Cattle Feeders Should Understand Grid Marketing

Amy Radunz from the University of Wisconsin looks at the importance of grid marketing for beef and explains what the price for a grid is based on.
calendar icon 9 April 2012
clock icon 5 minute read

When cattle feeders at the 2011 and 2012 Cattle Feeders conference were asked where the majority of their finished cattle were marketed, over 50 per cent of the producers answered at an auction facility. This is in contrast to the Great Plains which indicated that in 2001 over 45 per cent of cattle were marketed on a grid (i.e. grade and yield). Some reasons why Wisconsin may differ than the Great Plains include smaller feedlot size (average number of head for a Wisconsin feedlot is 29) and easy access to auction facilities with fed cattle sales. However, even when marketing cattle through an auction facility, feeders should understand finished cattle are being evaluated by buyers based on a grid pricing.

It is important to remember that the buyer/packer is taking the risk when purchasing cattle live. Thus the price can reflect how much risk the buyer is willing to take, and the more a buyer knows about the cattle (i.e. breed, implant strategy, ration) this allows the buyer to be more confident. Basically, there are four factors that would be used to determine price:

  1. dressing percentage;
  2. yield grade;
  3. quality grade; and
  4. other potential discounts.

The carcase (i.e. dressed) price for a grid is based on a yield grade 3, low Choice carcase and then the price is adjusted for premium and discounts for carcase traits.

Dressing Per cent is the percentage of the live weight, which will be carcase weight. This ‘yield’ (as buyers commonly refer to dressing percentage) is important in determining price. In the end, you are selling a carcase and this is what has the most value to the packer. Thus things not included on the carcase such as head/feet/legs (i.e. amount of bone); cleanliness; and amount of gut fill will lower the dressing percentage and price. Holstein steers will dress lower than most beef steers because they are lighter muscled, leaner, more bone (especially in head/feet/legs), and have a larger proportion of guts.

Yield grade is a measurement of cutability or in other words an estimate of the percentage of the carcase which will result in retail product. This is estimated using measurements of fat and muscle to determine the portion of fat to muscle in the carcase.

The main driver of yield grade is 12th rib fat thickness measured on the carcase. When trying to estimate this in live cattle, fat cover and muscling are used. Heavy muscled, lean animals will have a higher cutability and lower numeric yield grade (1 or 2), while lighter muscled and fatter animals will have a lower cutability and higher numeric yield grade (4 or 5).

When selling cattle on grid, small premiums ($1-2/cwt) will be assigned to yield 1 and 2 carcasses, while large discounts ($10-20/cwt) will be assigned to yield grade 4 or 5 carcase.

Therefore, feeders would want to minimize the amount of cattle marketed which may be stamped a yield grade 4 or 5. In beef steers with average muscling, the risk of obtaining a yield grade 4 would begin when they have reached 0.7-0.8 inches of backfat, whereas for Holstein steers which are lighter muscled the risk would begin at 0.5-0.6 inches of backfat.

Quality grade is measurement of eating quality of the meat and is based on two criteria:

  1. maturity or age of the animal; and
  2. marbling (amount of fat within the muscle).

In cattle under 30 months of age (i.e. young or ‘A’ maturity), the following quality grades would be assigned premiums on a grid, Prime and Upper 2/3 Choice whereas carcase which grade Select or Standard would receive discounts.

Evaluation of quality grade in live cattle is the most difficult of these factors to determine accurately. The amount of marbling is correlated to amount of external fat thickness and genetics. Thus buyers typically use breed type and fat thickness to determine the likelihood of cattle to grade Choice.

For example, Holstein steers will typically grade Choice between 0.35-0.4 inches whereas British beef steers will typically need 0.4-0.5 inches of backfat to reach the Choice quality grade. A beneficial skill for every feeder would be to learn how to evaluation fat thickness, since this impacts not only yield grade is also associated with quality grade.

The final criteria used in determining price is the risk an animal to acquire discounts. These discounts can include dairy type, stag/bullock, over 30 months age or hardbone, carcase weight, and dark cutter. These discounts can vary from plant to plant. Again these can be difficult to evaluate live, but buyers are looking for certain characteristics.

In order to avoid a carcase weight discount, the carcass should be between 600-900 lbs or a live steer between 1000-1400 lbs . In most cases feeders are concerned about avoiding heavy weight carcass discounts and modest discounts are usually applied from 900-950 lbs and then tend too increase at 950 lbs or greater. Steers, which have a staggy appearance (thicker neck, heavier muscled, leaner) are at risk for a stag carcass as well as increased risk of dark cutter discounts, therefore this usually results in a discounted live price.

When a group of finished cattle enter the ring, the buyer is evaluating the cattle for the traits outlined here to determine how much he/she is willing to pay. The price is based on the average of the group, however if the group contains cattle that are at risk of acquiring discounts then a lower price will be paid. Buyers do keep scorecards on who sold cattle.

They may not always keep a report card of every group, but they will know which cattle did not perform well in the plant and will take that into consideration the next time cattle from that feedlot go through the auction ring. Therefore if a feeder is marketing through an auction facility, it is important to provide information to buyers on cattle being marketed as well as learn how to determine when cattle are finished in order to market at the optimum time.

April 2012

Further Reading

- You can view the Cattle Feeder Clinic Proceedings by clicking here.

April 2012

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