If you're like me, you look on value-based marketing as a desirable thing-something that's not all that hard to understand. But, you may be wrong. I was wrong before I got into the in-depth analysis of grid pricing on which I have reported in my last two columns.
I suggested in my July column that grid pricing is forcing cattle feeders to focus like never before on one extremely important carcass factor-dressing percentage. And, I presented preliminary evidence that this is something that must start in the breeding pasture by adding muscularity.
I gave you an example of a real steer with the following profile: Choice grade, Yield Grade 1.94, KPH 1.2 percent, ribeye area 12.1 square inches (1.9 ribeye to carcass hundredweight ratio), backfat thickness of 0.24 inch, dressing percentage 62.8. I made the point that this steer would have dressed out at 64 percent had his ribeye been 13.3 square inches and had his ribeye-to-carcass hundredweight ratio been 2.09.
But, this example involved just one steer, and it further ignored the reality that dressing percentage also can be increased by adding fat to the carcass. So, I expanded the sample to include all 16 of the penmates of this steer that were fed out at Diamond-O Feedyard, Butler, Mo. I looked at the relative efficiency of using muscle and fat as enhancers of dressing percentage.
A key part of the valuing process was an assumption that either 1 square inch increase in ribeye area or a one-tenth inch increase in backfat thickness increases dressing percentage one point. For example, increasing ribeye area from 11.45 square inches to 12.45 square inches or increasing backfat thickness from 0.25 inch to 0.35 inch increases dressing percentage from 61.46 to 62.46.
I used an analyzer spreadsheet program I had developed for feedout cattle to do the economic analysis. This program calculates profitability by both grid and non-grid methods. I used IBP's new Real Time Market Value program for my grid.
It takes a good balance of quality grade and yield grade to come out a winner on the IBP grid. Unfortunately, adding fat can shift cattle into yield grades with lower premiums or actual discounts, and this was the assumption that went into this study. I also assumed that since this group of cattle started off at a high level of quality, the Choice/ Select ratio would not change significantly. However, I assumed that there would be some negative change in yield grades.
The results of my analysis are shown in detail in Economics of Dressout Enhancement table (above). As you can see, the profile of the 16-head group differed in many significant ways from that of the single steer described above. On the whole, my hypothesis regarding quality grades agrees with the real-world analysis described on the following page. The same can be said for changes in yield grades.
It is interesting, of course, that the data show increasing ribeye area to be more efficient economically than increasing backfat thickness. But this, in itself, isn't the point of this analysis. Cattle feeders who fight the dressout battle on every pen of cattle can't change muscularity once cattle have been placed on feed. Feeders can only change the dressout percentage by adding fat, and too few do this judiciously. It is very easy to tip a pen that might have earned good yield grade premiums into grades of lower value. The reality is that muscularity only can be added in the breeding pasture.
Muscle or fat?
After doing the 16-head study, which involved a certain amount of hypothesizing, I applied the real-world performance of real-world cattle to the same question-is muscle or fat the most economically efficient way of increasing dressing percentage. Put another way, the question becomes: Should dressout engineering be done in the breeding pasture or the feedyard?
To do this study, I went to my computer file containing five years of data on the OK Feedout, an annual feeding trial sponsored by the Oklahoma State University extension service. The file contains comprehensive performance data on individual feedout steers, which I grouped into two analyses -high-marbling breeds and low-marbling breeds. The steers in these groups were then placed into sub-groups according to ribeye sizes and backfat depths.
This study not only shed light on the muscle vs. fat issue, it revealed a lot about the differences in cattle breeds and types. The left side of Economics of Dress-out Enhancement for High- and Low-Marbling Steers table (above) profiles the two groups of steers without dealing with the ribeye or fat options for dressing percentage control.
Contrary to a lot of opinions, there was no economic advantage for the low-marbling group on the IBP grid. There was a significant ribeye advantage, a significant backfat advantage and a significant yield grade advantage, but no economic advantage.
Again, the IBP grid rewards cattle with good balance between quality grade and yield grade. Consequently, the high-marbling group gained more from its quality strength than did the low marbling group from its yield strength.
The table also shows the effects of ribeye vs. backfat in increasing dressing percentage and determining economic effect.
The data showed quite consistently that the quality scores were steady to higher in high-marbling cattle as muscularity increased. This maintained quality-related premiums. Concurrently, muscularity increases lowered yield grade scores, which increased yield-related premiums. This is a win-win situation.
The data also showed that quality increased somewhat in high-marbling cattle when fat increased. Unfortunately, however, this increase was overwhelmed by losses to lower-value yield grades. The result was a win-lose situation in which there was a loss of overall value.
Similar effects occurred in the low-marbling group. Muscularity increased quality grade and decreased yield grade-a win-win situation. Fat increased quality grade but also increased yield grade-a win-lose situation.
I embarked on this project several months ago with the goal of determining whether enhancing dressing percentage is done more efficiently by adding muscle in the breeding pasture or adding fat in the feedyard. This set of data provides strong evidence that cattle should be bred for dressing percentage, not fed for dressing percentage. As the table shows, muscle is over $15 more valuable than fat in high-marbling breeds and over $27 more valuable in low-marbling breeds.
This, of course, is just one set of data. Another data set might change the perspective.
I have never been, nor will ever be, a breed basher but I think the new era of grid pricing makes it more important than ever to give close scrutiny to breed choices. As these data show, blind allegiance to your breed or your herd within your breed may no longer work; there are cattle in every breed that do well on the grid
To contact Fred Knop, write Drovers or send e-mail to: firstname.lastname@example.org