Variability. It's the downfall of many attempts at value-based marketing in the beef industry.

Take a pen of relatively uniform feedyard cattle with above-average genetic potential for performance and carcass quality. Feed and market them together and at least a few will perform poorly, inflating cost of gain for the pen. Some will finish too light or too heavy and earn discounts. Some will grade poorly.

But if you can design management and marketing strategies that minimize or eliminate those losses, you can capture more of each animal's potential value.

To fully capitalize on value-based marketing, you first must engage in value-based management. Tom Holtorf, manager of Schramm Feedyard, Yuma, Colo., believes value-based management and marketing can achieve short-term and long-term benefits for the feedyard and its customers. In the short term, managing and marketing cattle on a more individual basis helps optimize the profit potential of each animal. In the long term, individual performance and carcass data will help cow-calf producers improve the quality and uniformity of their calves.

When we last saw the Montana calves in pen 112 at Schramm Feedyard, they were new to the feedyard and weighed an average of 602 pounds (Drovers, December 1999). Health has been excellent in this group of preconditioned calves, with 11 percent respiratory pulls and four repulls. After 137 days on feed, the calves weighed an average of 1,130 pounds.

Sorting for profit

As the feedyard crew moved the cattle into the processing chute for reimplanting on March 3, they had another key objective for the day-determining profitable marketing dates.

Feedyards engage in a delicate balancing act every time they set a marketing date for a group of cattle. Adding weight to cattle increases their value, provided they don't exceed grid specifications. Feeding cattle longer also can improve their quality grade, as long as they don't grow too fat and earn yield-grade discounts. And the cost of adding weight to cattle increases as they grow older and less efficient at converting feed. Eventually, all cattle reach a point where adding a pound of gain costs more than it returns. Conversely, cattle sold before they reach their biologic or economic endpoints give up potential for higher quality grades, potential for cost-effective gains, or both. The sorting process at Schramm aims to solve this dilemma. Each animal wears an electronic radio-frequency identification (RFID) eartag, fitted upon arrival. Once an animal enters the chute, a crew member scans its RFID tag with an electronic tag reader. The tag reader electronically transfers the animal's identification number to the computer. At the same time, the scales under the chute record the animal's weight and transfer that number to its individual records. While crew members administer implants and vaccinations, consulting veterinarian Lynn Locatelli takes an ultrasound reading and adds backfat and marbling scores to the records.

The chute-side computer runs "Beef Link" Individual Cattle Manager software, from AgInfoLink, which combines data from the scales, the ultrasound imaging and from the EID reader. As the feedyard crew scans the tag of an animal, a voice readout from the computer states the animal's tag number, its weight and its average daily gain since it was last weighed. It also calculates a marketing date based on projected gains. The addition of ultrasound imaging allows the computer to create a "profitability curve" for each animal, taking performance, cost of gain, and carcass value into account. The top of the curve represents the date at which the animal could earn the highest profit, not the highest price. Based on that projection, Dr. Locatelli assigns it into one of three marketing groups.

Just before releasing the animal from the head gate, a crew member notches its ear tag, with the position of the notch designating the animal's marketing group. All the cattle return to their original pen.

All good-just different

With an average daily gain of 3.91 pounds, this is a set of calves that any cattle feeder would like to own. But even small variation within the group could threaten their profit potential if they were managed and marketed as a group. Dr. Locatelli points out that their weights on March 3 ranged from 935 to 1,400 pounds. Daily gains ranged from 2.39 to 5.0 pounds and backfat ranged from a lean 0.10 inch to 0.42 inches. And while marbling at scanning time put the group at an average quality grade of mid-Select, grades ranged from mid-Standard to upper-Choice.

Cattle pulled for treatment posted lower gains, but some of the variation comes from differences in their backgrounds. Most of the group, purchased from G&G Livestock, Polson, Mont., are Charolais x Angus steers. Ranch manager Greg Gardner also raises some Angus x Angus cattle to provide replacement heifers. He targets steers from those matings to a natural-beef program. Five required treatment on the ranch, excluding them from the natural program, and Mr. Holtorf agreed to include them in the load. Due to genetics and lack of calfhood implants, they arrived at the feedyard weighing considerably less then their Charolais-sired penmates. Individual identification, sorting and strategic marketing, however, will enable Schramm feedyard to optimize the performance and value of these steers, in spite of their differences.