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Yield Grade Affects Beef Pricing

18 September 2009

US - Producing beef the consumer wants has been heralded by many, yet most consumers are quite removed from the beef business reports Kris Ringwall, Extension Beef Specialist, North Dakota State University.

Yield Grade Affects Beef Pricing Scales By Kris Ringwall, Extension Beef Specialist, . Thursday, September 17, 2009 11:35 AM CDT

Consumers, as the actual end users, have, in a sense, defaulted to the packer to provide the kind of beef wanted. As a result, today's commercial cow calf producer needs to understand the pricing structure for the finished beef product, which is essentially purchased by the packer.

Astute producers understand this relationship with the packer as a primary focus in beef. At the same time, producers realise the major drivers in the price received for finished beef are quality and yield grade.

For generations, cattle have been harvested for the purpose of providing red meat and white meat (fat). In recent times, the focus has been red meat, putting the maximum pounds of red meat on the rail and ultimately in the retail counter. This can be measured in several ways, but the most common is in calculating a yield grade for each carcase.

Yield grades, which calculate a common way to label a carcase as to the amount of red meat available, are listed as 1, 2, 3, 4 and 5. Yield grade estimates the amount of boneless, closely trimmed retail cuts from the round, loin, rib, and chuck. This indication of the yield of red meat within a carcase allows for the subsequent pricing of the carcase.

Four main carcase points are measured to calculate yield grade:

1. Fat. The amount of fat on a carcase is an obvious "need to know" number to estimate value for a preliminary yield grade. Fat thickness is physically measured, by cutting the carcase between the 12th and 13th rib and moving away from the backbone, to approximately three-fourths the distance across the rib eye. The amount of fat is measured in tenths of an inch.

A yield grade 2 has zero fat. A yield grade 3 has four-tenths (.4") of an inch fat thickness. A yield grade 4 has eight-tenths (.8") of an inch fat thickness. In the current market, yield grades of 4 are undesirable and discounted on price. There are indications that the upper yield grade 3''s may be discounted in the future. Packers do not buy fat, and add premiums to the yield grade 2 and discount the yield grade 3.

2. Hot carcase weight.

3. Rib eye size. This measurement establishes the proportion of rib eye relative to the hot carcase weight. Minimum hot carcase weights are required: a 600-pound carcase needs an 11 inch square rib eye; a 650-pound carcase needs 11.6 square inches.; a 700 pound needs 12.2 square inches.; a 750 pound needs 12.8 square inches; and an 800 pound needs 13.4 square inches. The USDA grading standards set these weight increment requirements.

Rib eye measurement excesses or deficiencies impact the preliminary yield grade in increments of three-tenths (.3). A carcase short 1 square inch of rib eye has an increase on its yield grade of three-tenths (.3); a carcase 2 square inches short has an increase in yield grade of six-tenths (.6), etc. Excess rib eye results in a decrease in yield grade, which has a positive price impact of the same magnitude.

4. Per cent kidney, pelvic and heart fat. As one would expect, the greater amount of fat, the higher the impact. The adjustment to the preliminary yield grade usually ranges from a minus five-tenths (.5) to a positive one-tenth (.1).

Packers and ultimately the consumers want cattle that finish with less than four-tenths of an (.4") inch back fat to assure a preliminary yield grade of 3. They also want a greater rib eye than required. Lacking even one square inch of rib eye will increase yield grade a third of a grade, which is not the direction to go. Keep reading about yield grade; the more you understand, the better you are positioned.

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