Progress, Not Complacency

Any endeavor with measurable goals provides opportunity for reflection on progress and satisfaction for achievement. Cattlemen and women have many achievements to be proud of, with significant improvements in food safety, animal welfare, production efficiency and consumer satisfaction. There are several metrics within each of these areas, and others not mentioned, that have seen rapid enhancement in the last few decades. 

It’s all too evident that progress potentially leads to complacency. For the beef sector to remain relevant and continue to increase sustainability we must not stop to congratulate ourselves for long. We should often recognize tremendous progress, but then reassess and adjust goals to align with the evolving future. 

Applying this specifically to the quality and eating satisfaction of our beef products provides a prime example. In the history of modern carcass grading, the USDA quality grade and premium branded beef mix has never been richer in quality. We’ve taken a few opportunities to highlight all-time highs in U.S. average carcass quality in the first six months of this year. If not for record marbling in fed steer and heifer carcasses, our downstream customers would have faced unfulfilled demand for premium quality beef cuts. 

Current market values for corn, fed cattle and boxed beef have collaborated to incentivize even greater marbling achievement than genetic advancement alone would have realized under different economic circumstances. The latest national USDA Prime grade percentages have topped 12% and for the past 12 weeks, CAB certification rates have been above 39%. Both are astoundingly good measures.  

As far as quality grade is concerned, these measures have led some in the industry to suggest that we’ve arrived at the destination. Perhaps, it could even reaffirm an ideology that carcass quality is just “fed on” rather than “bred on.” While indeed exceptional, there may be a bit of a misleading narrative resulting from recent trends.  

The record-wide gap between cost of gain versus fed cattle price is a significant factor in elongating feedyard stays for cattle. The unintended, negative consequences of these conditions are record-large proprotions of yield grade 4 and 5 carcasses. In the likely event that future feed costs or carcass cutout values shift, shrinking incremental cost of gain at heavier weights, potential exists that feeding days shorten and average total carcass fat content declines. This adjustment can’t be predicted, but given that markets are ever-changing, we should guide decisions on the probability that carcass quality will not always be artificially propped up on extremes. 

This is where the free will of cattlemen to breed and raise cattle as preferred will continue to present value differentiation. The fact that some choose to apply some (or a lot) of focus on genetics for carcass traits, while others do not, will persist as a significant margin opportunity. 

Beef demand has been exceptional because of dramatic increases in consumer satisfaction for a few decades. Since taste ranks at the top of the list when it comes to what drives consumers to choose beef, we know where our figurative “bread is buttered.” Packers continue to share a decent portion of their cutout premiums upstream to the cattle feeder, despite a growing proportion of higher-quality carcasses. Once the health and feed conversion components are accounted for, what else shall a cattlemen do to add value to their product? Nichè markets and verified production claims are viable margin drivers. But the differences in carcass value between the poorest and the best carcass outcomes are so tremendous, that even a half-hearted try toward excellence provides one of the largest payoff opportunities in the business.