Step up to the plate of value-based marketing grids without swinging for adequate red meat yield, and you can knock one over the fence without scoring.
For all the banter and hand wringing about the historic widening of the Choice-Select spread ($11/cwt. at press time), cattle can quality grade like a house of fire and still be money suckers.
Compare two pens of cattle that were marketed recently through the Gelbvieh Alliance (Table 1). Look at Pen A. With almost 89% grading Choice, you figure they could be worth a sizeable jingle, even if they were duds for yield grade. After all, across the industry today, quality premiums are worth about twice as much as those offered for yield grade.
Now, peek at Pen B. The yield grade was better than Pen A, but still nothing to write home about. And, only about half mustered a Choice grade. At first blush, plenty of folks would take Pen A and give you points. But, look again.
In an industry that hovers around 64% for average dressing percent - basically the carcass weight divided by the live weight - Pen B dressed at 65.85%, while Pen A dribbled out at 60.71%. That was the difference between Pen B turning an average $13.56/head premium on a live basis, while Pen A netted an average loss of $2.57.
"Dressing percent is worth twice as much as anything else because of the pounds it impacts," says Don Schiefelbein, executive director of the American Gelbvieh Association (AGA). In fact, he adds, "Under normal circumstances 45 percent of the value of a carcass in today's grids comes from dressing percent."
Likewise, Michael Bezner, manager of Bezner Beef, Texline, TX, explains, "When you look at grids, basically you've got dressing percent, quality grade, yield grade and out cattle (non-conformers) to consider. Certainly, dressing percent has the majority of the impact in the equation."
Obviously, folks can play with dressing percent, shrinking cattle or feeding on extra dress to extend the fat cutability. But, hold the shrink and fat endpoints constant, and the only way to increase yield is with muscle.
Unfortunately, the yield grade barometer the U.S. Department of Agriculture (USDA) uses to gauge carcass cutability (carcass yield) appears to be giving more credit to excess fat than dollar-worthy red meat, according to an AGA study.
In this study spanning four years, four packing plants and about 10,000 head of Gelbvieh Alliance cattle, AGA collected the yield grade components - ribeye size, fat thickness and the like - calculated the actual yield grades for the cattle, and then compared those to the yield grades assigned by USDA. According to Schiefelbein, graders called Yield Grade 1 cattle correctly 72% of the time, Yield Grade 2 right 65% of the time and Yield Grade 3 accurately only 56% of the time.
"When graders underestimated the carcass cutability, it was usually because the carcass had a larger than average ribeye," says Schiefelbein. "When graders overestimated red meat yield, it was typically because the carcass had a smaller than average ribeye."
None of this makes a case for how effective or ineffective the current USDA grading system may be. It does seem obvious, however, that the heavier muscled cattle in this study - those that brought more dollars across the scale - were discounted, while the lighter muscled cattle were actually rewarded.
Moreover, this is certainly not an indictment of the graders themselves. They can't be expected to account for every yield grade component and a detailed calculation of them in the 10 seconds or less they have to ogle carcasses coming down the line.
Instead, this study underscores the value of carcass yield and the need to consider it in selection. At the producer level, within the current system or a future one in which packers assign an instrument-derived cutability score to carcasses, it also emphasizes the sense of plowing toward the carcass center rather than the thorny extremes of quality or yield.
"It's difficult to make the high percentage English cattle yield, and it's difficult to make the high percentage Continental cattle grade," says Bezner. "So, we try to buy a middle of the road animal." Specifically, he spends more and more procurement energy trying to find English X Continental cattle that offer him a carcass hedge no matter where the spread is, who is grading them or what tomorrow might bring.
"It's not a simple business as this industry evolves from taking zero responsibility and weighing up fed cattle to taking full responsibility for the meat hanging on the rail," says Bezner. "Producers have to select seedstock that complement their production program in their environment, but those cattle must have value to someone beyond their ownership."