I have been following the cattle markets closely this spring. To some extent, waiting for the drop in prices that will undoubtedly make everyone groan, but also, because the current benchmarks in carcass quality that the industry is achieving have me psyched! Just this morning I was reading an issue of Beef Magazine, Dr. Nevil Speer always does a great job succinctly summarizing trends in the beef industry, and what struck me, even more than the fact that we now are achieving over 80% of carcasses in the U.S. grading Choice and above, was reflecting on these trends through the course of my own career. While I was still just young graduate student, the beef industry hit another record, the Choice-Select spread actually inverted. What does this mean? Well for a brief period, carcasses that graded Select were worth $2/cwt more than those that graded Choice. Well obviously, folks spend a lot of time and effort, and feed, to get cattle to grade Choice so where was the incentive?
Since then, the spread has bounced around and is back to over $17 at the time of this writing (May 2017), a fairly decent margin. Unfortunately, unless you are selling your cattle on the Yield and Grade grid, none of this may matter very much. However, regardless of how one sells their cattle, beef cattle producers are generally proud of making a "good" product and some may take cattle to extreme fat and weight endpoints to make that product. Pride, however, does not keep us in business and we should really be assessing the costs associated with putting on those extra pounds of fat if we're going to stay in business.
Interestingly enough, even in the wake of, what can only be described as awesome national cattle grades, carcass weights are trending downward. I will step on to my soap box for just a minute to say: This needed to happen! Carcass weights were out of control. The first load of cattle I followed through the slaughter plant were discounted at 850 lb. carcass weights, we've passed that by 200 lbs. (of carcass weight!) now.
But, again, the 80% plus national average for carcasses grading Choice or above causes me to reflect. I heard many times over the years the adage that: Cattle have to have age to marble. And, all too often, I have seen this taken too far, where cattle are kept on feed months too long and wind up with briskets bigger than basketballs and invisible tail-heads. All because we know that the fatter calf will go prime.
I like to crunch numbers, so I looked at a few different scenarios. If feed costs stay reasonable (I used $140/ton delivered as reasonable), we could take a steer from 1400 to 1600 lbs. in the current market, which has not dropped…yet, in about 80 days (assuming 2.5 lbs./day because heavy cattle are not as efficient) and still "net" a profit of close to $50/hd (May 2017 Choice carcass prices). That is, we could afford to pay ourselves $50 per head for those extra 80 days of feeding and labor. If we have 50 cattle, we could be paying ourselves approximately $31 per day to feed and care for those cattle. Oh, and I'm not assuming any bedding costs (Midwest estimates $5 per day for heavy cattle in the winter, $3 in the summer) or veterinary care, so deduct that from your daily income if you have those costs. Oh, and I'm assuming 100% of your cattle graded Choice because they will, with that extra 200 lbs.…right? If feed is $160 per ton, profit drops to $13 per head and the ability to pay yourself begins to shrink. If feed really jumps and we have to pay $180 per ton for these heavy cattle, we can kiss our profits goodbye and start fielding calls from the banker.
My point is this: cattle do not need "age" to marble. A lot of factors affect marbling. Genetics, feeding, age at weaning, even the dams nutrition while that calf is in utero, can all affect the potential of that animal to grade Choice or Prime. As an industry, we have done a phenomenal job selecting for quality genetics and managing how we feed cattle to improve grades. We need to also focus on the hidden costs of keeping heavy animals too long. How much does it cost to keep the lights on? How much time do extra days on feed take away from your ability to do other things on the farm or even to start another load of cattle in that barn?
In short, do not discount your facility costs in your calculations as I did in the previous example. These are different for every operation, but every building has a cost (repairs, electric, bedding, etc.). Every pasture has a cost (fencing, water, land value, etc.). In our industry nothing is "free". Do not take your land and buildings for granted by keeping less productive cattle on your farm just so they will be "good".