Steve Suther: Black Ink 4-18-11
April 18, 2011
The commodity markets were up and up, and mostly up as spring arrived. History says there is a kind of gravity that will bring prices at least partway back down. That’d be fine if input costs would fall back in tandem, but history also says we may not be that lucky.
As demand outpaced supply for any form of bovinity, you could still find cheap cows here and there, filling orders for less than $1,000. Sometimes that would even buy calved-out pairs. Better cows were selling for twice that. Weaned calves were bringing from $600 to more than $900 at similar weights.
You might wonder which cattle were the better bargain. All of them are eating more expensive feed and forage now, but the brood cows on the low end of the price scale will not produce calves that can cover costs, let alone top the market.
The grade bull with unknown breeding values bought by the pound and under budget won’t help build better genetics that can compete in this higher risk economy. You could use a better bull, but by the time you upgrade “junk” cows, this market may be a lost opportunity.
If you bought the cheapest calves in any weight range to graze or finish, you may pay more than you bargained for because of sickness, death loss, poor performance and low beef quality grades. Even if they stay healthy, the lower price up front was likely tied to some negative market information, like poor feed efficiency or inability to put on marbling.
You still get what you pay for, and that cuts especially deep when you have to pay a lot for anything in the category.
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Now more than ever, the smart money is on cattle of known genetics, feedlot performance and carcass merit. When low-potential cattle go on feed, the clock is ticking as every day they consume expensive feed, and they must rush to market the first time any packer will have them, just to cut losses. Meanwhile, premium quality cattle continue to gain weight and value on the quality grids as they can be sorted to optimum finish.
Consumers face similar choices in the meat case and on the menu. The financial impact is much smaller for each individual, but the effect on the beef industry is magnified when multiplied by millions. Do they want to pay half again or twice as much as other proteins for average quality beef, or save a buck with dependably bland fare?
Any beef they buy is going to cost significantly more than the alternatives. Some people may seek out cheaper, lower quality cuts and plan to use more high-moisture, slow cooking methods. Others may not realize that there are big differences in beef steaks that costs $4 versus $8 for their spring grilling party, only to be disappointed and have to apologize for the poor results later.
Many times, they find the best value proposition in paying a little more to buy a proven brand or quality grade that always satisfies.
Retailers and restaurateurs sometimes limit quality options, assuming their customers can’t afford the best. Imagine if an auction market manager turned away cows from an award-winning herd’s dispersal because the quality would be too high for the locals.
Perhaps more plausibly, a feedlot could decline partnering with an award-winning ranch to finish cattle with a track record of near ideal gain and grade, if they lack confidence. But most likely, several feedyard would jump at the chance to feed such cattle and own a percentage, because they know the quality is there.
Next time in Black Ink Miranda Reiman will look at our global reputation. Questions? Call toll-free at (877) 241-0717 or e-mail Steve@CertifiedAngusBeef.com.