Steve Suther: Black Ink 2-28-11
As you tag another calf and write the information in that little book, do you ever think about how well it will “hit the target?” If you are going to the trouble of establishing identity (ID) at birth, you should at least think about the future these calves will face.
Some beef brands and most focused supply chains have specifications that start with genetics. There are a few that want you to jump through more hoops than the resulting market price may cover, but the proven brands work on market premiums and tap into longtime consumer demand.
Do these calves represent a step forward, sideways or backwards? Will the heifers provide some excellent replacements that move the herd average in a planned direction?
Of course, it will take more than a year to get data on the steers and at least twice that to get the first indication on the heifers. That’s why you take a long-term approach.
Cattlemen who think beyond weaning often monitor the “Choice/Select spread,” or that difference between the value of USDA Choice and Select boxed beef. Many value-based packer grids include that variable as a component.
The fact is, that spread is sometimes very narrow. Those who see Choice as their ideal can get discouraged and consider changing directions. The heck with Choice, let’s just make more pounds of whatever they decide to grade it.
You might hear about the neighbor’s calves “topping the market” with genetics geared only for growth. You might hear about some pen of cattle that made more money at 50 percent Choice than another did at 80 percent Choice.
The fact is, those anecdotes prove nothing except what is possible. Other examples prove some cattle can be premium Choice or even Prime Yield Grade (YG) 1 and bring back $150 per head over Select.
Most of the data still confirms quality grade makes more money than yield grade, and fits in the same package with feedlot performance.
Although the 2010 weekly average Choice/Select spread of $6.30 per hundredweight (/cwt.) was $1.20/cwt., more than 2009, some argued it was not enough incentive to aim for quality. They might not have seen the Iowa State University research last year that said ability to marble (hit higher quality grade) is the top factor in feedlot profits anytime that spread is above $6/cwt.
Paying no attention to marbling at the ranch is easy, so it can be tempting to believe recent talk that we are producing “too much Choice.” Last year’s half-billion-pound increase in Choice production sold for $1.20/cwt. more, and demand for premium Choice brands is growing still faster.
If you look at where the premiums come from in 2010 grid-sold cattle, the top percentile groups do it with quality grade and brand premiums, easily overpowering some YG 4 discounts. But what about net profit?
When 443,000 commodity cattle fed from Texas to Iowa in 2004-2009 were sorted into high, middle and low profit groups by Professional Cattle Consultants, the highest profit third had the highest share of Choice. Profit declined as quality grade declined.
When all those cattle were sorted for average daily gain, the highest percentage of the lean YG 1s and 2s showed up in the poorest gaining third. With the same pattern in the poorest profit third, it does not look like it paid to aim for more of those lean yield grades.
That’s not to say you should ignore yield grade or ribeye area – it’s just not a complete target. You need quality grade and growth, and you need maternal traits if you want to make genetic progress in your herd.
You can find it all in today’s leading beef genetics, so don’t settle for less. Don’t shift away from marbling to add more of anything else, but aim for simultaneous progress.
With the fewest calves in 52 years, you’ll get $1.40/cwt. for just about anything, analysts say. It’s up to you if you want to go for another 20 percent or more. Finished cattle can’t get much bigger, so the continuing focus will be on making them better.
Next time in Black Ink Miranda Reiman will look at forging relationships. Questions? Call toll-free at (877) 241-0717 or e-mail Steve@CertifiedAngusBeef.com.
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