MARKETING FEEDLOT CATTLE By David R. Hawkins Michigan State University

MARKET KNOWLEDGE Market news reports are required reading. –Monthly magazines –Weekly newsletters –CattleFax or other market services. –Internet or World Wide Web –Data Transmission Network Talk to livestock marketers Attend local livestock auctions.

MARKET CYCLES In addition to long term cattle inventory cycles there are seasonal cycles. Historically, cattle marketed in April, May and June command the highest prices for the year, while cattle marketed in October, November and December bring the lowest. Competition from other meats and religious holidays can impact the market.

RISK MANAGEMENT Many cattle feeders utilize the commodity “futures” market to manage risk by trading cattle and feed contracts. Continuous buying and selling of cattle tends to reduce risk of price fluctuations in the marketplace.

WEIGHING CONDITIONS AND SHRINKAGE Cattle lose weight during transit. Excretory shrink is weight lost to “gut fill” due to defecation and urination. –Usually occurs during first hour or two of transit. Relatively easy to regain with access to feed and water. Tissue shrink is loss of body tissue fluid. –It requires a longer time to regain (up to 2 wks.)

WEIGHING CONDITIONS AND SHRINKAGE Cattle on grass or silage rations shrink about 4%, if kept off feed & water for 12 hours. Cattle on concentrate rations shrink 2.5% to 3%, if kept off feed & water for 12 hours. Morning weights are usually 2% less than evening weights. Incoming feeder cattle may shrink up to 10%, if stressed.

KNOW THE PRODUCT Be able to visually assess quality grade and yield grade or hire someone that can do this. Use carcass results from previous marketing to keep yourself current. Understand dressing percentage and the factors that influence. Adjust for differences in sex and/or breed type.

RELATIONSHIP OF LIVE PRICE & CARCASS PRICE Carcass price ($/cwt.) x Dressing % = Live Price ($/cwt.) Live Price ($/cwt.) / Dressing % = Carcass Price ($/cwt.) In the past, dressing % has been a major factor in determining value of market cattle Cattle with more finish and less gut fill have higher dressing %. Choice grade cattle will usually dress 63% to 64%

OPTIMUM HARVEST WEIGHTS From a pure beef production efficiency standpoint, steers should be marketed at 90% to 95% of their dam’s mature weight. Heifers should be marketed at 70% to 75% of their dam’s mature weight. Currently, we are marketing cattle at 50 to 100 lbs. heavier than this in order to achieve a higher % choice or higher dressing %.

MARKETING SELECTION METHODS If cattle go on feed with a large variation in age, it is usually best to “top off” the pen by selecting the market ready cattle once or twice. The remaining cattle should be sold when 80% of them reach the target grade. If cattle are uniform in sex and weight when they go on feed, it is best to sell them as a group when 80% reach the target grade.

MARKET PRICING METHODS Live weight - cattle are sold at the farm with specified weighing conditions or at the local auction market. Carcass weight - cattle are sold based on carcass weight after slaughter. Price grid - price is determined after slaughter based on carcass yield and grade with premiums and discounts.

CATTLE PRICING METHOD Sell LiveSell CarcassSell Grid Price Each Animal No Yes $ Animal Variability None High $ Packer Variability LittleModerateHigh Trucking Costs BuyerSeller

CATTLE PRICING METHOD LiveCarcassGrid Pricing Location Feedlot + Shrink Packing Plant Meat YieldEstimatedCarcass Wt.Yield Grade Quality Grade Estimated Actual Base PriceLive Market Dressed Market Varies

CATTLE PRICING METHOD LiveCarcassGrid Large Discounts NoSomeYes Price Set Each Time Yes No Seller’s Knowledge Not CriticalSomewhat Critical Very Critical

VALUE BASED MARKETING Currently a “buzz phrase” in the industry Cattle are individually priced with premiums and discounts Often the discounts on a few head can erase the premiums on the remaining cattle New technology is being developed to evaluate carcasses at line speed in large plants

BEEF CATTLE ALLIANCES Nearly 50% of all fed cattle are now marketed through an “alliance” or a “coordinated beef production system”. This has been increasing in recent years and will likely continue. Expect to see more “branded” beef programs in the future.

Certified Angus Beef (CAB) Oldest alliance established in Certify feedlots, packers, retailers & food service. Black hided, Mid-choice or higher, Max. YG 3.9. No dairy or Brahman influence. Carcass premium is $3 to $4.50/cwt. over Choice. Only 18% to 20% of cattle that visually qualify meet the carcass specifications.

Laura’s Lean Beef Began in 1989 No quality grade requirement, only YG 1 & YG 2. Carcass Wt. = 550 lb. to 800 lb. No implants or antibiotics can be used in production. Must be at least ¾ continental breeds (96% are Limousin influenced) Average premium is $58 per head.

U.S. Premium Beef Established in Equity based cooperative. Lifetime membership $500 Cooperator can deliver 1 animal for each $1 share of stock that he/she owns. Choice YG 3; no dairy; <1/2 Brahman Carcass wt. = 550 lb. to 975 lb. Av. Premium = $18/hd.+ Stock dividend = $22/hd.

LOCAL AUCTION MARKET Depends upon competitive bidding from a large number of buyers. May be best if you market small number of cattle or market infrequently or lack market knowledge. Volume of cattle marketed this way may decline in the future.

FREEZER BEEF Allows producer to retain ownership and sell on a “retail” basis. Requires a clean packing plant. Requires extra service from seller. Requires variation among cattle on feed at any one time. Works well for small herds that feed out their own calves.