Coordinated production and marketing systems are developing rapidly in the beef industry. The driving force behind this trend is beef's loss of market share and the resultant need to meet consumer demand for enhanced palatability, consistency, convenience and safety. These coordinated systems take shape in a number of ways, ranging from feeder calf marketing pools to closed cooperatives and other arrangements such as alliances, some of which produce branded products.
Implementation of value-based marketing usually is one objective of these systems. NCBA's Market Resource Task Force highlighted the importance of industry-wide adoption of value-based marketing at a recent meeting. Members of the task force agreed that essential components of a value-based system are:
1) Clearly defined, specific market targets 2) Establishment of an individual carcass identification and data transfer system from packer back to producer 3) Identification and characterization of cattle types 4) Sorting cattle with a specific target every time they are sold, rather then selling on the average.
Defining market targets includes establishing specifications for carcass traits as well as live cattle characteristics. This in turn leads to various methods of formula or grid pricing. Some formulas reward quality grade, some reward yield grade, and others try to balance the two. Similarly some alliances target the high-quality market (as measured by the upper two-thirds of Choice or higher), others target the lean/muscle market and others have a target somewhere between the two.
Pricing formulas reflect market targets. Discounts for "outliers" (dark cutters, over- and under-weights, etc.) usually are very high. A few outliers in a load can easily wipe out premiums paid on superior cattle in the same load. Producers within these alliances must avoid discounts if they are to benefit financially from formula pricing. Some alliances publish average premiums paid across all cattle marketed in their system. Average premiums generally range from $10 to $20 per head, with a few as high as $40 to $50 per head.
In our necessary quest to improve the end product, we must beware of going to extremes when selecting for carcass traits. As an industry, we have a history of going too far when selecting for specific traits such as size (at different times throughout history, we've selected both too small and too large).
Research in recent years has shown that antagonisms exist between certain carcass traits and other traits of economic importance. For example, extreme selection for lean meat yield could have undesirable effects on fertility, calving ease, maintenance requirements, marbling and size of retail cuts. Extreme selection for marbling could result in excessive seam fat deposition in less valuable primal cuts such as the chuck and round, which would further reduce their value in the marketplace. Astute seedstock and commercial cow/calf producers have noted that cattle in some of the highly marbled lines tend to be frail, light-muscled and below average in female fertility. Currently, there is no research to support these observations on highly marbled bloodlines; nonetheless, they come from respected cattle producers.
Studies in the U.S. and Australia indicate that the economic weighting of the three major groups of beef cattle traits for a commercial herd selling weaned calves is approximately 50 percent for reproduction, 25 percent for growth, and 25 percent for carcass. If a producer retains ownership all the way to slaughter, economic weighting shifts to approximately 30 percent for reproduction, 30 percent for growth and 40 percent for carcass. The weighting could conceivably move toward the carcass if the marketing structure of the beef industry were to change significantly in the foreseeable future. Furthermore, carcass traits quite likely already receive greater emphasis in niche marketing programs. But, for the time being and for the industry as a whole, these weightings would appear to serve as a reasonable guide for selection emphasis.
Harlan Richie, Distinguished Professor of Animal Science at Michigan State University, conducts extension and research in beef cattle production. He is faculty coordinator for MSU's Experiment at Lake City, Mich.