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The Cattle Business
Livestock Update, February 1997
Bill McKinnon, Animal and Poultry Sciences
If you are in the feeder cattle business, life would be so simple if all you ever sold were "M1's" or "L1's". The producer who markets only L1 or M1 is the exception. Table 1. illustrates the grading trends we have witnessed during the1990's in the fall in Virginia Cattlemen's Association sponsored graded sales. The numbers suggest a few trends. The most glaring trend is that fewer of the cattle are grading L1 or M1. For the last two falls less than two thirds of our cattle have fallen in the L1 or M1 categories. Where did the L&M1 cattle go? They became L&M2's. The last apparent trend is that we are making progress on reducing the number of cattle slapped with the "S" stick.
| Table 1. | Virginia Feeder Cattle Grades VCA Fall Sales | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Year | L1 & M1 | L2 & M2 | S1 | ||||||||||||||||
| 1990 | 76.3% | 12.8% | 10.5% | ||||||||||||||||
| 1991 | 72.6% | 14.1% | 13.1% | ||||||||||||||||
| 1992 | 70.7% | 15.9% | | 1993 | 70.0% | 17.2% | 12.8%
| 1994 | 67.2% | 20.3% | 12.1%
| 1995 | 59.2% | 30.4% | 10.1%
| 1996 | 62.7% | 26.6% | 9.1%
| |
The three grade groupings listed above represent 95%+ of the cattle marketed. The L&M3 cattle generally make up less than 1% of the cattle sold. During the fall of 1996 "LL" (extremely large framed) cattle were graded and sorted out across the board and made up less than 2% of the cattle graded. A few sales groups had been sorting off the "LL's" before the past fall. In the early 90's there also a few "SS" or extremely early maturing cattle graded. Today those cattle are rejected.
The increase in the number of "LM2's" during the last couple of years have been the cause for a lot of conversion. There have been a couple of "causes" for the increase in the "2's" thrown around. They may not hold water on closer scrutiny. For what ever reason, there a lot of "stringy, hard-doing, plain looking" cattle around. Getting these light muscled cattle out of the L&M1 cattle has really shaped up our good cattle and made them a much more attractive package to our buyers.
Table 2 looks at the price impact of feeder cattle grade on steers for the last three falls. Table 3 examines the discounts on feeder heifers in the fall not grading L1 or M1.
| Table 2. | Feeder Cattle Discounts by Grades - Steers | ||||
|---|---|---|---|---|---|
| 1994 | 1995 | 1996 | Three Year Average | ||
| L1 & M1 | $72.87 | $64.27 | $60.09 | $65.74 | |
| Discount $/Cwt. | Discount $/Cwt. | Discount $/Cwt. | Discount $/Cwt. | % | |
| LL | ($9.14) | ($8.60) | ($9.13) | ($8.96) | 13.6% |
| LM2 | ($5.02) | ($3.71) | ($4.89) | ($4.54) | 6.9% |
| S1 | ($8.74) | ($7.91) | ($9.65) | ($8.77) | 13.3% |
| LM3 | ($16.11) | ($14.19) | ($19.39) | ($16.56) | 25.2% |
| Table 3. | Feeder Cattle Discounts by Grades - Heifers | ||||
|---|---|---|---|---|---|
| 1994 | 1995 | 1996 | Three Year Average | ||
| L1 & M1 | $65.80 | $54.65 | $48.45 | $56.30 | |
| Discount $/Cwt. | Discount $/Cwt. | Discount $/Cwt. | Discount $/Cwt. | % | |
| LM2 | ($3.47) | ($3.09) | ($2.48) | ($3.01) | 5.4% |
| S1 | ($9.90) | ($10.33) | ($9.75) | ($9.99) | 17.8% |
| LM3 | ($16.84) | ($9.45) | $17.15) | ($14.48) | 25.7% |
The tables illustrate that the discounts by grade tend to stay at the same level on a price per cwt. basis as the base price level of cattle changes. This relationship means that the percentage discount grows substantially as the base price level falls. In addition to no buyer seeming to want the "3's," it becomes evident that the "S" heifer has a hard time finding a new home.
If genetics within the herd is the cause of poor grading cattle, the next couple of years is the time to get the situation fixed. New and improved genetics in the form of bulls and heifers will be cheaper now than in the year 2000. It make sense to fix problems now and be ready for the year 2000.