Why Cattle Differ in Value: Virginia Retained Ownership Program Summary

Livestock Update, August 2003

Scott P. Greiner, Ph.D., Extension Animal Scientist, Beef, Virginia Tech

The following table presents a summary of the closeout information on Virginia Retained Ownership Program steers shipped in September and December 2002. Six loads of steers from 39 producers, for a total of 412 head were placed on feed at two cooperating feed yards in southwest Iowa. The steers were fed in three pens, and harvested on six dates between January 14 and June 12, 2003. Each pen was sorted prior to harvest to optimize the endpoint of each steer, and the cattle were marketed on a carcass-value grid with IBP-Tyson. For comparison purposes, data representing the average of the steers in the most profitable one-third and those in the least-profitable one-third are presented along with the average for all 407 steers. Retained ownership profit (or loss) for each steer was calculated as the difference between total carcass value and Virginia feeder calf value, less all feeding costs (feed & yardage, trucking, health, carcass data collection & program fees). Five head of steers were not included in the analysis. These included two steers which died, and three head which were alternatively marketed as a result of health problems.

Substantial differences in growth performance are evident between the profit groups. The most profitable steers gained 0.5 pounds per day faster than the least profitable steers. This superior ADG resulted in fewer days on feed, and heavier live weights at harvest. Correspondingly, the high-profit cattle had superior feed conversion- more efficiently converting feed to live and carcass weight gain. A portion of this performance advantage may be attributed to the superior health of the high-profit group. Overall, one in eight steers received one or more health treatments during the feeding period. Only one in fifteen of the high-profit group were treated, whereas one in five of the least profitable steers were pulled and treated or more times for health reasons.

The superior ADG of the high-profit steers translated to heavier carcass weights at slaughter, which in combination with their advantages in carcass merit resulted in more total value on the rail. Carcass fat thickness and average yield grade was similar across all groups, which was to be expected as steers were sorted and harvested at a target fat thickness (0.40 in.). The ribeye area differences between groups were related to carcass weight. Each group was 0.7 square inches of ribeye area below the standard for their corresponding carcass weight, meaning that all the cattle were below average in muscling. The most significant difference between groups for carcass merit was found in quality grade. The high profit cattle graded 91% low Choice and higher, with 5% Prime and 37% qualifying for Certified Angus Beef (CAB; average and high Choice quality grades). This is well above the industry average of 1% Prime and 18% CAB certification rate. The low-profit group was 53% low Choice and higher, 43% Select, and 3% Standard grade. The high-profit group attained 54% yield grade 1šs and 2šs, with the balance yield grade 3šs. The low-profit group had an advantage in yield grade 1šs and 2šs (60%), but was also characterized by 3% yield grade 4šs and 5šs. Therefore, the proportion of "out" cattle on the grid system (Standards, YG 4&5šs) was notable between the high and low-profit groups. Compared to the often-quoted industry goal of 70-70-0 (70% Choice, 70% YG 1&2, 0% "outs"), the cattle overall attained desirable quality grades (76% low Choice and higher), and were slightly below the goal for cutability (54% YG 1&2) and conformance (2% "outs").

The base carcass grid price has been expressed as a low Choice, yield grade 3. The similarity in base price between the profit groups demonstrates that the prevailing market price at time of harvest had relatively little impact on profit in this data set, and that the fed cattle market was relatively constant over the time period the cattle were marketed. The combination of both superior quality and yield grades for the high profit group resulted in a grid carcass price $8/cwt. higher than the low-profit group. This higher carcass price coupled with heavier carcass weights resulted in a $150 advantage in net carcass value for the most profitable steers.

Primarily due to a strong fed cattle market, retained ownership on this set of cattle was advantageous. The average steer returned an additional $102.75 over their assigned value as a feeder calf departing Virginia. Despite this, tremendous variation existing among the 407 steers fed. This is demonstrated by the $135 difference in average return from retained ownership between the high profit and low profit steers, which translates to a difference of $17/cwt. as a feeder calf. This $135 difference is directly related to higher carcass values and lower feeding costs of gain for the high-profit steers. The cost of gain advantage for the high-profit steers is attributed to their superior gain, feed conversion, and health. There was little difference between the profit groups in their assigned feeder calf price or total feeder calf value between the groups.

While this summary includes a small number of cattle marketed during a short timeframe, the magnitude of the differences in profitability between the superior and inferior cattle is very similar to data collected through the Virginia Retained Ownership Program over the last 10 years. Over the years, analysis of Virginia ROP data has demonstrated a $120-$200 value difference between superior and inferior cattle, regardless of the prevailing market or feeding conditions.

This summary further emphasizes the importance of genetics and management. For producers who have made a strong effort to add value to their cattle through improved genetics and management, retaining ownership past weaning is a means of reaping financial benefit for these superior cattle. The Virginia Retained Ownership Program is designed to provide feedback to progressive cow-calf producers who desire information on the industry suitability and profitability of their cattle post-weaning. Gaining feedback on the feedlot and carcass performance of cattle is the first step for a beef producer in deciding on the future direction for the herd. For more information n on the Virginia Retained Ownership Program, contact Scott Greiner at 540-231-9163 or sgreiner@vt.edu.

VIRGINIA RETAINED OWNERSHIP PROGRAM
Closeout Summary: September & December 2002 Shipments

	Group Average 407 head	High Profit 1/3 136 head	Low Profit 1/3 136 head
Growth Performance
VA shipment weight, lb.	695	706	685
Slaughter weight, lb.	1212	1261	1165
Days on Feed	155	152	159
ADG, lb./day	3.51	3.78	3.22
Estimated feed:gain	6.77	6.68	6.89
Sick pulls, % treated	12.0%	6.6%	22.1%
Carcass
Carcass weight, lb.	745	782	711
Fat thickness, in.	0.43	0.43	0.41
Ribeye area, sq. in.	12.1	12.4	11.7
Yield Grade	2.9	3.0	2.9
USDA Quality Grade	76% CH- & better	91% CH- & better	54% CH- & better
	2% Prime	5% Prime	0% Prime
	19% CAB	37% CAB	8% CAB
	22% Select	9% Select	43% Select
	1% Standard	0% Standard	3% Standard
USDA Yield Grade	7% YG1	7% YG1	7% YG1
	49% YG2	47% YG2	53% YG2
	43% YG3	46% YG3	38% YG3
	1% YG4&5	0% YG4&5	3% YG4&5
Base carcass price (CH, YG3), $/cwt.	$125.22	$125.88	$124.78
YG premium/discount, $/cwt.	$1.50	$1.65	$1.24
QG premium/discount, $/cwt.	-$0.75	$2.34	-$4.15
Carcass price, $/cwt.	$125.96	$129.88	$121.87
Total carcass value	$938	$1,014	$865
Equivalent live price, $/cwt.	$77.42	$80.44	$74.23
Financial
Actual feeder calf price, $/cwt.	$77.77	$77.13	$78.33
Actual feeder calf price, $/head	$541	$543	$537
Cost of gain, $/lb.	$0.494	$0.476	$0.518
Feed cost of gain, $/lb.	$0.353	$0.348	$0.359
Health costs, $/head	$15.51	$12.96	$19.80
Retained ownership profit/loss, $/head	$102.75	$168.99	$34.30
True feeder calf value, $/cwt.	$77.77 (base)	$86.01	$68.99
True feeder calf value, $/head	$541 (base)	$607	$473

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