Beef Quality Corner - Carcass Merit Worth Dollars

Livestock Update, March 2001

Bill R. McKinnon, Extension Specialist, Livestock Marketing, Virginia Tech

Until very recent years, cow/calf operators did not give any direct attention to carcass merit in their breeding programs. There simply was not any direct economic return to breeding in carcass cutability or quality. Feeder cattle and the vast majority of finished cattle were sold by the pound on a liveweight basis.

The beef industry is experiencing dramatic change in its marketing structure. More finished cattle are being sold on a carcass value basis through some agreed upon carcass grid. More cow/calf operators are retaining ownership longer in the calves they produce. New production/marketing alliances are attracting cattle with predictable feedlot and carcass performance.

The next five to ten years will bring even more shifts in how business is conducted. A recent prediction suggested that within 5 years over 50% of our calves will be directed toward a particular targeted beef product. One of the recent growth enterprises within the beef industry appears to be firms that perform data collection and tracking. The coming of mandatory individual animal identification will accelerate that trend. This means that more and more feedlots and packers will be able to identify the source of cattle that work within their structure. Sources of cattle that fail to perform on the basis of health, growth, and carcass merit will also be identified.

The Virginia Retained Ownership Program has provided producers the opportunity to receive feedback on the feedlot and carcass performance on a sampling of their cattle. The most recent closeout on 194 ROP cattle shipped in December of 1999 demonstrated the impact that feedlot performance and carcass merit can have on profitability. When the cattle were sorted into the top third and bottom third based upon profit from retaining ownership, some interesting relationship became evident. The price data below has been adjusted to take out the impact of price fluctuations during the six months that the cattle were marketed.

	Average	High 1/3 Profit	Low 1/3 Profit
Profit	$13.28	$100.41	- $68.10
Average daily gain	3.51	3.58	3.33
Cost/lb. of gain	$0.409	$0.403	$0.426
Carcass price $/cwt.	$111.55	$115.74	$108.23
Added carcass value over live price	$4.00	$41.36	- $21.80
Starting weight		662 lb.	661 lb.
Equivalent feeder cattle value/cwt. based upon profit/loss		$95.83	$70.15

We discuss the development within the industry of a "two-tiered" price structure. The above data certainly lends credence to that notion. Based upon the relative feedlot efficiency and carcass merit of this set of cattle there was over $25/cwt. difference in the value as feeder cattle between the top and bottom third. Cattle that are documented to have superior health, efficiency, and carcass performance will be worth more in marketplace in the near future. Many producers will chose to maintain some financial interest in these superior cattle.

All of the ROP cattle were marketed on a carcass value grid in a marketing agreement between the feedlot and the packer. When the carcass profiles of these two groups of cattle are examined, the reason for differences in carcass values becomes apparent.

	Average	High 1/3 Profit	Low 1/3 Profit
Prime	.5%	1.6%	0%
CAB/Sterling Silver	6.3%	7.8%	3.4%
Choice	39.8%	73.4%	17.5%
Select	49.2%	17.2%	69.8%
"Outs" (No Rolls, Dark cutters, lights, etc.)	4.2%	0%	9.5%
Average Yield Grade	3.00	2.98	3.05

Two distinct differences are apparent. The high profit group had a higher percent of the cattle grading low Choice or better and had no "Outs" or severely discounted carcasses. The yield grades suggest that there were no significant differences (2.98 vs. 3.05) in overall cutability. The differences in marbling that dictate quality grade must have been impacted by either days on feed or genetics. Most cattle producers would assume that the higher quality grading cattle carried a higher percentage of British breeding. In actuality, the high profit group carried 41% British genetics while the low profit group had 61% British breeding.

The data clearly demonstrates the impact of carcass merit upon profitability. As value based marketing as opposed to "selling on the averages" becomes more the norm, feeder cattle producers will have to pay more attention to post weaning health, growth and carcass merit.

Clearly, the most rapid means of transforming these characteristics will be by adjusting specific breeds used within the commercial breeding program. Comparing the averages of various breeds there are distinct genetic differences in various economically important traits.

Within the breeds being used, EPD's are the most important tools to allow producers to make genetic change. Cow/calf operators considering retaining ownership in their cattle or targeting buyers with specific carcass targets need to begin including carcass traits in their selection process. Expected progeny differences for traits such as ribeye area, marbling or intramuscular fat are seven times more useful in making genetic progress than a bull's own performance.

For producers planning to conventionally market their feeder cattle: the selection process should continue to focus on growth and avoiding calving difficulty, while sidestepping the use of genetics that do severe damage to carcass merit. Though in many cases today potential carcass value has little to do with immediate feeder cattle sale value; producers need to avoid digging themselves into a hole for the future.

Visit Virginia Cooperative Extension