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The beef industry may have had a commodity mindset in the good old days, but things are definitely different today. New markets dictate more progressive management and record keeping practices from producers, while they add opportunities for practitioners to engage with clients.
Value-added opportunities for cow-calf producers have expanded in recent years to the point that generic cattle, low accountability, and anonymous producers are quickly becoming a thing of the past. Behind these opportunities is an industry that has experienced changes since December 2003 in beef export market access, and also one that has become more aware of the impact health and genetics have on cattle feeding performance and end-product quality, especially for today’s quality-conscious consumer.
These days, the price spread among the same class of cattle is larger than ever, and it’s not uncommon to find a $25/hundredweight (cwt.) spread on calves and a $100/head spread on fed cattle. Overall, consumers and the beef industry as a whole benefit from increased accountability and stepped-up management. Darrell Wilkes, the U.S. beef supply systems manager for ABS Global, Inc., believes producers who choose to raise and market above average cattle versus commodity cattle will be rewarded, too, for documented quality as well as added value. He explains that numerous forces are responsible for the price spread in the marketplace, namely branded beef, grid marketing, name-brand health programs, name-brand genetics, supply chain marketing, and documentation and verification.
Beef products of today are slotted and marketed under numerous brands to further differentiate and meet demands at the retail and food-service levels. Branded beef carries a specific or implied promise, such as breed-specific, guaranteed tender, grain-fed, grass-fed, natural, organic, humanely-raised and/or environmentally responsible.
Certified Angus Beef® and Certified Hereford Beef® are examples of breed-based brands, while packer brands include Cargill Meat Solution’s Sterling Silver® Premium Beef, or National Beef’s Naturewell® Natural Beef, Black Canyon® Premium Reserve, and Imperial Valley® Premium Beef. Still, some are store brands such as Safeway’s Rancher’s Reserve®, which is guaranteed tender. According to the 2010 National Meat Case Audit, some 51 percent of beef sold at retail was, in fact, store branded.
Known to increase carcass value knowledge for both feeders and producers, grid marketing has become increasingly popular, especially with the availability of instrument grading. In 1989, ten percent of fed cattle sold on grids. According to Wilkes, in 1999 this figure was 20 percent, and today it is now 45 percent.
Name-Brand Health Programs
There has been a natural evolution of health programs in feeder calf marketing, and the bar keeps rising, Wilkes relays. A generic vaccination program is just at par; there can be discounts given for the use of non-modified live vaccinations. A premium program includes a name-brand integrated modified-live vaccine, mineral, and parasite control program, he says.
Jim Davis, a 24-year Superior Livestock Auction representative based in Boise, Idaho, adds, “Every time I sit down with a rancher, I talk about vaccination. I try to get them on the VAC 34 or VAC 45, because of how much more these cattle are bringing versus the other cattle. We want them healthy when they go.” He also confirms that buyers are definitely interested in mineral programs, and he has many customers who are testing and identifying their calves as BVD PI-free.
A recent study, conducted by Kansas State University, shows that the supply of weaned calves and those treated with certified health programs have both increased over time. “Cattle producers striving to improve profit might first focus on improvements in calf weaning and animal health programs as they offer the greatest value-added premiums,” reports this study, which evaluated the genetic, management, and marketing characteristics of more than 30,000 lots of calves sold on Superior Livestock Auction’s video market from 2004 to 2010. (See Table A.)
Well-known seedstock genetics are also considered premium. The color “black” is no longer thought of as a genetic description, and breed is not even descriptive enough for some buyers, Wilkes points out. Instead, buyers desire to know what seedstock program’s genetics are represented within the calves, and how those sires’ expected progeny differences (EPDs) rank within that respective breed. Davis, too, assures that buyers want to know about genetics as well as health. He says they are “totally aware” of bloodlines and reputable seedstock operations and how these cattle perform.
Additionally, Kansas State researchers concluded in their study that buyers appeared to be more discriminating in seller management and marketing claims. “Producers who generically described their calves as weaned, non-implanted, black-hided calves with all their shots missed chances for additional revenue that more specific descriptions may have provided.” Why the need for so much information? Just under 50 percent of cattle are targeted for different grids, each with specific quality and yield grade, carcass and rib eye area targets, with attached premiums and discounts.
Supply Chain Marketing
These systems fill the pipeline with specific, targeted genetics, so this practice is also widening the feeder cattle price spread. Buyers and sellers involved in supply chains develop long-term relationships and share information for mutual benefit and success. They are especially product-focused to ensure customer needs are met.