HUNTIN' DAYLIGHT -- WEIGHT STILL WINS...FOR A WHILE
by: Wes Ishmael
It's true that an eight-weight USDA Choice Carcass would have been worth $109.12 more than a Select one the second week of January based on boxed beef cutout values and a USDA Choice-Select spread of $13.64 that week.
But it's just as true that a Select carcass weighing 900 lb. that week would have been worth $96.70 more than the Choice 800-pounder.
In other words, even as the Choice-Select spread has reached historic highs—it was $23/cwt. for a time in 2006—there often continues to be more economic incentive to increase carcass weight than carcass quality.
Viewed through these spectacles, it's not much wonder that quality grade has continued to decline in the industry, despite a cowherd mostly increasingly Angus-influenced.
In fact, according to the 2005 National Beef Quality Audit (NBQA) released last summer fewer cattle graded Choice or higher in 2004 (58.5 percent) than in 1975 (84 percent). In the eyes of purveyors, retailers, restaurateurs and packers insufficient marbling is the single greatest challenge for beef. Insufficient marbling was also cited as the biggest challenge when responses were aggregated from seedstock operators, cow-calf producers, stockers/backgrounders and feedlot operators. Quality Grade represents the single greatest lost opportunity in each periodic NBQA ($26.81 in 2005).
Even the vaunted Certified Angus Beef program (CAB), which ultimately created a new premium category for all beef (upper two-thirds of Choice and higher) is coming up short finding enough cattle to fill demand. According to CAB officials, a record number of cattle were identified for the program last year — 13.1 million head — yet a record low percentage — 14 percent -- were accepted for CAB certification. Despite that, increased product utilization meant that CAB still marketed more than 500 million lbs. of product.
This at a time when, arguably, there are more Angus-influenced cattle running around the country that at any time in history. Though the American Angus Association actually registered more cattle in the late 1960s, the 347,572 head registered last year dwarfs every other breed association.
Combine it with cattle registered through the American Red Angus Association (43,201) as reported by the National Pedigreed Livestock Council and 80 percent of all registrations from the major English breeds are from these two breeds; 48 percent of all cattle registered with the primary English, Continental and American breeds.
Moreover, as reported in last month's Western Cowman (Black Tide-Part 1) various industry surveys indicate Angus and Angus crossbred cattle comprise at least two-thirds of the commercial cowherd.
One example is a survey commissioned by Certified Angus Beef, LLC a couple of years ago. In that survey 65 percent of respondents—commercial producers with at least 100 cows—said there herd was Angus-based. Another five percent named Red Angus as the primary component.
In another survey conducted by the American Angus Association a couple of years earlier, 33 percent of producers surveyed said their cowherd was primarily composed of Angus. Another 30 percent said it was Angus crossbred and 22 percent answered crossbred. Of the 22 percent who answered crossbred, 78 percent indicated Angus was represented in those genetics. According to AAA, “When analyzing all responses, 68% of total producers surveyed indicated Angus was a major influence on the genetics of their cowherd. All other breeds were mentioned specifically by less than 10 percent of producers surveyed.”
Given the inherent genetic advantage of Angus and Red Angus in marbling, and the sheer numbers of them in the industry, plenty of folks have been wondering how in the world USDA quality grades could be running backwards. CAB undertook an intensive process to discover some answers.
Building More Pounds
“It is clear that no one factor is solely contributing to the decline in marbling,” say authors of a summary White Paper, Larry Corah, CAB vice president and Mark McCully, CAB Director of Supply Development. “But numerous factors are having an effect. Because of this trend, the economic value received for cattle sold through a value-based marketing system is affected and, on a large scale, the demand for beef threatened.”
Among the factors cited in the CAB research:
Cattle Health Problems—Cattle treated for sickness even once
in the feedlot marble less than those that remain healthy. Cattle health today
“In Iowa State University research, calves treated two or more times for bovine respiratory disease (BRD) had an 18 percent reduction in ability to grade Low Choice when compared to healthy calves. The impact was a 44 percent reduction in Prime and 33 percent fewer Premium Choice grading cattle…
“A 13-year ('92-'04) evaluation of Kansas feedlots reported an annual trend of increased death loss in both steers and heifers. The summary showed a decrease in placement weight was associated with increased death loss…
Use of Ethanol co-products—As the percent of ethanol feed byproducts
increase in fed cattle rations, marbling decreases, while yield grade increases.
That's based on a summary of 13 studies by Dr. Chris Reinhardt, Kansas State
University Extension Feedlot Specialist. The studies included wet or dry distiller's
grain at varying levels of corn prices increase, along with feed co-products
from ethanol production.
According to Reinhardt, “The reason for this decline in marbling may be associated with the reduced level of starch availability in distilled products as compared to corn. Although feedlot cattle performance is generally not reduced, the lower level of starch digestibility could affect marbling adipocyte differentiation.”
change in feedlot management and infrastructure—Aside from a drastic shift in cattle feeding geography—from the Midwest to the Southern Plains—during
the past 35 year, average feedlot size continues to increase. Both have an
impact on marbling, according to the CAB study:
“Larger feed yards almost exclusively use steam-flaked grain. Smaller yards use rolled or cracked grain and almost always feed corn…
“A review of 552 studies by Owens and Gardner showed the significant effect of flaking on quality grade (negative to quality)…More ruminal starch digestion should increase the organic acids that are later converted to glucose and glucose is a precursor for marbling. In the review, steam-flaking increased ribeye area though not relative to carcass weight. It is hypothesized that this increased muscle area has a diluting effect on marbling. With increased daily gains achieved through steam-flaking, days on feed are reduced, and that could also reduce marbling.”
is a journey, not an event—“Recent research suggests that marbling development is a lifetime event… Moreover, the time period near weaning seems to be an especially critical period in a calf's life because of the management events occurring. Management strategies during this time period—early weaning, creep feeding, delayed implanting, and maintaining health—all contribute to the subsequent quality grade and level of CAB® acceptance.”
• Implant strategies—“Utilization of growth-promoting implants is one of the most economical management practices used by beef producers. Equally well documented is the negative impact implanting has on quality grade. Research studies have shown that the percentage of cattle grading Choice and higher can be reduced by 15-20 percent, with the percentage of CAB®-accepted cattle reduced by 8-10 percent in aggressive implant programs. Increased feeder calf cost and high break-even prices have likely increased the implant frequency and/or potency used in the beef industry over the last several years.”
• Genetics—“Marbling is a very heritable trait, allowing genetic selection to have a significant effect on quality grade and CAB® acceptance rates. Both genetic selection within breed and differences between breeds will dramatically impact marbling levels.”
• Early weaning—“Calves are traditionally weaned at 6-8 months of age, but weaning earlier—as early as 3-4 months—has shown dramatic positive effects on quality grade and CAB® acceptance rates. In these studies, early-weaned calves often graded 50 to 75 percent or more average Choice and above, up to twice as many qualifying for added premiums when compared to traditionally weaned calves. Early and steady use of a high grain ration, preferably corn, was the key to success. The mode of action likely relates to high-grain diets yielding more propionate, a gluconeogenic precursor, resulting in greater marbling deposition.”
• Creep feeding—During times of lower calf prices, and because of logistical challenges in some production systems, creep feeding is seldom used. However, research clearly shows that when calves are placed in an accelerated production system, resulting in harvesting at 13-15 months of age, creep feeding accentuates marbling potential. Research at the University of Illinois and the Ohio State University has shown that grain—usually corn-based—creep feeding increases marbling levels; 100 days of such feed is capable of raising final marbling by a full score. Corn is ideal because it increases starch absorption in the small intestine.”
• Disposition—“Often overlooked is the impact poor disposition has on marbling potential. Recent Iowa State University research showed that cattle displaying aggressive behavior had greatly reduced quality grades.”
• Vitamin A Levels—“Research from both the United States and Japan suggests that high levels of Vitamin A may negatively impact marbling deposition...The results have been variable in research studies, and the authors have recommended further research.”
• Animal Gender—“Numerous studies have shown that heifers consistently out-grade steers by 8-10 percentage points in Choice levels, with CAB® acceptance rates 6-8 percentage points higher in heifers. The cattle cycle and the resulting percent of heifers in the harvest mix influences grade and CAB® acceptance rates. A 1 percent change in the heifer harvest percentage correlates to a 0.1 percent change in CAB® acceptance percentage.”
• Calves vs. Yearlings—“Traditionally, the average age at harvest has been 18-20 months. However, because of short cattle supplies and widespread drought conditions, age has decreased in recent years. A Nebraska research report suggests 30-35 percent of all cattle are placed on feed as calves, which likely relates to Northern and Midwest cattle rather than all fed cattle.
“The widely held industry belief is that yearlings out-grade calves, but that is likely influenced by the production system. A Nebraska study showed that calves of common genetics split at weaning had drastically different quality grades based on the production system. The calf-feds had 32.5 percent grade Prime and Premium Choice versus only 1.2 percent for the yearlings that were placed on a winter growing diet where gains were only 1.16 lbs./day for 197 days. Equally important, 19 percent of the yearling carcasses were classified as tough by a sensory panel versus zero for the calf feds.”
• Antagonistic Traits—“The correlation between marbling and ribeye area is -0.2 (negative), inferring genetic selection for muscling could reduce marbling levels. However, the potential likely exists for selective breeding to overcome this antagonism. Just as random genetic selection for yearling weight increases birth weight, strategic genetic selection can increase yearling weight while holding birth weight constant. The same logic may be applied to selection for marbling and ribeye area.”
Not coincidentally, all of these management practices and industry realities are aimed at achieving greater efficiency defined as more pounds of beef per unit of input cost.
More consternating than the irony between having more grading potential and a lower percentage of cattle grading Choice and higher is its potential impact on consumer beef demand.
As measured by the Retail Beef Demand Index (BDI), through the first three quarters of 2006, beef demand has dipped for six consecutive quarters. The first quarter BDI was the lowest since 2004; the second and third quarters were the lowest since 2002 (fourth quarter numbers weren't yet available). Though it is still 25 percent stronger than when the industry halted two decades of declining demand in 1999, last year's annual BDI was on par with demand in 1992.
There are also indications that consumer demand for Choice and higher grades of beef is growing even while the overall beef demand index continues to lose some ground. In effect that means Choice-Select premiums should remain wide, resulting in more incentive to increase quality rather than weight.
Certainly, sustained, steep corn prices provide less incentive for adding carcass weight.
CAB White Paper about declining quality grades available at www.cabpartners.com