Nalivka: Marketing Beef Value vs Pounds

Pounds or yield is important to the cow-calf operation, feedlot, and packer.  Yield has always been a driver to the meat industry or agriculture for that matter as “price X quantity = revenue.”  Ranchers, feedlots, and packers all sell pounds of beef.  But, the market is shifting and those pounds of beef produced are increasingly scrutinized by consumers expressing their preferences in the market place.  Not only has this led to premiums directed at beef that meets those preferences, demand has performed well in the face of record production in 2018.  This is both U.S. and global demand.  But, while U.S. beef export demand is a key factor in the market, few ranchers can say they are producing for the export market and show a sales receipt from a Japanese or South Korean buyer.  Your beef may be exported by a U.S. packer but the fact is what you do at the ranch probably doesn’t control that sale.

While I won’t dispute that yield will always be important to the success of your ranching operation, I also suggest the industry is now putting increased emphasis on value and we have seen increased emphasis on genetics that enhance carcass quality.   A major attribute of increased value is higher quality.  Many ranchers are focusing on “producing the right cattle for the right market” and are shifting away from being simply a price-taker in the market to a “price maker.”   We are seeing this in overall quality of beef produced with 84% of fed cattle grading Choice today compared to a 2009-2013 average of 72%. 

Add genetic selection for carcass quality to low birthweight calves and you have a profit dynamic that goes beyond weaning weight or yearling weight and yield.   Premiums for All Natural Cattle are currently ranging near $31 per cwt with the NHTC premium at $20 per cwt, and CAB at $4 per cwt.   Premiums for carcasses grading Prime range up to $28 per cwt.   At the same time, the discount for Select grade cattle is -$15 per cwt and cattle over 30 months of age is averaging -$17 per cwt. 

Ranchers can manage their cattle for the premiums and discounts in the market listed above.  Is it worth it?  Only you can answer that question but as the market changes toward truly producing beef according to consumer preferences, the resulting increase in demand for your product in turn creates opportunity at the ranch, at the feedlot, and the packing plant all to your benefit. 

Nalivka: How Packer Margins Impact Beef Demand

Nalivka: Amazon's the New Sheriff In Town