A long standing joke by cattle feeders when asked what kind of cattle they like to feed is to respond, “the kind that can walk up to the feedbunk.”
In the days of yore, when everything was sold on averages in the cash market, that answer wasn't really a joke. With a few exceptions, it was pretty much standard operating procedure.
That was then; this is now. And now, with about half the fed cattle sold on a grid, a formula, through an alliance or some other form of marketing channel designed to more accurately reward value, cattle feeders are a little more aware of the role that genetics play in downstream profitability.
Mind you, they'll still feed about anything that can walk off the truck and find its way to the feedbunk. But, as says, extracting value out of those kinds of cattle is much more challenging than it used to be.
Brink is the senior vice president and chief risk officer of Five Rivers Cattle Feeding, the world's largest cattle-feeding enterprise with a combined feeding capacity of more than 839,000 head of cattle. Brink says his outfit has a simple formula to guide its cattle-buying decisions. It's based on looking at lots of data from lots of cattle and mining it to see what kind work best in all regions and all situations.
“We sell about 1.5 million cattle a year on a grid, and we've done it for quite a few years. So we have the ability and the luxury to go into the data and find out what's working for us,” he says. And what the data show are some strong regional differences in cattle performance in a packing plant.
Southern packing plants — those in the Texas Panhandle and Southwest Kansas — are starved for grade, Brink says. These plants typically see Choice cattle making up somewhere around 40% of their harvest.
“So grade, while not the only factor, is really the dominant factor that will drive a grid premium in a Texas or Kansas packing plant,” he says. “Any cattle you sell into that environment that grade well are going to do very well because they're compared with the plant averages.”
In contrast, it's a little different as you head north, he says.
“Northern plants will run a higher percent Choice all the time. They'll run from the mid 50s to 60%, sometimes into the mid 60s,” Brink says. But the cattle harvested in northern plants produce higher yield grades (YG). “I've seen many weeks in these northern plants where YG 4s and 5s will run 10%, 15%, sometimes 20%.”
Grade still matters when selling cattle on grids in northern plants, he says. But cattle that can produce carcasses with adequate quality grade and score at YG 2 or better will perform well on the grid.