Quality, Yield Or Both?

You've learned it isn't that hard over time to mold your herd with carcass EPDs. But where should you focus quality, yield or both? Unfortunately, there's no simple rule of thumb on this one. It's a pretty complicated deal, says commercial producer Jon Ferguson, Kensington, KS. Yield versus quality is a tradeoff. What premiums do you get for yield grade? What premiums do you get for quality grade?

You've learned it isn't that hard — over time — to mold your herd with carcass EPDs. But where should you focus — quality, yield or both? Unfortunately, there's no simple rule of thumb on this one.

“It's a pretty complicated deal,” says commercial producer Jon Ferguson, Kensington, KS. “Yield versus quality is a tradeoff. What premiums do you get for yield grade? What premiums do you get for quality grade?”

“It is a complex issue and a micro-decision for the individual producer,” agrees Ted Schroeder, Kansas State University (KSU) ag economist.

“As a producer targets higher quality grades, he can get worse yield grades,” Schroeder explains. “As importantly, as a producer keeps trying to feed to higher quality grades, those last few pounds go on at a very expensive cost per pound.”

But, on the plus side, he says feeding to higher weights can result in higher dressing percentages. “You've got to consider the expected changes in costs and revenues that occur at the same time when you manage cattle targeted for a particular grid,” he adds.

Iowa State ag economist John Lawrence answers the quality versus yield question with more questions. “If you start chasing one trait, for instance quality grade, how does it affect the other traits?

“How does the optimal animal vary in different price scenarios? If the Choice-Select spread is $12, what did it cost you to get that $12? Did you have to give up gain or feed efficiency?” he asks.

Lawrence warns that the answers change under different price scenarios. “You'll get one result if there is a $4 premium for Choice and a different result if there is a $12 premium.

“The same thing applies with feed costs. There is less incentive to feed additional days to get more Choice in a pen if feed costs are high and the Choice-Select spread is low,” he says.

“There isn't a single answer,” says Clem Ward, Oklahoma State University ag economist. “If you have really good genetics and get 75% Choice or better, it would make sense to target a quality grid. If you get 40% Choice but have high-yielding cattle, with Yield Grades (YG) 1s and 2s, then a yield grid makes sense. Even then, there are different grids for high-yielding cattle and different grids for high-quality cattle.”

Ward recommends first taking stock at your ranch before worrying about grids. “Producers need to assess their resource availability and develop the genetics that will fit their circumstances,” he stresses. “What works for Montana may not work for Florida. Then, they can target the grids or alliances with the bulls.”

Schroeder says there's another step. “You have to know your cattle. You can't just work from averages. When we have a history on the cattle, it's fairly straightforward. We can more accurately predict performance and what added costs will occur to reach a particular target.”

“There are opportunities for both quality and yield,” adds KSU ag economist Kevin Dhuyvetter. “There is no reason both can't be profitable. Quality and yield aren't mutually exclusive. Find those genetic lines that do both.”

“To reap the maximum rewards on most grids, you are going to have to do both,” adds KSU animal scientist Dan Moser.

Producer Herman Laramore, Marianna, FL, shoots for that balance. He says, “My Angus-Brangus cows with a Charolais bull can fit either program.”

After retaining ownership and collecting carcass data for almost 15 years, his closeout sheets show cattle that are a little more quality oriented.

They're close to 70% Choice at YG 2 and 3. But that's with two-thirds of his cows and all of his heifers bred to Angus or Brangus bulls. Only a third of the cows (late calvers) are bred to Charolais bulls for a terminal cross.

After finishing at Tri-State Cattle Feeders in Hereford, TX, both crosses have been profitable for him selling on a live basis.

In the fall of 2001, though, he sold the bulk of his calves to Future Beef Operations, a beef marketing alliance that favors red meat yield. If that market continues to be viable, he can easily breed more of his cows to Charolais to boost red meat yield.

Or, he can stick with his current breeding program and move more into a quality-oriented grid.

Laramore comments, “It is good to have a happy medium. You better not get too far out in one direction because the market can go either way.”

Ferguson also has flexibility with his cattle. “Our terminal cross is a half Charolais/half Angus, and we are able to have a respectable amount of YG 1s and 2s, but also have acceptable numbers of high Select/low Choice animals. In my mind, it's kind of a nice compromise.”

Ferguson says the IBP grid he normally sells on rewards YG 1s and 2s. “That's a constant,” he says, “but the wild card in a grid is the Choice-Select spread. If it's $3, like it is now (mid-April), or $12-15, like it is in May or June, it changes dramatically.

“You have to assume what that Choice-Select spread is going to be when you market a group of cattle. Then, you've got to base both long-term genetic decisions and shorter term management decisions on those assumptions,” he says.

“It is not an exact science,” he maintains. “But it is one you can spend a great deal of time on and be rewarded handsomely.”

Becky Mills is a freelance writer based in Cuthbert, GA.

Sorting By Dollars

Figuring out which bulls provide the right economic balance between quality and yield is no problem for Dean Bryant. As a Purdue University employee in the '80s, he and scientists Ron Lemenager and Truman Martin developed an index that rates seedstock based on the dollar value of their EPDs. Now, the Monkton, MD, producer puts the index to work selecting bulls for his Angus operation.

First, on the question of whether selecting for quality or yield is more important, Bryant says, “We do both.”

He has compelling reasons for dual selection. He and partner Ed Burchell sell Angus seedstock, and marbling sells.

However, as an offshoot of their carcass testing program, Burchell, Bryant and Bryant's wife, Marcia, market their Roseda Farms Black Angus beef to upscale grocery stores and restaurants. Yield is a big deal because their branded beef sells by the pound. It's a premium-priced product and better provide a quality eating experience.

But, back to the economic index, Bryant says, “It's a simple concept, but it's hard to come up with an economic value.”

There are two indexes. One is general. It sorts on birth weight, yearling weight, milk, marbling, ribeye area (REA), fat thickness (FT) and Yield Grade (YG). The carcass index sorts on marbling, REA, FT and YG.

Since he helped develop the index more than a decade ago, the dollar figures may be a little dated; however, the index still serves its purpose.

In the carcass index, Bryant adds $40 for every point of marbling score.

“The marbling EPD is based on the cost of going from Select to Choice on a typical sized animal,” he explains.

REA is $11.43 for 1 sq. in. of ribeye; FT is a minus $89.25, and he uses a YG value of $8 in determining these numbers.

“If I was reworking it now, I would drop the REA and FT and use percent retail product. I'd also look at the average retail price of Choice, $2.90, $3 or $3.20, and plug that value in. But I haven't worried about changing it. The program still sorts out the bulls that are high in marbling and retail yield,” he says.

The proof is in the EPDs of the bulls and replacement heifers they produce. “We get EPDs for 0.5 marbling and 0.5 retail product pretty consistently in our program.”

They've also got numbers on a set of steers, the bottom end of their '99 bull crop, fed out in 2000; 7% were Prime, 57% qualified for Certified Angus Beef® (upper ⅔ of Choice), 93% were low Choice or better, and 7% were Select. As for yield, 71% were YG 1 and 2.

You can have both.

Out With Out Cattle

As more cattle producers move to grid marketing, they're learning a lesson row crop folks have known for years. Deductions hurt.

“Other than feed efficiency, probably nothing has more of an impact on a producer's profit than ‘out’ cattle,” says Dan Moser, Kansas State University (KSU) animal scientist. “Premiums can pale in comparison to the magnitude of the discounts.”

“One stag, one heavy, one dark cutter out of 80 head of high-quality, high-yielding, high-revenue type steers can wipe out most of the profit or increased revenue from a value based marketing situation,” says Ted Schroeder, also from KSU. “Two out cattle will certainly make it a losing proposition.”

John Lawrence, Iowa State University ag economist, says the classic example of the stiff punishments for outs are the penalties for overfeeding.

“Say there's a $20 penalty for a Yield Grade (YG) 4, and another $15-$20 penalty for a 950- or 1,000-lb. carcass. You could end up with a $350-$400 discount,” Lawrence says. “It does send a clear signal you don't want that to happen.”

However, Oklahoma State University ag economist Clem Ward says it's a risk you might have to take. “It's helpful anytime you can eliminate the bottom right hand corner of a grid — the standards, the YG 4s and 5s, the heavies and the lights. But if you're in a quality grid, it's a management risk. It might take some 4s and 5s to get the quality,” he says.

“The penalty for out cattle depends on the discounts in the market place at the time,” says producer Jon Ferguson, Kensington, KS. “On most grids, carcasses over 950 lbs. or under 550 lbs. are discounted. But this can vary significantly.

“For example, if the Choice-Select spread is high, it may not be as bad to accept a few more YG 4s or 950-lb. carcasses because you are getting rewarded handsomely for the Choice carcasses,” Ferguson says. “You have to be cognizant of where the discounts are on various classes of out cattle.”

He says, “Some grids have an allowance for a certain amount of out cattle.”

“The key is to minimize the chances of having outs occur,” says Schroeder. “If it's the cow's fault, get rid of her. On the other hand, don't blame her for a heavy. Her calf might have been the best performing calf in the pen.”

He states, “Manage more carefully with more use of intensive data. It is so tremendously important in order for a grid marketing system to be successful.”