been a huge educational boost to the industry.”

When the grade is determined by a USDA grader, there is a chance of human error, Wilkes explained. “What if that person had been looking at 400 carcasses an hour and had a hangover or was sick? Is that who you want determining what your check will be?” Wilkes asked. With the development of grid marketing, producers get paid for exactly what they produce. “Electronic grading is a way for the carcass to be evaluated accurately,” Wilkes explained. “It has even been accepted by the grader's union.”

Wilkes cautioned producers that human graders typically give carcasses fewer yield grade 4s. Producers who received five percent yield grade 4s with a human grader, may see 12-15 percent yield grade 4s with instrument grading, he said.

Name brand genetics
In today's market, producers need to be willing to share what genetics they used to produce a calf with the buyer. “Black is not a genetic description,” Wilkes cautioned. “Even breed is not an adequate description for an increasing number of buyers. Many buyers want to know where the bulls came from, how their EPDs rank within their breed, and any other pertinent information you can provide.”

He continued: “If feeders are purchasing calves for what they pay now, producers need to provide as much information about the calves as possible. They should be able to tell the bull's breeding, EPDs, mineral program, objectives for the operation, growth efficiency, etc.”

Wilkes said he thinks producers need to be prepared to breed cattle for feed efficiency and documented profitability. “At ABS, we have been progeny testing for feed efficiency for 10 years now,” he explained. “We are seeing breeders starting to stack pedigrees for feed efficiency.”

There is a $47 spread in sire EPDs for feed efficiency, and a $80 spread in sire profit EPDs, which includes feed efficiency and carcass merit.

Wilkes said producers can make a lot of improvement in their calves by using feed efficiency as a selection tool. He sited studies where sires have equal daily gains, but different levels of feed intake and vice versa. “The profit differences are real,” Wilkes said. “There are bulls out there that look the same, but have an $80 difference in profitability due to feed efficiency.”

Source and Age Verification
Producers also need to think about source and age verification to earn a premium for their calves. However, he cautioned producers, make sure the program is USDA-approved, or it doesn't count. “Packers are paying a $20 to $40 premium for age and source verified cattle,” he explained. “Cattle-Fax estimates the Age and Source Verification premium on 5-weight calves at $22 per head.”

Wilkes added that age and source verification are required for beef exported to Japan, and have become a feature in most domestic branded beef programs. “Interestingly, exports to Japan in 2010 have nearly recovered to the 2003 levels,” Wilkes said. “The industry has risen to the Age and Source Verification challenge. We just need to verify more cattle.”

With so many opportunities available to earn more premiums for the cattle produced, Wilkes urged ranchers to stay on top of things. “If the premium buyers don't know about your premium cattle, little is gained,” he said. “If you don't document their added value, they are assumed to be average. If you have something special, look for the buyers who are offering to pay a premium for what you produce,” he said.