Challenges, Changes, and Opportunities in the Beef Industry

Wayne R. Wagner Ph.D.
Livestock Specialist
WVU Extension Service
10/2000

The challenges for the beef cattle industry, and the producers who make up this industry, are huge. Collectively, it is time for us to begin working together rather than independently. The results of the National Beef Quality Audit indicate that the industry needs to:

1. Improve uniformity and consistency
2. Improve tenderness
3. Improve overall palatability
4. Improve flavor
5. Reduce excessive weights of cuts/portion size.

All these factors are affected to some degree by genetics - and the genetic decisions are made at the cow-calf level.

Change. It is important for change to occur in this industry. Change is vital. On the other hand, tradition has made change difficult. It is time to think, learn, listen, and become more involved. There is simply not enough professionalism in this industry! Too many fail to take advantage of opportunities to become involved, to learn, and to become "quality" food producers.

The National Cattlemen's Beef Association's (NCBA) goal is to become more consumer focused. Focus! Are you consumer focused? Few of us are, and our future will depend upon our response to changing consumer attitudes, lifestyles, and preferences. Although we need to become more consumer focused we must continue to select and produce cattle that are functional and productive in low input forage-based production systems. Put another way, cows must be cows first.

Direction. What is your direction? How can we decide what changes are necessary if we do not know where we are? I used to think that no one should be in the purebred business unless he or she fed cattle. However, now I am convinced that the industry would be much improved if everyone in the cow-calf business were required to feed cattle. Why? Because it is educational. It is a learning experience, and it forces you to understand some of the problems and challenges of this industry. Sell finished cattle on a grid, and I guarantee you will become more familiar with unacceptable product and the costs associated with supplying such a product.

I am not a cattle feeder, but I have fed cattle. I understand the importance of health and feed conversion to profitability. Although I am a cattleman I am a consumer too. I understand the disappointment of a poor steak! I also understand that the recommended daily intake of meat is 3 to 6 ounces. That is not a 14-or 15-square-inch loin eye cut 3/4 to one inch thick. Where did we get this mentality in the beef cattle industry that if a little bit is good, more is better? Optimum needs to become part of our vocabulary. Optimum is defined in Webster as: "the best or most favorable degree, condition, amount." Optimum loin-eye size is probably 11 to 13.5 square inches.

Several years ago we developed a program called the West Virginia Feedlot and Product Information Program (WVFPIP). The purpose is to provide producers an opportunity to obtain feedlot and carcass information on a portion of their calf crop without having to retain ownership on their entire calf crop. To participate should not be burdensome. The requirements are fairly simple:

1. Must be a current member of the West Virginia Cattlemen's Association.
2. Steer and/or heifer calves born after December 1 of the preceding year can be fed (this year December 1, 1997).
3. Minimum consignment is 5 head; either or both sexes represented.
4. Steer calves should weigh 550 to 750 pounds and heifers 525 to 725 pounds at delivery. (Tentative delivery is November 9, 1998).
5. Calves weaned at least 30 days and preferably 45 days prior to delivery, started on feed and taught to eat out of a feed bunk and drink from a water trough.
6. Vaccinated as follows:
a) 7-way clostridia (two injections)
b) IBR, PI3, BVD, BRSV, and Lepto 5 (killed product).
c) Pasteurella (One-Shot recommended 10 days before shipment).

Let me share with you some of our experiences feeding cattle in southwest Kansas. First, the advantages:

1. Near ideal environment
2. Low investment in facilities (low yardage)
3. Close proximity to several packers
4. Professional nutrition and veterinary services
5. Feed resources - wheat, corn.

Usually, climatic conditions for feeding calves from November through May are good in southwest Kansas. However, the winter of 1997-98 was a poor one, which delayed marketing of our cattle 2 to 4 weeks and increased cost of gain $3 to $5 per cwt. Our target for marketing calves is April and May, which are usually two of the better market months. Also the choice/select spread is usually small during this period and widens in July and August. Table 1 shows a summary of feedlot performance and feed conversion over a four-year period. Let's focus on the Hitch II 98 cattle. There were two pens of steers and one pen of heifers. The dry matter feed conversions for those three pens were 6.38, 7.24, and 6.70 lbs. respectively. In that same lot, dry matter conversions for steers in 97, 96, and 95 were 5.99, 5.63, and 6.38 respectively. Dry matter conversions for heifers at Hitch II in 97 and 96 were 6.26 and 6.41 respectively. No heifers were fed in 95. You will also note that death loss was generally higher in 98 than in previous years. The Supreme 98 and CRF 97 groups were selected Angus steers and represent attainable levels of achievement for dry matter conversion. My personal goal is to achieve a DM feed conversion of 4.5 pounds per pound of gain. As DM feed conversion improves, cost of gain improves.

The disadvantages of feeding cattle in southwest Kansas, in my opinion, are the higher transportation costs to the feedlot and feed cost. Average trucking per head for steers and heifers shipped in November 1997 was $33.75 and $30.29 respectively. Southwest Kansas is approximately 1,300 miles from Morgantown, West Virginia.

My personal interest in feeding cattle in Kansas is "opportunity." It is central to some important alliances. One is Farmland Industries, a farmer-owned cooperative, and their alliance with Supreme Feeders.

Table 1: Summary of Feedlot Performance and Feed Conversion for the West Virginia Feedlot and Product Information Program

 

Lot/Year Pen a

Breed

No. of Head

Death Loss, %

In Weight

Out Weight

DOF b

ADG c

Cost of Gain/cwt d

Feed Conversion, DM

Hitch II 98

                 

Steers

Mix

200

3.50

572

1195

180

3.23

53.59

6.38

Steers

Mix

106

5.66

690

1273

169

3.02

59.26

7.24

Heifers

Mix

155

1.94

540

1089

186

2.85

55.98

6.70

Supreme 98

Angus

156

2.56

578

1192

175

3.38

51.08

5.46

Hitch II 97

                 

Steers

Mix

112

1.79

596

1124

152

3.35

51.47

5.99

Heifers

Mix

48

2.08

534

1083

170

3.10

55.09

6.26

CRF 97

Angus

69

1.45

643

1285

176

3.64

46.83

5.49

Hitch II 96

                 

Steers

Mix

241

0.00

596

1169

173

3.31

59.59

5.63

Heifers

Mix

64

1.56

563

1061

179

2.68

68.57

6.41

Hitch II 95

Mix

221

.90

631

1222

190

3.05

49.79

6.38

a Steers unless identified otherwise
b Days on Feed
c (Out Weight - In Weight) / DOF
d Deads in; Does Not Include Trucking

Farmland is producing and selling "branded" beef products including pre-cooked Top Round and Prime-Rib and Philly Shaved beef. I believe they have the potential to increase the value of the beef animal to their members. For some time we have been told that branded hides cost the industry. Soon, Farmland will pay an extra $3/head for unbranded steers, but not heifers. Certainly, they have the potential to utilize new information and technology to increase demand/market value such as feeding vitamin E to extend shelf life and incorporating on-line tenderness evaluation measures of carcasses. Furthermore, they can provide source verified products more readily than any other packer. Beginning this fall, the WVFPIP cattle will be fed at Supreme and marketed through Farmland.

We sold our cattle in WVFPIP on the Gelbvieh grid this year. There are many grids out there, and on a given set of cattle each grid will produce different results. Most of our cattle were harvested on May 12 or June 16. Table 2 shows the premiums and discounts and the base price for the harvest dates of May 12 and June 16. The Choice premium was based upon the Choice/Select spread at the time of harvest. For example, on May 12 Choice carcasses were valued at $1.44 over Select, but on June 16 Choice carcasses were valued at $4.24/cwt over Select. By early August that spread had widened to about $12/cwt. You will notice a $1/cwt premium for Certified Angus Beef (CAB) over Choice and there was a $5/cwt premium for Prime over CAB. You will also notice that there were substantial discounts for standards, yield grade 4, heavy and light carcasses, and dark cutters. In my opinion, it takes a value based market to provide the incentive to produce a better beef product.

Table 2: Premiums / Discounts with base Select, Yield Grade 3 as a Base.

 

 

Gelbvieh Alliance Kill Date

Grade / Class

5/12

6/16

Base ($/cwt)

$102.56

$99.44

Prime

7.44

10.24

Certified Angus Beef (CAB)

2.44

5.24

Choice

1.44

4.24

Select

---

---

Standard

-10.00

-10.00

Commercial

-32.56

-29.44

Yield Grade 1

4.00

4.00

Yield Grade 2

2.50

2.50

Yield Grade 3

---

---

Yield Grade 4

-20.00

-20.00

Yield Grade 5

-25.00

-25.00

Heavy / Light

-20.65

 

Dark Cutters

-20.65

 

 

Table 3 is a summary of the USDA Quality and Yield Grades for the 97-98 WVFPIP cattle by sex. For information purposes they are listed by both quality and yield grade. In the steer group, 2.5, 52, and 43 % made USDA Prime, Choice, and Select respectively. In the heifer group, 4, 57, and 39 % graded Prime, Choice, and Select respectively.

Table 3: Summary of USDA Quality and Yield Grades for the 1997 - 98 West Virginia Feedlot Test and Product Information Program a

 

Quality and Yield Grade

Steers a

Heifers a

Prime 2

1.1

2.0

Prime 3

1.4

2.0

All Prime

2.5

4

CAB 1

-

.7

CAB 2

5.3

4.0

CAB 3

3.5

4.0

Choice 1

.7

2.0

Choice 2

18.6

32.2

Choice 3

23.5

12.1

Choice 4

.4

2.0

All Choice

52

57

Select 1

3.9

6.7

Select 2

30.2

28.2

Select 3

9.1

4.0

All Select

43

39

Standard 1 & 2

2.1

-

Commercial

.4

-

All Others

2.5

0

a expressed as a percentage in each sex as follows - 286 steers and 149 heifers

Table 4 lists my target ranges for hot carcass weight (HCW), Marbling, and Yield Grade and the percentage of WVFPIP cattle that fell within those ranges. The "Gelbvieh Grid" paid discounts for HCW under 550 or over 950 pounds. My target is more conservative, 600 to 850 pounds. If we are interested in meeting consumer needs this is realistic because it reduces variability in portion size and thickness.

Table 4: Percent of Cattle in the 1997 - 98 WVFPIP That Are Within Target Ranges for Hot Carcass Weights, Marbling and Yield Grade a

 

Item

Steers

Heifers

Number of Cattle

286

149

Average Fat Thickness, inches

.48

.53

Hot Carcass Weight (600 - 850 lbs.)

83 (237)

91 (136)

Marbling (Slight 50 and above)

89 (254)

91 (135)

Yield Grade (< 3.5)

84 (240)

86 (128)

Within All Three

62 (177)

66 (99)

a Actual Number in parenthesis

Table 5 lists the rib eye requirements for different carcass weights to cause a zero change in the preliminary yield grade (PYG). Because most of us think in terms of live weight, I have listed the live weight equivalents at a dressing percent of 63 and 64.5. The PYG at .4 inches of fat is 3.0 (The PYG at .3, .5, and .6 inches fat is 2.75, 3.25, and 3.5 respectively.). Put another way, a carcass with .4 inches of fat between the 12th and 13th rib has a preliminary yield grade of 3.0. A USDA grader adjusts the PYG for rib eye area in relation to HCW and percent KPH (Kidney, Pelvic and Heart fat). KPH is relatively unimportant, so lets disregard that for now. If rib eye areas are larger than those in Table 5 at a given carcass weight, yield grade improves. My contention is that if rib eye areas of 11 to13.5 square inches will satisfy most consumer preferences for portion size, then to achieve yield grades of 1 and 2 will limit HCW to a maximum of 850 pounds.

The target for marbling is Slight 50 and above. Slight 50 is in the middle of USDA Select. The target for yield grade is less than or equal to 3.5. There were 286 steers and 149 heifers with complete data in this data set. Eighty-three percent of the steers and 91% of heifers met the targets for HCW which seems acceptable. For marbling, 87% of steers and 91% of heifers fell within the acceptable range. For yield grade, 84 and 86% of steers and heifers respectively met the target. However, when you consider the cattle that met all three targets, 177 steers or 62% and 99 heifers or 66% met the requirements. This seems inappropriate if we are consumer focused. I believe we can and must improve consistency and quality. In order to determine the merit of our cattle, we need to collect carcass data and then use that information when we make breeding and selection decisions.

Table 5: Rib Eye Requirement for Different Carcass Weights to Cause Zero Change in Preliminary Yield Grade (PYG)

Hot Carcass Weight, of HCW

Rib Eye Area Requirement (sq. in.)

Live Weight @ 63% Dress

Live Weight @ 64.5% Dress

550

10.4

873

853

600

11.0

952

930

650

11.6

1032

1008

700

12.2

1111

1085

750

12.8

1190

1163

800

13.4

1270

1240

850

14.0

1349

1318

900

14.6

1429

1395