Whenever cattle prices are in trouble, one of the first "solutions" is to dump the federal grading system and move to private branding. Before we embark on such a path toward private grading and branding, we might best consider the ultimate results of such a move. It might also pay to briefly review the history of federal grades and their impact on the industry.
The federal grading system for beef was initiated in the 1920s for one thing - to provide uniform terminology for price reporting. The grades were extended to live cattle for the same reason - so we could compare Choice steer prices in Amarillo with Choice steer prices in Chicago.
The grades were not even thought of as consumer grades until much later. In the 1950s, economists doing consumer market research found that the federal beef grades also reflected the quality of beef. The higher the federal grade, with more fat (marbling), the more tender and juicy the cuts of beef.
Through their own research studies, large food retailers also found similar acceptability results. Soon, federal beef grades were mass merchandised to consumers throughout the entire retail and HRI (hotel, restaurant & institution) industry. The federal beef grades soon added a value to the beef and, even today, the grade has a value.
Most food retailers used federal grades almost exclusively in purchasing their beef. Such grades provided beef buyers with a consistent, unbiased quality grade and also allowed them to purchase this type of beef from any packer that had federal grading. The growth of the beef industry from small local supply-consumption areas to a nationally distributed food product was due largely to the use of these federal grades.
New Breeds As newer beef breeds were developed, the grade standards were "adjusted" to allow this new beef to attain the higher grades. In fact, for a while this was done almost every 10 years. Consumer acceptability was used as the excuse for the changes but the grades themselves became less reliable. Some retailers even became confused about the newer grades and started backing away from using them.
These factors, plus the push by the cattle industry to merchandise more "lean" beef, and the altered cattle production (more exotic breeds requiring longer feeding periods and heavier weights to reach higher grades), caused the proportion of beef graded Choice to drop significantly. In 1990 almost 90% of beef was graded Choice; now the figure is closer to 60%. The image of quality beef has also probably suffered because of this production trend.
Today, federal grades are still an integral part of the beef industry. They still provide uniform terminology and the only official unbiased beef and cattle grade source. While the grades are not "sold" to the consumer as much and house brands are frequently super-imposed, they are still vital to the beef purchasing system.
Private branding may sound great but it does have some severe problems. Beef buyers who use them would be locked into purchasing from the only one supplier of that brand. As a consequence, this would reduce the buyer's bargaining ability and provide a less competitive market. Price information would also be greatly affected and market reporting might cease altogether.
Some cattle that graded Commercial in 1954 would today grade Choice. Should there be any question about why there's so much variability today? We have a good system in place, but it needs to be rescued from the periodic changes that have confused its users. Left alone, users will again become familiar with it and structure their buying programs around it.
Cattle Feeding Statistics The USDA Cattle On Feed Report showed 9.72 million head of cattle on feed in the U.S. on May 1, 1998. This is in feedlots with capacities of 1,000 head or more. That represents a 2% drop in cattle feeding from a year ago, about the same reduction as the April feeding level.
While this national total was down, some states - Texas, Nebraska, Idaho, South Dakota and Washington - actually reported increases. Based on the May statistics, these states alone accounted for 52% of the cattle on feed.
Fed-cattle marketings in April reached 1.88 million head, down 2% from a year ago. It's also the third consecutive month of steady marketings.Forecast equa tions suggest that larger marketings are coming in either May or June. Since the May weekly sales did show some very large movements of feedlot cattle in the Texas Panhandle area, they may have already occurred.
Placements of cattle and calves into feedlots in April were 1.58 million head. This is up 2% from a year earlier but down a sharp 7% from the March placement level. The largest placement gain was reported in Texas, but healthy increases were also recorded in Nebraska and Oklahoma.
Feeder cattle and calves placed on feed by weight groups were all down from the previous month except the heaviest group which remained steady. Compared to a year ago, only the very lightest calves, those in the "less than 600 lbs." category, were lower. All other groups were up 7-10%.
Here Is What's Ahead The cattle market moved higher in early May and then lost the gain in the final weeks. Both slaughter cattle and feeders followed a similar price path.
Choice fed steers in the Amarillo feedlot area reached their highest level of the year the first full week of May, as did heavier feeders. >From there, however, it was all downhill. The drop was only about $3/cwt. for feds but as much as $10/cwt. for heavy feeders.
The cattle market may be able to hold on to its current price levels as we move through the summer. This largely depends on if the anticipated larger feedlot marketings have already moved into the market or not. The later summer months should bring us back into a March-April feedlot marketing level. That would probably allow some price improvement.
Feeder cattle and calf prices will continue to track the fed-slaughter cattle. Emerging drought conditions in the South and West, however, might force some early movement of calves. That would hurt late summer prices unless feedlots again move into the black and begin buying feeders earlier this year.