Grandma warned, "Be careful of what you wish for, because you just might get it." Well, Grandma's admonition is about to happen.
For three decades, cattle producers have decried "the thieving packers" who won't pay for the good ones or won't discount the sorry ones raised by the "other guys." That day is here.
The driver of the new beef marketplace is the consumer - the one cattlemen have long criticized as being "too uneducated" or "too lazy" to cook. From here on out, more of the prices for all classes of cattle will be determined by the cattle's ability to fit into one or two of those small blocks on "the grid" for quality. And, it will be an electronic instrument that will likely be making the call, as well as determining yield grade, quality grade and tenderness.
Lack of tenderness accounts for the majority of beef consumers' undesirable eating experiences. Instrument grading will slot carcasses differently than before. These new grades may have the same old names, but they will more accurately predict consumer tastes.
A wag recently suggested that our recent presidential election "was really between Madonna and Martha Stewart." Just as in politics, one size doesn't fit all consumer plates. It will be a real challenge for beef producers to deliver beef to the changing, demanding, socially diverse and unforgiving consumers of the world.
The beef industry increased beef demand the past two years by delivering consistent beef to the consumer. This reincarnation of beef demand is reminiscent of Lee Iacocca's saving Chrysler Motor Co. from bankruptcy in the 1970s. The beef industry's resurrection, however, was largely accomplished by further processing and sorting of the beef by packers and processors.
The responsibility and risk for quality, cutability and consistency is now being transferred to beef producers. The past two years may end up seeming like a cakewalk when compared to the future challenges that face seedstock breeders, cow/calf producers and feeders.
The Future Is Now We sold a load of finished cattle on IBP's Real Time Grid last May. These cattle were contemporaries since birth, and nearly every steer's extended pedigree had carcass Expected Progeny Differences (EPDs). Their sires and dams had been ultrasounded for carcass merit.
One of these steers graded high Select and Yield Grade 3.2. Another qualified for Certified Angus Beef (CAB) with a Yield Grade 2.8. Both carcasses weighed 805 lbs.
Just last year, the difference between these two steers would have been plain vanilla versus a chocolate sundae, both served in a paper cup with a plastic spoon. On that day in May, however, the difference was $237.
This is not your grandfather's marketplace. If the swine industry is any indication of things to come, fasten your seat belts.
Iowa is the nation's largest swine producing state and has the most independent swine producers. During a three-year period in the mid '90s, 25% of Iowa's independent swine producers went out of business. Meanwhile, Iowa's pork production increased. This exodus of independent producers occurred mostly before the 8/lb. market price disaster.
It's both interesting and scary that this paradigm shift occurred when independent swine producers' only option became selling their butchers on a "grid." Generally, those who "suffered" selling on swine grids were those who insisted on using their traditional genetic sources, nutritional and management practices. Most had little idea as to who would ultimately buy their hogs until they were ready to be marketed.
It's a "bad news, good news" situation. Have data on your cattle's health regimen, their gain, their conversion, how they cut, and how they grade (including tenderness and at what weight). The alternative is to hope that two old-fashioned order buyers are on the seats when you sell your feeders.
If you retain ownership, you'd better cross your fingers that the one cattle buyer in your show pen is short-bought when you sell your "fats." It could get really nasty.
If your plans include targeting specific consumer markets, utilizing proven predictable genetic inputs and managing the health, humane care, implants and rations of your cattle, you will be a winner - if you sell them right. Before you even turn out your bulls, explore the marketing options.
This game we call the beef business will be played across all ZIP codes and in all herd sizes. The winners will prosper as never before. These winners will have one thing in common - recognizing and accepting change.