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Grid Marketing Sorting out the numbers Cattle-Fax Mike Miller Bill Chandler.

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Presentation on theme: "Grid Marketing Sorting out the numbers Cattle-Fax Mike Miller Bill Chandler."— Presentation transcript:

1 Grid Marketing Sorting out the numbers Cattle-Fax Mike Miller Bill Chandler

2 A Balancing Act

3 Grid Marketing  General Overview  Grids: How they work  Cattle Markets  Trends in grid marketing  Helpful Tools

4 What is the industry target?  Quality Grade  Yield Grade  Carcass Characteristics  Weight

5 The Target Yield Grade 1 Yield Grade 2 Yield Grade 3 Yield Grade 4 Yield Grade 5 Prime $16.20 $13.70 $12.20 $(4.80) $(9.20) CAB$11.20 $8.70 $7.20 $(7.80) $(12.80) Choice $7.20 $4.70 $3.20 $(11.80) $(16.20) Select $0.80 $(3.30) $(4.80) $(19.80) $(24.20) Standard $(11.00) $(13.50) $(15.00) $(30.00) $(35.00) 550 Carcass Weight Range 950 *Ch/Sel Spread $8.00 *60% Choice Grade

6 How Grids Work  Premiums  Prime  Upper 2/3 Choice (i.e. CAB)  Choice  YG 1  YG 2

7 How Grids Work  Discounts  Select  Standard  YG 4  YG 5  B-Maturity  Dark Cutter  Weight (either light or heavy)

8 How grids work  Other Factors  Freight  Base price determination  Quality grade base  Weight limits

9 What is your target?  Quality Grade  Red Meat Yield  Natural  Seek out a program that fits your cattle

10 Grid Marketing Basics  Grid marketing does not guarantee a premium  Discounts can be substantial  It transfers risk from the packer to the owner of the cattle  Grids change constantly

11 How do you maximize returns?  Understand your cattle  Be honest  Understand the market  Just because your marketing on a grid or formula does not detach you from the cattle market  Understand the program  Premiums versus discounts

12 Cattle  Do you have some history on the cattle?  Performance in the feedlot  Carcass characteristics  Be conservative when you estimate future performance

13 Importance of performance  Don’t overlook feedlot performance Pen 1 Pen 2 ADG3.0-10%3.3 Conv %6.6 Cost of gain$.50+10%$ lbs. 500 lbs.$250$275 $25 per head

14 Market Fundamentals  Seasonal supply and demand  Choice/Select spread  Timing of marketings

15 Steer and Heifer Slaughter 5-year average 2003

16 Weekly Average Beef Production yr avg.

17 Choice/Select Spread

18 Ch/Sel Spread Seasonality 5-year average spread

19 Seasonality of Fed Cattle Prices

20 Choosing the right program  What fits your cattle?  Change the grid to the cattle not the cattle to the grid  Quality grade versus yield grade  Where will the cattle be fed?  How much does it cost?

21 Choosing the right program  Analyze the premium/discount structure  Fixed grade base vs. plant averages  How is the Choice/Select spread determined  Base price determination

22 Trends in Value Discovery  Gathering more information  Fine tuning management  Impact on genetic selection

23 Value Discovery Changing PAR yg1yg2yg3yg4yg5 Premiums Discounts Additional Premiums for: -Prime -CAB or Similar Specs -Choice 1980’s 1990’s 2000

24   Pricing Method: Pricing on Value of Beef and the By-Products Produced   Message: “Some Cattle are Better than Others”   Result: Produce More of the Better Cattle Grid Marketing

25 Pulling Product Through Sharing Information Beef Industry Structure: The Way it is Evolving Seed Stock Cow/Calf StockerFeedlot Packer Processor Retailer Food service Consumer

26 Percentage of fed cattle movement from: Formula, contract, alliances and packer fed cattle

27 Percent of cattle graded Choice

28 Cattle Yield Grades Yield grade 1 & 2 Yield grade 3 & 4

29 Cattle Carcass Weights

30 Trends  Larger premiums but larger discounts as well  Different base prices  More coordinated programs  More cattle marketed on grids and formulas


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