Producers try to manage cattle and resources based on market incentives, but that's not simple when signals change faster than they can make adjustments.
Sometimes it helps to step back and check the flow.
Iowa State University helped do that back in 2002 when it published, "Assessing the Cost of Beef Quality." That study showed it generally pays, depending on the USDA Choice and Select beef price.
In feedlot profitability, marbling turned out to be a key driver, even more important than carcass weight when the Choice/Select spread was at the 1996-1999 average of $8 per hundredweight (cwt.) or higher. Moreover, that study concluded, "The current trend to rewarding higher quality-grading cattle will have the added benefit of reduced cow cost."
Much has changed in the last decade, so what about those cost/value relationships? To find out, Certified Angus Beef LLC sponsored a "Revisit" 2009 white paper, with economist ISU John Lawrence again anchoring the research team.
The resulting paper note several changes since 1999: "Value-based marketing is commonplace, the national beef cow herd has shifted toward more Angus influence, and carcass weights have increased. Most notably, however, cattle and grain prices have increased."
Iowa fed cattle and corn prices for 1996-1999 averaged $64.13/cwt. and $2.49/bushel (bu.), respectively, compared to $88.87 and $3.04 for 2005-2008. The ISU team looked at the relative importance of cattle performance and carcass characteristics on feedlot profitability, given the new price levels.
Grid marketing's rise was noted in the 2002 paper, which ranked traits affecting profit. Building on that with data from the Tri-County Steer Carcass Futurity (TCSCF) on individual gain, efficiency and carcass measurements, the "Revisit" shows quality is at least as important with higher costs. In fact, no other driver of feedlot profitability was more important than marbling at Choice/Select spreads of $6/cwt. or more.
In both studies, marbling had the largest impact on feedlot net returns when the Choice/Select spread is $8/cwt or higher. The latest study also notes $6/cwt as the Choice/Select spread point where the relative importance of marbling score is equal to other factors. Otherwise, nothing changes in the order: carcass weight and feed efficiency are still next after marbling, followed by ribeye area in fourth place.
Over the last 15 years, the Choice/Select spread has averaged lower than $6/cwt. only once, and that was last year, McCully says. "Marbling is still the most significant performance and carcass trait even as prices shift, so we must learn how to keep feeding cattle to make the most of their marbling potential."
In every phase of the beef industry from ranch to consumer, "it is increasingly important to understand cost/value relationships," he says. "In the recent economic turmoil, consumer sales of the Certified Angus Beef ® brand increased because of that understanding. It's even more important on the ranch, to know what makes more money in the end."
The complete white paper, "Assessing the Cost of Beef Quality, Revisited," is available at www.cabpartners.com/news/research/index.php. To view a video with John Lawrence discussing the paper, go to www.youtube.com/watch?v=vr0LXX_5RJk.