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Articles from 2002 In October


2002 BEEF Quality Challenge (archive)

Editor's note: This is the archive version of the contest information. This same information has been optimized for the Internet and can be viewed at http://online.beef-mag.com/2001_bqc/index.htm.

The beef cattle industry is looking for ways to capture more value from its products. More and more cattle are being sold on a carcass grid or formula basis. The goal of this year''''s Beef Quality Challenge is to teach cattle producers what they need to consider when selling cattle on “the grid.”

The initial step in finding solutions to beef quality and value challenges is greater knowledge of how our industry works from gate to plate. Therefore, this challenge will explain the factors that influence the value and quality of cattle as they are sold to the packer. Secondly, we hope this contest will create a forum for discussing potential solutions to beef quality challenges.
Dan Hale, Ph.D.
meat scientist, Texas A&M University

The Prizes

Under 13 years old — $500 savings bond & trophy

14 - 18 years old — $500 savings bond & trophy

Over 19 years old — $1,500 in cash

Feedyard team — $5,000 worth of Zinpro® products

Match the Steer to the Grid

The field of 10 finished steers is pictured below. The steers have been placed into two groups (pen A and pen B). Pen A represents five steers from a central Texas auction market, and there is no pre-auction history on these cattle. The five steers in pen B were Premium Value Added Calf (VAC-45) calves purchased from a central Texas auction market. Presented with each steer picture is the steer identification number and final live pay weight (lbs.) after the 140-day feeding period in the feedyard.

On the attached entry form, match each steer to the optimal marketing option, either grid A and grid B. Details on these two marketing options are listed on the final page. Winner in each category will be selected based on the highest number of correct matches. In case of a tie, the first tie-breaker is to estimate the range in total carcass value from highest to lowest among all 10 steers. The range is calculated by subtracting the lowest total carcass value from the highest total carcass value.

How to Enter

All entry forms must be received in the office of the Texas A&M University Meat Science Section by Nov. 15, 2002. Late entries will not be considered. Other rules can be found on the entry form. You may enter either by way of regular mail, fax, the BEEF Web page at www.beef-mag.com or the e-mail address below.
regular mail:
Dan Hale
Meat Science Section
348 Kleberg Center
College Station, TX 77843-2471
fax:
Meat Science Section
979/845-9454
e-mail:

[email protected]

The objective is to match each steer to one of two marketing options (carcass grids). In the December issue of BEEF magazine, using these 10 steers as the backdrop, we will present articles giving the results and discussing grid marketing, calf health programs, preconditioning, genetics, feedyard management, marketing and carcass and meat quality issues. Winners will be announced in the January 2003 issue.

Cattle Information Cattle Selection

Ten steers were purchased from a central Texas cattle auction; five steers have been through a VAC-45 preconditioning program and five steers are of unknown history. The VAC-45 calves were weaned 45 days and processed using an aggressive calf health program. These 10 calves are of diverse breed types, frame size and muscling, and they had an initial feedyard weight range from 598 lbs. to 850 lbs.

Cattle Feeding

All steers were fed at the Department of Animal Science McGregor Research Feedyard in McGregor, TX. The five VAC-45 calves were given an implant, dewormed and fed together (Pen B). The five unknown history steers were vaccinated against calfhood diseases, implanted, dewormed and fed together (Pen A). The cattle were fed in the feedyard 140 days and handled similarly to a commercial feedyard.

Data Collected

Each steer was weighed monthly during the feedyard phase. A log was kept on each steer to quantify health-related issues, and medicine costs were recorded. Feed efficiency was evaluated on a pen basis. Carcass data and boxed beef cutout data was collected on each steer.

Marketing

Two carcass grids were developed using information from USDA Market News Reports (www.ams.usda.gov/lsg/mncs/index.htm) and industry contacts. These grids are presented on page 4.

No endorsement of products and services by Texas Cooperative Extension is implied.

What to Consider in Matching a Steer to its Grid
  • What kind of carcass will each steer produce?

    First, estimate the USDA carcass quality grade and yield grade for each calf. Also, determine if it will produce a defective carcass often referred to as an “out.” Out carcasses most often are either dark cutters, USDA Standard Grade, USDA Yield Grade 4, greater than 950 lbs. weight carcass, or less than 550 lbs. weight carcass. Notice that each grid pays premiums and discounts based off of the carcass merit of the steer. The premiums and discounts differ between the two grids.

  • What is the USDA quality grade and yield grade for each steer?

Quality Grade

A USDA quality grade is a composite evaluation of factors that affect the palatability of meat (tenderness, juiciness and flavor). These factors include carcass maturity, firmness, texture and color of lean, and the amount and distribution of marbling within the lean.

Beef carcass quality grading is based primarily on degree of marbling and degree of maturity. Marbling (intramuscular fat) is the intermingling or dispersion of fat within the lean. Graders evaluate the amount and distribution of marbling in the ribeye muscle at the cut surface after the carcass has been ribbed between the 12th and 13th ribs. Degree of marbling is the primary determination of quality grade.

Maturity refers to the physiological age of the animal rather than chronological age. Because chronological age is virtually never known, physiological maturity is used. The indicators are bone characteristics, ossification of cartilage, and color and texture of ribeye muscle.

Cartilage becomes bone, lean color darkens, and texture becomes coarser with increasing age. The industry term “hardbone” is used to describe carcasses with advanced maturity because the soft cartilage has turned to hard and flinty bone.

More than 95% of cattle that come from feedyards produce A maturity carcasses. A maturity carcasses qualify for the USDA Prime, Choice, Select and Standard quality grades (see the USDA quality grade chart at left).

Another term used in the cattle industry is top Choice. It is very difficult to determine whether cattle will grade USDA Choice, let alone determine at what level within the Choice grade they will fall. Top Choice or premium Choice are categories often used to describe A maturity carcasses that have a marbling score of Modest or Moderate.

Yield Grade

In beef, yield grades estimate the amount of boneless, closely trimmed retail cuts from the high-value parts of the carcass — the round, loin, rib and chuck. However, they also show differences in the total yield of boxed beef cuts.

We expect a USDA Yield Grade 1 carcass to have the highest percentage of boneless, closely trimmed boxed beef cuts, while a USDA Yield Grade 5 carcass would have the lowest percentage of boneless, closely trimmed boxed beef cuts.

The USDA yield grades are rated numerically and are 1, 2, 3, 4 and 5. Yield grade can be estimated by looking at the shape of the steer (see drawings at right).

  • How did previous groups of cattle from my ranch perform in the cooler?

    When selling on a grid, it''''s best to have a previous track record on cattle from your operation. Unfortunately, we don''''t have that information for these cattle. The more information you have on previous groups of cattle, the more sound your marketing strategy.

  • Selling on a carcass grid.

    All these cattle will be sold on a carcass grid basis. It''''s up to you to determine if grid A or grid B is best for each steer. Cattle feeders will work several types of cattle through each grid to determine if one grid favors high cutability (lean meat yield) or high-quality grading cattle.

    Both grids A and B have substantial discounts for out carcasses. You will need to determine which grid is less punitive on each type of discount. For example, it appears that grid B will pay more for USDA Standard carcasses than grid A.

  • What''''s the base price and how do I determine the final carcass price/cwt.?

    On grid A and grid B the base carcass price is “based” on a USDA Choice, Yield Grade 3 carcass that weighs between 550 and 950 lbs. If the carcass doesn''''t fit that quality grade, yield grade and weight combination, then premiums and discounts are applied to the base price.

As an example, if you have a steer that produced a USDA Select, Yield Grade 3, 800-lb. carcass, then the carcass price/cwt. would be $100.50 for grid A ($107 - 6.50) and $100 for grid B ($106 - $6). The weight, yield grade and quality grade discounts and premiums are additive.

In other words if you have a steer that produces a USDA Select, Yield Grade 2, 955-lb. carcass, then the carcass price/cwt. would be 97.50 for grid A ($107 - $6.50 + $2 - $5) and $100 for grid B ($106 - $6 + $3 - $3).

Dark cutter and hardbone carcasses have stand-alone discounts and are not additive with quality grade, yield grade and weight premiums and discounts.

Grid A
Base live cash/cwt. $66.00 Premium/
Base dressing % 64.70% Discounts
Base carcass, $/cwt. $107.00
Base is a Choice YG 3 carcass
Prime $115.00 $8.00
Top Choice program $110.50 $3.50
Choice $107.00 $0.00
Select $100.50 ($6.50)
Standard/No Roll $95.00 ($12.00)
YG1 $110.00 $3.00
YG2 $109.00 $2.00
YG3 $107.00 $0.00
YG4 $95.00 ($12.00)
YG5 $87.00 ($20.00)
<550 lbs. $92.00 ($15.00)
950-999 lbs. $102.00 ($5.00)
>999 lbs. $92.00 ($15.00)
Dark cutter $79.00 ($28.00)
Hardbone $85.00 ($22.00)
Grid B
Base live cash/cwt. $66.00 Premium/
Base dressing % 64.20% Discounts
Base carcass, $/cwt. $106.00
Base is a Choice YG 3 carcass
Prime $112.00 $6.00
Top Choice program $108.00 $2.00
Choice $106.00 $0.00
Select $100.00 ($6.00)
Standard/No Roll $97.00 ($9.00)
YG1 $112.00 $6.00
YG2 $109.00 $3.00
YG3 $106.00 $0.00
YG4 $91.00 ($15.00)
YG5 $81.00 ($25.00)
<550 lbs. $86.00 ($20.00)
950-999 lbs. $103.00 ($3.00)
>999 lbs. $95.00 ($11.00)
Dark cutter $76.00 ($30.00)
Hardbone $81.00 ($25.00)

Quality grade, yield grade, and weight premiums and discounts are additive.

Examining The Markets

During this year's debate over the nation's farm bill, some critical changes affecting livestock marketing were considered. The debate was highlighted by the Johnson amendment, which would have controlled how and when packers could own livestock. While there was intense and divisive arguments over the consequences of this amendment, nearly everyone predicted profound long-term impacts of such legislation.

In the end, and with what many considered with relief as a “punt” and others considered a cop-out, the House Agriculture Committee promised to conduct a “sustained and comprehensive examination of our nation's livestock markets and consideration of potential legislative solutions.”

Now, the committee is gearing up to do just that — hold hearings on the current state of livestock markets. Chairman Larry Combest (R-TX) is asking individuals, businesses and organizations to provide his committee detailed information on the structure, health and fairness of the nation's livestock marketing system.

Combest wants macroeconomic answers to specific questions that underline industry problems. But the issues raised might also serve as a self-examination of management and marketing policies of individual feeding and ranching operations.

Over the next few months, the debate will inevitably involve the major livestock organizations and lobbying groups. The issues are complex, interactive and will affect everyone differently. Do yourself and the industry a favor: Take the time to analyze the issues and respond to whatever degree you feel appropriate, and forward them to the group you feel best represents your interests.

  1. Characterize the strengths and weaknesses that exist in the current marketing system for livestock. Outline the nature and scope of the problems you observe. Finally, describe an appropriate governmental role in maintaining a viable livestock marketing system.

  2. The Grain Inspection, Packers & Stockyards Administration's (GIPSA) definition of “captive supply” differs from many in the livestock and meatpacking industry. Why? Given that GIPSA's definition differs from many in the regulated industries, should GIPSA modify its definition? Please define the term captive supply.

  3. Should captive supplies be reduced to 50%, 25%, 0% or some other number? What criteria should a packer use to reduce captive supplies? Which current feeders will be eliminated from the captive supply chain? Who will make this decision? How will we measure the success of limiting or eliminating captive supplies?

  4. Are you familiar with studies that have been conducted to determine what the current price of fed cattle would be if there were no captive supplies today? Will eliminating captive supplies put beef at a long-term disadvantage to pork and poultry in the development of new branded convenience products?

  5. In lieu of current alliance systems, what type of production and marketing system will provide a quality and consistent product needed for branded meat products?

  6. Do contracts, alliances or other kinds of marketing agreements improve or harm marketing alternatives for all sizes of producers? Since some lenders require price protection (hedges, forward contracts, etc.) for cattle production loans, what alternatives will replace forward contracts?

  7. Should independent, producer-owned plants, feedlots, marketing cooperatives and other livestock businesses — currently and in the future — be subject to the same level and kinds of legal and regulatory restrictions as more traditional livestock operations?

  8. What role do purchasing arrangements by major retailers have on packer pricing, captive supplies and other marketing and production arrangements? What is the current farm-to-retail price spread? How has this changed over time? What role have captive supplies had in altering the spread? Will a further regulation of captive supplies or other governmental intervention in livestock markets impact the spread? How?

  9. Numerous policy proposals have been discussed in Congress recently — the ban on packer ownership, for example. Meanwhile, a measure that would require packers to purchase 25% of their daily slaughter from the cash market is being discussed now. Highlight the economic effects of each of these on all of the participants in the livestock production sector in both the near and long term.

  10. Mandatory price reporting (MPR) was advocated as necessary to improve market transparency and price discovery. Implicit in the arguments of individuals advocating mpr was the idea that this improvement would lead to higher prices for producers. What has been the effect of MPR on producer prices?

  11. How does one reconcile the assertion that packers manipulate the market with the fact that prices move both up and down?

  12. What structural and/or economic transformations have occurred in the livestock, poultry, meat and retail industries in the past decade? To what extent have these transformations been caused or influenced by consumer demand or purchasing habits?

  13. Has the merger and acquisition activity in these sectors been greater than similar activities in other segments of the U.S. economy, such as other food or consumer product manufacturers or retailers? What factors have motivated mergers and acquisitions within these sectors?

  14. What factors have motivated vertical integration within these sectors? Are all vertical integration models the same? If not, describe various models and their benefits or detriments for consumers, retailers, manufacturers and producers.

  15. During the past 10 years, which meat packers have increased packing capacity and/or built new packing facilities — those who own or contract for some or all of their livestock, or those who do not?

  16. Does the business structure of the current U.S. retail, meat and poultry processing, and livestock production sectors optimize productivity, quality and profitability for each sector? Why or why not?

  17. Based on a competitive analysis of these sectors, which are better positioned for business success or failure? Why?

  18. Would an analysis of farm, processing and retail margins for meat products over the past decade show that any one of these sectors has greater power or profitability than any other? Why?

  19. How do these production/processing/retailing sectors compare with similar chains in other consumer product manufacturing industries, such as the automotive, dairy or pharmaceutical industries? What lessons can be learned?

  20. What are the drivers of and barriers to profitability in today's livestock production, meat and poultry processing, and retail industries?

  21. What effect do vertical integration, contracting and other supply-management strategies in the meat and poultry production/processing/retailing chain have on consumers? Retailers? Processors? Producers?

  22. Does the current Packers and Stockyards Act need to be modernized to respond to changing conditions in the livestock sector? If yes, outline the specific changes and/or additions to current law and resources that would be necessary to accomplish this goal.

Formal answers to each listed question may be sent to [email protected]. house.gov. Be sure to include the original question with your answers.

Discover what's under the hide

Most of you have some black cows, or at least you know somebody who does. You have probably seen black calves selling for what seemed like a premium to other hide colors that day, when all you knew was what you could see. Maybe some buyers had inside information, or maybe somebody just bid more than the facts could justify.

Some breeders have discovered black hides make a set of cattle look more uniform, and uniformity is a marketable commodity — even if it is only skin deep. Those who trade in “blacks” may tip their hats in thanks to Certified Angus Beef LLC (CAB), but CAB is working to end idle speculation on all things black.

If you feel taken by having bid up a set of black calves that later disappointed you, don't buy them again without more information. And if black hide is all your calves have to offer, be worried about market value in the future.

That's not to say there's anything wrong with a black hide. It just doesn't say enough — like a rectangular slip of paper that appears to be green. If it has what it takes to meet eight carcass specifications at a finished weight, then we'll see what kind of dollars we're talking about.

Last year, it was a share of $23 million, just for the CAB component of grid-marketed cattle. That doesn't include the Choice premium, or those for CAB Prime, which is now identified at plants owned by National, Smithfield and IBP.

One common challenge we face in the transition from a commodity-based industry to the focus on individual carcass value is maintaining identity. The market offers incentives right now — knowing is the only way to avoid paying too much for calves that only look like they might hit a grid target.

  • If you're a cattle feeder, you're taking action to avoid more of the red ink that has been shed over the last several years. You may still take chances on improving the put-together pens of odd singles and culls because the procurement cost is relatively lower. What you can't stand is another round of what only appear to be “good black cattle” purchased at a speculative premium.

  • If you're an order buyer, you may be playing the color game. It's a time-proven means of profit, but things are changing. This is a great time to start adding information to go with cattle of apparent quality.

    Tomorrow's premiums will be on keeping known genetics together and becoming a trusted part of the information chain so that sources can improve their offerings. Sure, that means you have to pay a little more, but only when you know it's worth it.

  • If you're a backgrounder or stocker operator, consider forging business links to both feedlots and cow-calf producers. You may be able to reduce the risk of owning unknown cattle by sharing ownership and participating in the information loop so you do know what's coming in.

  • If you're a cow-calf producer, and if you don't yet know, find out what's under those black hides. It isn't enough to learn that they're ½- to ¾-Angus with the rest in Hereford and/or Gelbvieh.

You have to characterize the genetic potential in those cows. You may never know the actual breed makeup, but you can learn what they will do.

Breed them to registered Angus bulls with the industry's most accurate expected progeny differences (EPDs) to produce calves that can hit the premium CAB target. Then, watch to see if your cows have what it takes to carry those bloodlines to fruition.

If you sell enough uniform calves to fill a pen, check with the buyer to see if you can follow their progress in a feedlot. Even though you don't own them, most CAB-licensed feedlots will provide information on their performance and grade. This route is a little less bumpy in the case of “special feeder calf sales,” where buyers are shopping for known quality and not just black hides.

The way to make sure you know about your calves' post-weaning performance is to retain a share of ownership. A lower risk, but less accurate option may be to select a few “representative” steers for an association- or university-sponsored value discovery project pen.

Eventually, you'll see feedlot and carcass information on calves born on your ranch. If you like what you see, you're in a strong position to use data for future sales and to continue improving. Don't blame the bulls if you don't like what you see. The fault is more likely in your cow genetics.

There are many roads you can take when you get bad news. Keep quiet and, for a few more years, sell the weanling calves that look good, even if they aren't. Step up heifer replacements with progeny from your top cows in post-weaning value. Purchase some foundation heifers of known performance and work with a seedstock supplier to develop calves good enough that anyone would be glad to partner on.

Steve Suther is the director of industry information for Certified Angus Beef LLC.

Montana Beef Network Fall Sales

Three Montana Beef Network (MBN) premium feeder calf sales are scheduled for Oct. 4, Nov. 1 and Dec. 6. The sales will be facilitated through Frontier Stockyards, Miles City, MT, an Internet/video cattle sale company, says John Paterson, Extension beef specialist, Montana State University.

The cattle will be videotaped and advertised for at least one week and then sold at market price plus a $20/head premium. Half of the premium will be paid to the producer upon delivery with $10/head in escrow at delivery. This premium money will be distributed to the producer or back to the buyer 45 days later based on morbidity and mortality standards.

Producers consigning calves must be beef quality assurance-certified. Prior to sale they must follow a weaning protocol, which includes vaccination at least 45 days before consignment. The cattle will be individually identified with electronic eartags, and MBN will make every effort to return carcass data to producers, adds Paterson.

The cattle will be shipped on a predetermined delivery date FOB the backgrounding location. Frontier Stockyard's representative will be present for delivery, weigh-up and payment to producer.

For additional information call Paterson at 406/994-5562 or Gordon Bruner (Frontier Stockyards) at 877/343-9047

Animal Biotech Concerns

There's no evidence that food from cloned livestock is unsafe for human consumption, but more research in this area is needed. That's according to a National Academy of Sciences panel that recently issued a report identifying science-based concerns about animal biotechnology. The Food and Drug Administration sponsored this report in preparing to rule on the safety of cloned cattle and other animal-biotechnology products.

The greatest concern, the panel says, is the ability of transgenic animals — especially fish and other highly mobile animals — to escape and reproduce in the natural environment.

Another moderate concern is uncertainty surrounding new proteins that are expressed when genes are inserted from another species. Though it's difficult to gauge, it is possible these proteins may trigger allergic reactions in a small percentage of people who consume meat or milk from such animals.

The panel was not asked to identify potential benefits from animal biotechnology or to make policy recommendations. However, it did suggest that tighter regulatory oversight of animal biotechnology is needed.

To read the full report online, visit the academy's Web site at www.nap.edu/books/0309084393/html/.

Two New Gelbvieh Programs

The American Gelbvieh Association (AGA) unveiled two new programs in August — a first-of-its-kind Feedyard Merit EPD and a follow up on its SmartCross crossbreeding program.

Feedyard Merit EPD

This new expected progeny difference (EPD) program consolidates traditional weaning weight and yearling weight EPDs and provides a genetically-derived economic value for feedyard performance.

Expressed as a dollar value/head, the Feedyard Merit EPD depicts the ability of a parent to produce progeny that will excel in important feedyard performance traits, such as average daily gain and feed efficiency, says Don Schieifelbein, AGA executive director.

The Feedyard Merit EPD may be used to estimate how future progeny of one animal will compare to progeny of another animal within the same breed. The EPD isn't designed to predict actual feedlot performance levels, but it can be used to compare sires based on estimated progeny performance differences when progeny are sent to a feedyard.

The Feedyard Merit EPD comes on the heels of AGA's release last year of its innovative Grid Merit EPD. Meanwhile, the AGA is currently working to develop a Cow-Calf Merit EPD for release in 2003.

Smartbuy Program

The AGA's SmartBuy Program combines a source-verified, preconditioned calf-tagging program with a cash incentive program for buyers of SmartCross calves. For a limited time, AGA will pay buyers $2/head for every SmartCross-tagged calf purchased.

SmartCross is a crossbreeding program designed to show commercial producers how to make more profitable cattle using registered Gelbvieh and Balancer bulls in a crossbreeding program. SmartCross encourages commercial producers to have a balance of Gelbvieh and British genetics to hit the beef industry's profit center.

SmartBuy follows up SmartCross by identifying calves with the most profitable blend of Gelbvieh and Angus-based genetics. To receive a SmartCross tag, at least 75% of the calves in a load must be sired by registered Gelb-vieh, registered Balancer or registered Gelbvieh x Angus hybrid bulls and out Angus-based cows (red or black).

These calves combine the right balance of Gelbvieh and Angus genetics to perform well in a feedlot and hang a high-quality carcass with lots of red meat yield, AGA says.

“Our biggest challenge in gaining credibility with feeders for Gelbvieh-influenced calves is lack of ability to identify those calves,” says Schiefelbein. “Many times, Gelbvieh-cross calves are misidentified as they go through the sale ring and the Gelbvieh genetics aren't recognized. SmartBuy gives seedstock producers a chance to work with their top commercial producers to identify SmartCross calves with a balance of Gelbvieh and Angus genetics.”

The calves must also be vaccinated according to guidelines for VAC 34 or VAC 45, and producers must follow beef quality assurance guidelines by giving all injections in the neck.

For more information, contact AGA at 303/465-2333 or visit www.gelbvieh.org.

Feeder cattle price cycles (part II)

This current turnaround phase of the cattle cycle is generating considerable uncertainty among beef cow producers. Typically, marketing factors in this phase change so quickly that the previous year's marketing experience is of little or no value in designing this year's post-weaning marketing strategy.

As a result, beef cow producers must look forward, not backward, for their market price signals. This makes formulating profitable post-weaning marketing strategies difficult.

In evaluating post-weaning marketing strategies, producers must first recognize that retaining calves in any post-weaning profit center is a margin game. Two things will determine success: your efficiency in buying and selling cattle (measured through the buy/sell margin) and your feedlot/pasture efficiency in generating added weight (measured by cost of gain). Remember that cattle cycles greatly impact buy/sell margins but have little or no impact on cost of gain.

Buy/Sell Margins

The buy/sell margin is the price of the heavier backgrounders/stockers coming out of the feedlot/pasture, minus the price of lighter calves going into the feedlot/pasture. Under normal price relationships, the buy/sell margin is negative, meaning lighter calves going on grass are priced higher per cwt. than the heavier calves coming off grass and going to the feedyard.

A negative margin ensures a loss in marketing the initial weight of the animals coming out of a backgrounding/stocker profit center. The extent of that loss depends on the buy/sell margin.

The magnitude of the negative buy/sell margin changes as we go through the cattle cycle. In general, buy/sell margins follow a predictable cyclical pattern, which implies that marketing losses associated with the normal negative buy/sell margin also follow a cyclical pattern.

Price Cycle Projections

Figure 1 presents my current beef price cycle projections for 500- to 600-lb. and 700- to 800-lb. steer feeders, plus 1,200-lb. slaughter steers. Buy/sell margins are represented by the vertical difference between any two lines. This chart illustrates the 1986-96 beef price cycle discussed last month on page 20, but with my current 2002 projected beef price cycle added on.

I've revised these projections annually the last six years. But the management signals these projections have sent during this period really haven't changed — until 2002. The Sept. 11 terrorist attacks and the current multi-year drought caused a significant change in 2002.

Six key factors have impacted the 2002 beef price cycle projections.

  1. Bovine spongiform encephalopathy (BSE) outbreak in Japan. The August 2001 BSE outbreak cut beef consumption in Japan by 50%. U.S. and Canadian beef exports to Japan, the number-one U.S. export customer for high-value beef cuts, fell immediately. Japanese beef consumption still hasn't recovered to levels before the BSE outbreak. In the last year, however, South Korea and Mexico have imported additional U.S. product, which made up most of this difference.

  2. The Sept. 11 terrorist attacks. Business travel in the U.S. hasn't recovered to its pre-Sept. 11 levels. Since most travelers consume high-valued restaurant beef cuts, this represented the loss of a second high-valued beef market.

    In contrast, home beef consumption of lower-value cuts went up, leading to a drop in total carcass value. Decreasing carcass values implies lower cattle prices.

  3. Poultry exports reduced by the Russian poultry ban. Russia, the largest market for U.S. poultry exports, retaliated against a new U.S. steel trade policy by banning poultry imports. The poultry destined for export was thus dumped on the U.S. domestic market. The surplus of poultry led to retail featuring of poultry, which pressured domestic prices for pork and beef.

  4. The down economy, which has forced a change in U.S. consumption patterns. Consumers are moving to lower-priced beef cuts, which reduces carcass values.

  5. Western U.S. and Canadian droughts, which are forcing more heifers to feedlots, thus generating added beef production. Increased cull cow slaughter (especially in Canada) is also adding to total beef production.

  6. Increased carcass weights, a main contributor to this year's increased beef production. At a time when beef demand is about stable, we've dramatically increased beef supply.

U.S. beef production jumped 4.6% in the first half of 2002. The additional tonnage pulls beef prices down as more beef moves under “specials,” which generate less total revenue from retail beef sales. We are awash in total pork, poultry and beef supplies.

Planning Prices

My current beef price cycle price projections are shown in Figure 2. In many respects, these new projections suggest a beef price cycle similar to the last beef price cycle but with two main differences.

The first difference is the projected double top. The second is that the beef price cycle will extend two more years to 2008.

The double top, I believe, is due in large part to drought, which has prompted a substantial increase in beef supply.

Once the drought passes, we should see heifers retained for breeding and cow slaughter decrease. These factors will trigger a cattle cycle feeder calf price kick.

Higher feed grain prices should reduce carcass weights to more normal levels and trigger a feedlot-induced price kick. These two price kicks should strengthen feeder calf prices back to a more normal cattle cycle/beef price cycle relationship.

These projected beef price cycles share some similarities with past cycles.

  • First, both cycles took four years from the bottom to the cycle's first top. Second, the last feeder calf price cycle had six “better years” (1988-1993) across its top. This generated a six-year, average calf price of $90 in the Northern Plains. The projected feeder calf price cycle is projected to also have six better years across the top with a projected six-year, $92 average calf price.

  • Third, the past cycle took six years from its first peak to the end of the downturn. The current price cycle is projected to take eight years from the first peak in 2000 to the end of the downturn in 2008. The two-year extension in the projected beef price cycle is drought-related.

The biggest marketing challenge is figuring out when the drought will end and when drought-stressed ranchers will begin to repopulate their herds. At this point, my current projections are based on the assumption these will happen in 2003.

Harlan Hughes is a professor emeritus of North Dakota State University. Retired spring 2000, he is currently based in Laramie, WY. He can be reached at 701/238-9607 or [email protected].

Starting Right

Variety may indeed be the spice of life. But variety also can be a tricky thing to navigate when you're the manager of a 12,000-head cattle feeding operation that becomes home to young cattle of all classes, types and conditions.

The custom feeding operation in Sioux Center, IA, is owned by Farmers Co-op Society (FCS). Feeding out beef cattle since 1972, the feedlot's one-time capacity is 8,000 head in confinement buildings and 4,000 head in outside lots. In addition, backgrounding lots are available in the area for customers who prefer to let FCS start their light cattle.

A situation like Farmers Co-op Confinement Feedlot, with incoming cattle of many different types and classes, dictates how the animals are managed to start them on feed properly, says Larry Cheney, beef consultant, Land O' Lakes/Farmland Feeds.

“Are calves coming in as preconditioned (weaned, fed for 30 to 40 days, given their initial round of vaccinations and boostered), or are they bawling calves that were pulled off their mothers, loaded on trucks and hauled 20 to 30 hours to get to the lot?” Cheney asks.

Health status, backgrounds and stress are different for cattle coming directly off grass compared to those that have been in a growout yard and put on 300-400 lbs.

“Our number-one concern in the feedlot is cost-efficient performance,” Cheney says. “We need dry matter intake with the right kind of calories that translates into feed conversion for carcass gain. Final dry matter conversion rates usually reflect the way cattle were started on feed when they arrived at the feedlot.”

According to Cheney, the typical starting program for spring calves weaned in the fall and sent to the feedyard under moderate stress should include:

  • First, make sure they have plenty of clean, fresh water. Lot space should be adequate, and the surface should be as dry as possible; dust or mud can add stress to incoming calves.

  • Day 1: Give them access to long-stem hay at about 1% of bodyweight (5 lbs. for a 500-lb. calf).

  • Day 2: If the hay is cleaned up, add another 1% of bodyweight of long-stem hay and top-dress with 1% bodyweight of starter ration.

  • Day 3: If calves are starting to push the hay aside to get to the ration, begin reducing the hay amount and top-dress 6 lbs. of starter ration on the hay once they are cleaning up the ration from the previous day.

  • Day 4: Continue reducing the long-stem hay and increase the starter ration by 1 lb.

  • Day 5 and on: Pull the long-stem hay and increase starter ration by another 1 lb./head/day. Continue this process until the calves are consuming 3% of their incoming body weight of starter ration.

  • During this starting phase, calves can be “worked.” An ionophore may be fed through the starting phase as a coccidiocide, and antibiotics can be fed at the appropriate levels if any signs of disease crop up.

  • A typical starting ration might look similar to this: chopped alfalfa hay — 35%, whole corn — 30%, wet corn gluten feed — 20% and Land O' Lakes Stress Care Liquid — 15%.

More information is available at the Land O' Lakes Farmland beef production Web site, www.beeflinks.com.

This article is written by Gary Burchfield of Hansen Communications.

A Stress Care Believer

Because his feeders come from so many different owners, Jeremy Jansen, manager of the Farmers Co-op Society (FCS) feedlot, says it's important to evaluate incoming cattle and get them quickly started on the most appropriate feeding program. That's doubly true for stressed cattle, he says.

Jansen pays close attention to stressed calves, particularly greener cattle coming in off pasture, usually at 600-700 lbs. and new to feedlot conditions.

“Freshly weaned calves that are long-haul type cattle tend to be highly stressed as well,” Jansen says. “So, we incorporate Land O' Lakes Stress Care Liquid into rations for the first 14 days as standard practice for highly stressed cattle,” he says.

Designed to get new cattle to the bunk quickly, the fortified liquid supplement contains vitamins and minerals in a molasses base. Yeast culture enhances feed palatability and stimulates rumen microflora and digestion.

Mark Kujawa, PhD and vice president of technical services-worldwide for Diamond V Mills, says the yeast culture nurtures healthy populations of rumen microbes.

“The rumen microbes break down feedstuffs into starches, sugars, proteins and other nutrients for absorption and use by the animal for maintenance, growth and production,” he says.

During those first two critical weeks, the yeast culture helps the rumen function at optimal levels, allowing the calves to more fully utilize nutrients from their feed to better overcome stress, build the immune system and do better in the feedlot, he adds.

Jansen says that when new cattle get up to the bunk and eat well, they become efficient gainers for the rest of their time in his lots. The liquid supplement with yeast culture makes up about 7% of the starter ration for incoming feeders.

Beyond that, the feedlot's total-mixed rations are built around good alfalfa hay, corn, wet distillers grains and condensed corn solubles. The latter two are by-products of Siouxland Energy & Livestock ethanol plant, located adjacent to the FCS feedlot.

Producers don't have to be co-op members to bring their cattle to the FCS feedlot, but most are, says FCS beef specialist Paul Smit.

Jansen says the feedlot emphasizes a feeding program that produces lower costs of gain. “If we can put on 400-500 lbs. of beef per animal at 10 percent lower feed cost, that's an extra $25/head net for the owner,” he says.

Finished cattle are generally marketed on a dressed basis or on grids to area packers.

Access the Farmers Co-op Society Web site at www.farmerscoopsociety.com.

Probiotics slash E. coli incidence

A new feed ingredient that contains probiotics or “good bacteria” can reduce the presence of E. coli 0157:H7 in live cattle by as much as 50%, according to researchers at Texas Tech University.

In the study, which was conducted during the summer (when cattle are known to shed more E. coli), 180 steers were fed one of three diets. The control group received a standard diet of grain and roughage. The other two groups received a standard diet that also included one of two strains of Lactobacillus acidophilus, which is similar to the bacteria commonly added to yogurt.

Fecal samples from the cattle were analyzed upon arrival and every 28 days thereafter until they received probiotic supplementation. After a 60-day supplementation period began, samples were analyzed every 14 days. Researchers used the most sensitive test methods available to detect the presence of E. coli 0157:H7.

During the mid-feeding period, the number of cattle testing positive for E. coli 0157:H7 was 18% to 19%. Near slaughter, that number was less than 10%. Cattle fed the probiotics showed major reductions in the incidence of E. coli.

Besides reducing E. coli, the probiotic is extremely cost-effective. Researchers estimate the cost of feed supplementation is roughly 1¢/animal/day, which is offset by improvements in feed conversion.

Further research studies are underway and, if successful, will lead to commercial field trials aimed at affirming the benefits of this strain of Lactobacillus acidophilus.

To view this research in its entirety, visit the American Meat Industry Foundation's Web site at www.amif.org.


Cattle are a natural reservoir of the food-borne pathogen E. coli O157:H7. Because sodium chlorate is bactericidal only against nitrate-positive bacteria, it's been suggested that chlorate supplementation be used to reduce E. coli O157:H7 populations in cattle prior to harvest. In work at the Southern Plains Agricultural Research Center, College Station, TX, cattle were given access to drinking water supplemented with different levels and forms of sodium chlorate.

Results of this study indicate that treating cattle with sodium chlorate reduced E. coli O157:H7 populations at a pre-harvest critical control point.

Even though chlorate kills intestinal bacteria, those cells lacking nitrates are unaffected by sodium chlorate. Thus, the gastrointestinal fermentation profile was not altered by chlorate supplementation in this study. It appears that chlorate could be used to improve food safety, but further studies are needed to determine the most effective treatment regimen.
Journal of Animal Science 2002 80:1683-1689


Research in Georgia was designed to determine the impact of selecting sires based on yearling intramuscular (IM) fat measured by ultrasound on corresponding marbling score. Ultrasound measurements collected in purebred cooperator herds were combined with other ultrasound records collected by the American Angus Association.

Ultrasound genetic values for fat thickness, ribeye area and IM fat percentage were computed. Each year, bulls were randomly mated to commercial Angus females.

Data show that yearling Angus bulls selected for high IM fat percentage or high ultrasound IM fat percentage expected progeny difference (EPD) can be expected to produce steers with significantly higher amounts of marbling and quality grade. Apparently, marbling can be increased without corresponding increases in external fat thickness and yield grade.

This implies that ultrasound IM fat percentage should be included in genetic evaluation programs to allow producers to select animals that can influence the degree of marbling in progeny at a younger age.
Journal of Animal Science 2002 80:2017-2022


Measurement of differences in wholesale cut yields of beef carcasses at plant chain speeds is important for the application of value-based marketing. To improve the accuracy of grade assessment, Colorado researchers evaluated the ability of a commercial video image analysis system — the Computer Vision System (CVS) — to predict commercially fabricated beef subprimal yield and augment USDA yield grading.

The CVS was evaluated as a fully installed production system, operating on a full-time basis at chain speeds. This work indicates CVS (either alone or combined with some human grader estimates) more accurately predicted carcass cutout yields than did yield grades assigned by online graders.

Data indicate that predicting wholesale cut yields using CVS assessments was more accurate than whole-number yield grades assigned by online graders. The results also indicate CVS approached yield grades assigned by expert graders, and an augmentation system combining yield grade factors assigned by expert graders with cold camera ribeye area was as accurate as yield estimates made by expert graders.
Journal of Animal Science 2002 80:1195-1201


It's confirmed. Transportation is a major contributor to cattle stress. A study at the Lethbridge Research Centre in Alberta, Canada, found that after a three-hour trip, plasma cortisol concentrations and heart rates were higher in cattle than before loading. What's more, loading itself resulted in a 50% increase in heart rate.

The study is part of the center's ongoing research to lay the groundwork for stress-reduction strategies. Further studies will include developing objective means to measure stress and help build the basis for effective animal care protocols.

An objective measure of stress in cattle would help producers cut production costs and stress-associated losses by altering management to minimize stressful situations, the researchers say. Stress contributes to reduced growth and reproductive performance in cattle, as well as increased health problems and reduced carcass quality.

For more information, contact Gerry Mears at 403/327-2238 or visit www.agr.gc.ca/science/lethbridge.

Compiled by BEEF staff. To submit items for “Research Roundup,” e-mail [email protected] or fax to 952/851-4601.