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) allows the buyer to be more confident. Basically, there are 4 factors that would be used to determine price: 1) dressing percentage; 2) yield grade; 3) quality grade; and 4) other potential discounts. The carcass (i.e. dressed) price for a grid is based on a yield grade 3, low Choice carcass and then the price is adjusted for premium and discounts for carcass traits. Dressing percent is the percentage of the live weight, which will be carcass weight. This ‘yield’ (as buyers commonly refer to dressing percentage) is important in determining price. In the end, you are selling a carcass and this is what has the most value to the packer. Thus things not included on the carcass 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 larger proportion of guts.Why all cattle feeders should understand grid marketing
Yield grade is a measurement of cutability or in other words an estimate of the percentage of the carcass 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 carcass. The main driver of yield grade is 12th rib fat thickness measured on the carcass. 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 per hundredweight) will be assigned to yield 1 and 2 carcasses, while large discounts ($10-20 per hundredweight) will be assigned to yield grade 4 or 5 carcass. 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 carcass 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 criterion 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, carcass 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 carcass weight discount, the carcass should be between 600-900 pounds or a live steer between 1000-1400 pounds . In most cases feeders are concerned about avoiding heavy weight carcass discounts and modest discounts are usually applied from 900-950 pounds and then tend too increase at 950 pounds 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.
For more detailed information on how these factors are determined and how grid pricing works you can download Live Cattle Evaluation for Carcass Traits and Grid Marketing Basics from the 2012 Cattle Feeders Clinics. You can also download other information presented at this year’s program athttp://fyi.uwex.edu/wbic/feedlot/ and UW-Extension offers a hands-on program to learn more evaluation live animals and carcasses in June 2012 at our Steer to Steak program.
~Amy Radunz, UW Beef Cattle Extension Specialist
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