Cattle Marketing
M
arketing means getting reasonable value for the size, weight, number, type and
condition of cattle sold. Some factors affecting these determinants of value are the
subject of this chapter.
O
Source & Age Verified Cattle Marketing Programs
ne of the hottest value added topics in our industry involves Source and Age Verified Cattle. With all the interest and buzz circling around these opportunities, it’s no surprise that there is
also a growing amount of confusion about what actually makes up a Source and Age Verified animal.
Many producers have already been approached by packers, feeders and/or buyers requesting that they or their consignees complete
a verification form or affidavit in line with their
source and/or age verification requirements.
Many of these forms are part of a set of programs approved by USDA that will qualify
calves to be marketed as beef for the Japanese
marketplace, while others are just purely a paper affidavit with no export affiliation whatsoever.
The most important thing to understand is
that just because a producer has completed an affidavit, those calves may not be eligible to be
sold as beef for the Japanese market. To start clearing up some of the confusion surrounding all of
these different forms let’s begin with a series of definitions.
Beef Export Verification Program (BEV)
A BEV is a series of product requirements that the USDA and an export market (exampleJapan) agree upon and demand of any supplier wishing to export beef into that country’s marketplace. The supplier must have in place, or be a part of a USDA-approved Quality Systems Assessment (QSA) program or a Process Verified Program (PVP) that meets all of the BEV requirements.
Eligible beef products must be derived from cattle that are 20 months of age or younger at the
time of harvest. Cattle must be individually identified and traceable back to the ranch of origin.
(Note – Neither Japan nor USDA specify visual vs. electronic ID – so long as each calf is
uniquely and individually identified and that identifier matches all records. Individual programs
may have specific tagging requirements.)
The records for each calf must indicate either the actual date of birth of each individual calf
being sold; or if the producer has a group of calves born in the same calving season each calf may
be identified with the actual date of birth of the oldest calf born in the group.
Example – A producer has 20 calves born between Feb. 20 and March 20, he has the option of
assigning each calf with its actual individual birth date—or if the oldest calf was born on Feb. 20,
2005, all 20 calves would then be assigned the birth date of Feb. 20, 2005.
Quality Systems Assessment Program (QSA)
Any packer, feedlot, auction market, producer, animal health company, or other related company or group can follow the USDA QSA guidelines. If approved, they can offer a QSA program
under which cattle can be enrolled to qualify for Japanese export. Each program may have unique
features but the basic elements outlined by USDA will require the producer to identify animals,
document birth dates and have a written management system.
To date there are 43 approved QSA programs that have been granted the right by USDA to begin qualifying cattle for Japanese export. A list of programs approved and audited by USDA is
available online at www.ams.usda.gov/lsg/arc/qsap.htm.
Only the cow-calf producer can enroll a calf in a QSA program and all animals must have been
enrolled by an approved QSA prior to being sold in order to qualify for Japanese export. These
programs are accepting responsibility for each producer’s management records validating the age
and source verification claims. To protect the integrity of the program, USDA and each of the approved programs will be required to do regular audits of program and producer records to confirm
that all records are in place back to the herd of origin, validating the birth and source info for individual calves.
Process Verified Program (PVP)
The PVP is similar in design to the QSA programs with the exception that the PVP also makes
claims and audits all management claims made by the program.
Example – A PVP program may verify and audit only source and age info or it may also include all natural claims, preconditioned claims, etc. To date there are 23 USDA-approved PVPs
that have followed the approval process and been granted the right by USDA to begin qualifying
cattle as Process Verified. A list of programs is available online at http://processverified.usda.gov.
What does it all mean?
USDA and in this case, the Japanese, have laid down a set of requirements that our beef and
edible beef by-products must meet in order to be exported. Our government and the Japanese
government aren’t concerned with any product attributes other than how old the calf was when it
was harvested and that each individual animal being harvested for export can be traced back to
the ranch of origin.
If you’re asked to complete a marketing affidavit on cattle you need to make sure you know
what you are signing. Talk to your buyers and ask them to clarify what they’re wanting to accomplish.
QSA and PVP programs may be a great opportunity for many producers, but if consignors are
not already enrolled in a QSA or PVP program the cattle CAN NOT be represented as being eligible for export to Japan. If consignors have completed an affidavit and have records on hand to
validate the claims being made then they can be represented at sale time as being simply Source
and Age Verified – but again, this does not mean they are qualified for export to Japan.
Participation in a QSA or PVP or even completing a general Source and Age Verification affidavit is absolutely voluntary. It is a value-added opportunity for everyone in the marketing chain.
– Adapted from the Livestock Marketing Association website
http://www.lmaweb.com/member/QSA/qsa.html.
Cattle Marketing
(cont.)
Market Timing
550 lb Steer Monthly Seasonal Index
110.00
Monthly Seasonal Index
108.00
106.00
104.00
102.00
100.00
98.00
96.00
94.00
92.00
Last 5 yr
A beef producer’s ultimate economic role is to convert low-value or
unmarketable forage resources into a
quality protein product. With foragedriven production systems, most
cows calve in the spring. Weaning
and selling those calves in the fall
causes a supply bulge that results in
lower calf prices in the fall. See figure to the left—Feeder Cattle Seasonal Index price relationships.
Last 10 yr
While every year will have its own
price pattern, fed cattle prices are
Figure 3. Monthly Seasonal Price Index for 500-599 lb. Steers in Nebraska, 1996-2005.
usually highest in March, averaging
about 8% above the annual average.
Heavy sales of feeder calves tends to depress prices in the fall. Thus prices in August, September, October, and November tend to be about 5% below the annual average price.
90.00
JAN
FEB
MAR
APR MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
Nobody really knows when the variations in cattle numbers will affect cattle prices, or by
how much. Anybody who has a guess can argue the point by using some previous cycle as
evidence.
Cow Marketing
Few price graphs show opportunity in the marketplace better than the seasonal slaughter
cow price data. These data for utilSeasonal Cow Prices—1997-2006 (USDA)
ity slaughter cows indicate that the
increase in price from November to
March of the next year averaged
about $6.00/cwt since 1997,
equivalent to an increase of about
14%. This equates to about
$72/head for a 1,200 lb cow.
Since most market cows in the
U.S. are sold between October and
January, the marketplace is flooded
and prices are lowest at that time.
When a cow is determined “open”
at preg-check we want to get rid of her as soon as possible. She’s no longer considered a
“money-maker,” but rather a “money-taker.” The quicker she can be sold the sooner we get
her out of our hair and the less money we throw away supporting her. This is a true and logical argument, but it bypasses an opportunity in the marketplace due to seasonal price patterns.—Jason Ahola, BQA Coordinator, PH.D, University of Idaho.
Price Makers
Within a sale period, calf weight
probably affects price more than anything else. Generally, lighter calves
bring more money/lb. than heavier
calves. If, for example, 1,200-lb.
slaughter steers were bringing
$70/cwt., 800-lb. steers would be
worth about $80/cwt.; 500-lb steers
would be bringing over $90/cwt.
These example price relationships
are based on corn being "normally"
priced. In years when corn is high
priced, feedlot operators prefer to buy
“weight” rather than feed it on, so the
price of heavier cattle improves, relative to lighter feeders. In a recent year when corn was at a
record high, slaughter, stocker, and feeder steers were selling within a $5/cwt. spread. Conversely, cheap corn increases the price of lightweight calves relative to heavier feeders.
Uniformity, Quality, and
Volume
Feedlot operators want calves that will
gain predictably in the feedlot. So, buyers
will frequently pay a premium for cattle
that are uniform. Uniformity begins with
the cow herd and the type of bull used.
A short breeding season is also an important aid in producing calves that are similar in age and weight.
Markets are usually topped by uniform
calves grouped into truckload lots
(48,000-50,000 lbs.) of steers or heifers.
However, most owners of small herds cannot assemble truckload lots and so must look for other
ways of selling their calves. Some collaborate with other owners of small herds with similar
breeding, attempting to make it easier for buyers to assemble loads of similar calves, thereby improving price per pound.
Most auction markets do a very good job of grouping calves or promoting special sales for
calves that have been treated similarly. They offer a variety of programs featuring different health
and weaning regimes.
Cattle Marketing
(cont.)
Feeder Calf Grades
The Agricultural Marketing Act of 1946 originally mandated the standards for feeder calf
grades. Changes were made to the grading standards for live feeder cattle in October 2000.
They offer a valuable tool for marketing of cattle and calves and certify the grades used to make
contracts for cattle on the futures market.
The grade of feeder cattle is determined by evaluating three general value-determining characteristics: Frame size, thickness, and thriftiness. Frame size is a skeletal measurement that takes
into consideration height and body length in
Steers
Heifers
relation to age. Thickness refers to the development of the individual animal's muscling in
Frame size
Estimated harvest weight lbs. relation to its skeletal size. Thriftiness is an
appraisal of the apparent health of the animal
Small....
1100
1000
and its ability to grow and fatten normally.
Medium…
Large…
1100-1250
1000-1150
Frame size standards for thrifty feeder cattle are
assigned one of three marks, L (large frame), M
>1250
>1150
(medium frame), and S (small frame). Largeframe steers and heifers would be expected to reach a U.S. Choice carcass
grade at Yield Grade 3 (about 0.5 inches of fat at the 12th rib) at a weight
heavier than 1,250 pounds. The chart above shows the other weight/frame
size relationships for both steers and heifers.
The thickness (muscling) grades range from
Number 1 to 4. “Inferior” cattle are unthrifty
and are not expected to perform normally in
their present state and include those that are
“double muscled.” Inferior cattle can have
any combination of thickness and frame size.
Therefore, where we have had only four
grades or so to concern ourselves with in the
past, we now have 13. They are L1, L2, L3,
L4, M1, M2, M3, M4, S1, S2, S3, S4, and
Inferior.
This will give potential buyers an even clearer picture of the calves
offered for sale. Producers and buyers alike will benefit as the entire beef industry looks to improve the quality and consistency of
the product that eventually finds its way to our dinner table.
Shrink and Its Meaning
Shrink (weight loss) in cattle results from a loss of gut fill and/or tissue loss. Consequently,
both buyers and sellers are concerned about shrink, especially since cattle that have undergone
excessive shrink are also more likely to get sick.
Pasture weight is greater than market or delivery weight. Differences in these amounts depend on time, distance, previous fill and other stresses associated with the marketing process.
Recovery from shrink requires anywhere from five to 30 days.
Buyers frequently want sellers to compensate for shrink by offering a 2% to 4% discount, or
"pencil shrink," on direct sale bids. Buyers know that shrink is inevitable and that higher prices
per pound can be offered for "shrunk" cattle. Sellers should be sure that calves are not allowed
to shrink excessively before weighing so as to avoid paying for both a pencil shrink and a considerable actual shrink. For example, sellers should take care that calves are not left overnight
without feed or water.
Time and Distance
Primary factors that affect gross shrink are time and distance traveled. Studies indicate that
when water and feed are unavailable, cattle shrink about 1% per hour for the first three to four
hours—and about .25% per hour for the next eight to 10 hours.
Amount of Fill Affects Degree of Shrink
Cattle normally have more gut fill on lush grass, silage, or haylage rations than on hay or
high-concentrate feedlot rations. Ensuring calves are weaned and on a hay-grain or conditioning
diet will result in less shrink than shipping them directly off grass and milk. Calves sold directly
off their dams suffer additional stress because they are not accustomed to eating dry feed and
drinking water from unfamiliar sources.
Handling and Shipping
When cattle are handled as quietly as possible and shipped directly from the farm to their final destination in minimum time, both seller and buyer
For more information, go to the
benefit. Weight loss, stress, and cost to regain pay weight
National Beef Quality Assurance
are minimized.
Guide for Cattle Transportation:
www.tbqa.org
Dos and Don’ts for
Feeder Calf Producers
As you manage your cattle during
transfer of owner, follow these tips:
• Make sure hauling and holding
times are kept to a minimum.
• Don’t keep calves off feed and water before shipment; maintain them on
their regular diet.
• Don’t overfill before shipment.
• Handle calves quietly, carefully,
and slowly during sorting, loading,
and hauling to minimize stress.
• Make every effort not to move the calves during periods of heat stress.