ASSESSING THE COST OF BEEF QUALITY

Abstract

The number of U.S. fed cattle marketed through a value based or grid marketing system is increasing dramatically. Most grids reward Choice or better quality grades and some pay premiums for red meat yield. The Choice-Select (C-S) price spread increased 55 percent, over $3/cwt between 1989-91 and 1999-01. However, there is a cost associated with pursuing these carcass premiums. This paper examines these tradeoffs both in the feedlot and in a retained ownership scenario. Correlations between carcass and performance traits resulted in economic tradeoffs that change across input costs and quality grade premiums and discounts. Feedlot profitability was largely determined by marbling, carcass weight, and feed efficiency. Carcass weight was most important at a low C-S spread. However, at average C-S spread and higher, marbling became the largest determinate of feedlot profits, and its importance increased with the C-S spread. Carcass weight and feed efficiency influence on feedlot profitability declined at higher C-S spreads. Rib-eye area was the fourth most important variable and declined in importance as marbling increased in importance. There is some indication that cows with lower feed costs also produce the most profitable calf for the feedlot, and vice-versa. The data suggests that cow size and marbling score are negatively correlated. The current trend toward wider C-S spreads and rewarding higher quality grading cattle places greater emphasis on marbling ability of calves. These correlations and results suggest that higher marbling is associated with lower cost cows to maintain.