“Performance Paradigm II: Carcass Marketing Window”
by Chris Reinhardt, feedlot specialist
When are feedlot cattle done?
Most managers who’ve sold a few pens of cattle can eyeball a pen of cattle and thumbnail when the average of the pen is ready to be shipped. It’s what we do.
But after moving to a carcass-value (grid) marketing system, this traditional approach to terminating the finishing period is no longer a best practice. In the past, selling on a live basis, we were paid an average price per pound for all animals, for all pounds. But on a grid system, we are paid a different price per pound for each animal based on it’s individual, not the average, value.
Grid premiums and discounts are based on supply and demand. The Choice-Select spread is based on how many Choice boxes are available relative to the demand, and the volume of Choice carcasses that normally arrive at that plant during a given week. Yield grade 4 and 5 discounts are based on how many over-fat carcasses the plant has to deal with during the week and what the meat market will bear. Yield grade 1 and 2 premiums are based on what the demand is for lean boxes. The grid is designed to incentivize more of the types of carcasses which are in demand and dis-incentivize those that create added cost to the plant. As an illustration: although we normally consider Choice beef to be more valuable than Select, we’ve actually had brief periods when the Choice-Select spread has actually been negative, because the Choice demand was completely fulfilled, and the Select customers did not want to pay extra for Choice, and actually were willing to pay slightly less because of the extra internal fat that Choice meat carries.
Producers on a grid have essentially told their packer-partner to evaluate each animal separately from their penmates, and to pay on what each individual animal is worth, yet they continue to insist on selling when only the average of the pen is ready. If we built door frames for the average, half of us would bang our head every time. In other words, if the theoretical “average” animal is ready, half of the pen is over-fat and the other half is under-fat. Neither half is going to receive it’s hypothetical maximum value, and all will bring less than they could bring per pound, regardless of what grid is being used.
Why not match shipment practices to the very same evaluation system that will be used to determine individual value? Why not evaluate animals individually and sell them when they achieve some standard which will bring maximum value from the grid? Although ultimate marbling potential is driven partially by genetics, it is also driven by overall level of body fat. Few yield grade 1 or 2 carcasses grade Choice or above. By feeding to a Yield grade 3 or above every animal is given the opportunity to reach Choice, although not all have the ability.
Although many grids provide a small premium for lean carcasses (yield grade 1 and 2), the feed efficiency of lean animals is not sufficiently better than the feed efficiency of yield grade 3 animals to justify shipping early. If we calculate daily carcass gain as 80% of daily live weight gain, and conversion similarly, we can determine that carcass value of gain almost always exceeds carcass cost of gain until animals approach yield grade 4.
So the goals of carcass-based marketing are (1) retain animals until the cost of carcass gain approaches the value of carcass gain and (2) sell animals when each individual will approach maximum grid value, not the “average” animal.
