LMC Report: Prime Cattle Classification Statistics

NORTHERN IRELAND, UK - THE second quarter classification statistics (April - June 2011) show that the trends identified in classification immediately after the introduction of VIA continued to be evident over the entire quarter.
calendar icon 26 August 2011
clock icon 5 minute read

LMC can gather classification statistics based on the price reported kill.

Approximately 74 per cent of cattle were price reported in the second quarter of 2011 (4 April - 3 July 2011).

The first point to note in this data is that the kill has been significantly lower during this period, compared to the same period last year. The price reported prime kill was down 14 per cent from 73,810 in Q2, 2010 to 63,207 in Q2, 2011.

Table 1 below shows that during the second quarter the proportion of U grades in the NI prime cattle kill was 12.8 per cent.

Last year, U grades accounted for 23.3 per cent of the prime kill in the second quarter.

Table 1 shows that in the second quarter, the proportion of R grades is up marginally compared to the same period last year. Meanwhile, the proportion of O grades has also increased slightly, with a sharp increase in the proportion of P grades in the kill.

Table 2 shows the proportion of cattle graded in each fat class division over the course of the second quarter of 2011.

As with conformation, there have been some significant changes since 2010. Although fat class three remains the dominant class in Q2 2011, the proportion of cattle graded as fat class three has fallen by 12 percentage points compared to the same period in 2010.

The proportion of carcases graded in all other fat class divisions has increased during the same period with fat class two now accounting for 20 per cent of cattle.

Most readers will conclude that the reasons for the differences in grading statistics between 2010 and 2011 have been driven by the introduction of VIA. Before exploring this change, it is worth pointing out that any comparison of grading in Q2 2011 with Q2 2010, is not like-for-like.

Caution is therefore advised when looking at Tables 1 and 2. It is worth considering whether the reduced kill has any impact on the proportion of cattle falling into each fat class and conformation division.

It is also crucial to point out that we are not comparing like-with-like, given the fact that manual graders operated to a five point scale while the machines operate to a 15-point scale.

While the machine has the option of applying +,= and - subclasses, the manual grader did not have the same flexibility.

However, most analysis will link the change in classification grades over the course of 2010 / 2011, to the introduction of mechanical grading at the end of March 2011.

The industry was braced for tighter grading at the time and any analysis since then has shown this to be the case. There is no doubt that the introduction of VIA will have had a varied impact with some producers impacted differently to others.

Some producers will conclude that the introduction of mechanical grading has had a negative impact on their business. Others have expressed satisfaction with the new system.

Individual producers are best placed to make an assessment of its impact on their own businesses.

It is worth bearing in mind however, that these statistics provide no conclusive evidence that producers are generally worse off as a result of VIA.

To arrive at such a conclusion we would need to believe that average cattle prices are lower than they would have been had VIA not been introduced.

Given that the trade has moved on since April, that is something that is almost impossible to establish.

However, we ought to think about how the relative values attached to different grades have changed since the introduction of VIA and consider the impact of the new pricing grid.

With fewer animals killing at U grades, the logical conclusion is that U grades are now of greater value. With some cattle that would formerly have been considered U grades, now killing as R grades, the quality of cattle in the R division ought to have improved and they should also have greater value.

Given that in relative terms the new pricing grid put greater value on sucklertype animals, you would expect to see the price of U and R grades rising to a greater extent than average prices following the introduction of VIA.

This is what happened (see Bulletin Issue 2161). Average prices rose slightly in the first week of VIA, but the price of most grades rose to a greater extent.

This could be interpreted as an indication that while the general cattle trade improved slightly, the market was attaching greater value to individual grades because the quality of cattle in those grades had actually improved.

One way of looking at this is to express the price of each grade as a proportion of the average price of all prime cattle before and after VIA.

This ought to provide a rudimentary analysis of how the relative values of U and R grades have changed since its introduction. In Q2 this year for example, U3 prices were on average 104.5 per cent of the average prime cattle price.

This was up from an equivalent figure of 103.3 per cent in Q1, 2011 which indicates a relative increase in the value of U grades.

A similar change was evident for R grades and indeed for most grades.

There is one final important point to bear in mind for anyone disappointed with grades awarded. The incremental impact of stepping down the grading scale (e.g. from U to R) is now lessened because the steps are no longer as steep from one grade to another under the 15-point scale as it was under the five-point scale.

Further Reading

- You can view the full report by clicking here.

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