There are more Yield Grade 4 cattle out there than people would like to think,” says Ben Brophy, manager of value-added alliances for Caprock Cattle Feeders Inc., based at Amarillo.
And that's another way of saying cost of gain and breakevens are higher on those cattle, making their value as feeder cattle lower than they have the chance to be.
It's true that every head moseying up to a feed bunk is a Yield Grade (YG) 1 at some point in its life and that cattle feeders could feed lighter muscled cattle fewer days and hedge against YG4 discounts. But it's also true that feeding these kinds of cattle fewer days and marketing them at lighter weights pushes break-evens higher.
So whether it's risking and accepting hefty YG4 discounts or selling fewer pounds, cattle that come up short on muscling — relative to their frame and quality potential — are worth less to feeders on the front end.
|Balanced||Out of balance|
|Performance||**Premium/discount (cwt.)||Performance||**Premium/discount (cwt.)|
|45% Choice||+ $2.25||70% Choice||+ $3.50|
|3% No roll||- $0.15||20% Upper Choice||+ $0.80|
|52% Select||$0.00||30% Select||$0.00|
|Total quality||+ $2.10||+ $4.30|
|10% YG 1||+ $0.50||5% YG 1||+ $0.25|
|50% YG 2||+ $1.50||30% YG 2||+ $0.90|
|40% YG 3||$0.00||45% YG 3||$0.00|
|20% YG 4||- $3.00|
|Total yield||+ $2.00||- $1.85|
|Net premium/discount/cwt.||+ $4.10||+ $2.45|
|*For the comparison above: Ch = +5/cwt.; upper Choice = +$4/cwt.; No Roll = -$5/cwt.; Yield Grade 1 = +$5/cwt; G 2 = +3/cwt.; YG4 = -$15/cwt.; so Par value= Se YG3.|
|**The premium or discount multiplied by the pen percentage equals the premium or discount for each cwt. of cattle in the pen.|
Brophy's description of two industry-typical sets of cattle illustrates the point.
Consider an 800-lb., YG2 carcass that grades low Choice. If the YG2 premium is $3/cwt., all else being equal, the carcass earns a $24 premium, relative to a YG3.
Now compare that YG2 low Choice carcass to one that grades high Choice but is a YG4. The premium for upper Choice is $4/cwt., which gives you $32 additional value for premium Choice.
Unfortunately, that YG4 carcass also will be discounted $15/cwt. for yield, or $120. On a net basis then, the carcass loses $112 for quality and yield combined relative to the YG2 low Choice.
Starting In The Hole
Get into a pen with high-quality, low-yielding cattle like these and Brophy says it's not unusual to have at least 15% YG4 carcasses. So, multiply the $112 net loss above by 15% and you're starting out $16.80/head in the hole on every head of cattle in the pen.
Subsequently, when feeder buyers find cattle like this, they have to start their bidding at least $2/cwt. back of where they could have otherwise started (see Table 1 for another value comparison of typical pen performance).
Stagnating Carcass Merit
This dilemma is nothing new, but unfortunately it's growing. Compare the 2000 National Beef Quality Audit (NBQA) to the one conducted in 1995. The percentage of fed cattle yield grading 2.49 or better had declined 4.4% to 27.5%, and cattle yield grading 2.99 and better had declined 8.3% to 49.6%.
At the same time, YG3 cattle increased 4.4% to 38.6%, and YG4 cattle increased 3.3% to 10.4%. While the average carcass weight increased almost 40 lbs. between the two studies, the mean quality grade remained Select.
Salt in the wound comes with the likelihood that there's even less muscle and poorer industry-wide yield grades than the NBQA numbers indicate. According to Brophy and other feeders, USDA graders typically call carcasses leaner than they actually are.
That means there are probably more YG3 and 4 carcasses and fewer YG1 and 2 carcasses. These ultimately will be discovered when the industry moves away from visual grading to instrument-assisted grading.
That's one reason cattle feeding organizations like Caprock are getting more involved in the genetic side of the business. In fact, Caprock already has a formal relationship with two multi-breed seedstock producers whose genetics have proven their balanced merit within their feedlots.
“We're not saying producers need to use these or any other genetics to do business with us, or that you must use a particular crossbreeding system,” Brophy says.
“What we are saying,” he adds, “is that if you choose to use high-percentage cattle, which will create a higher percentage of non-conformance, understand the challenges you're creating so that you and we can do a better job of managing those challenges.”