Quality For Profit

Quality For Profit

Real-world data helps confirm how cattlemen can earn top grid premiums

Sam Hands can attest to the value of genetics and how utilizing modern selection tools and management have transformed his family’s cattle operation, Triangle H Grain & Cattle Co., in Garden City, Kan. Forty years ago, he was using AI to obtain the best genetics and retaining ownership of the calves through a custom feedyard. That’s when he became frustrated with a cash market that didn’t reward better cattle.

“The feedyard manager said, ‘If you think you can do better you should sell them on the rail.’ So I did,” Hands says. “We beat the cash market, but I found out my cattle weren’t much better than the industry average for quality at the time—40% to 45% Choice.”

That experience led Hands to work aggressively to revamp his breeding program. The journey began with a visit to the late Henry Gardiner, Gardiner Angus Ranch, who was on the leading edge of selecting seedstock for carcass traits and feed efficiency.

“I had some concerns at first,” Hands admits, referring to advice to reduce cow size and utilize a straight-bred Angus program. But the results proved stunning over time.

In 1985, Triangle H opened their own feedyard, which helped the family market the grain they produced through cattle. Since then, another feedyard west of Garden City has been added to the operation. As manager of the cattle operations, Hands also gained greater access to performance and carcass data on his cattle. 

“Before we started using Gardiner genetics, our retained ownership cattle posted a 3.75 lb. average daily gain with payweights of 1,275 lb. and graded 40% Choice,” Hands says. “Today, our cattle gain about 4.25 lb. per day with payweights at 1,425 lb. and grade 95% Choice or better.”

The Triangle H example is testament to the advantages available to both cattle feeders and calf producers, says Tom Brink, owner of Top Dollar Angus, Inc. The top cattle in feedyards today are worth about $125 per head more than the national average, according to a benchmark study released early this year that identifies how to create the highest value for cattle. 

The analysis, “Evaluation of Cattle Earning Top Grid Premiums,” evaluated premiums earned by 15,164 high-quality cattle marketed on grids between 2011 and 2014. The data were evaluated by Brink and Shawn Walter, Professional Cattle Consultants. Beef Today sponsored the study. 

“With 70% of all fed cattle now marketed on carcass-merit grids and formulas, superior cattle now capture sizable premiums,” Brink says. “Feedyard managers are no longer surprised when some cattle earn a 
$50 to $75 per head premium on the grid/formula base price. With the right genetics and management, premiums that large and larger are not only possible, they 
occur every day.”

Triangle H and 14 other industry stakeholders supplied data for the analysis of top grid premiums. However, Hands has studied closeout data from his family’s feedyards and finds some stunning variations.

When Triangle H Grain & Cattle Co. revamped its breeding program to focus on carcass traits and feed efficiency, Sam Hands says increased profits followed. 

“Our data on more than 25,000 cattle we’ve fed during an eight-year period showed a $459 per head difference, on average, between the top and bottom cattle in any given pen,” Hands says. “There was a 300 lb. difference in their weight, top to bottom, and the average daily gain on those cattle varied by 2.82 lb. per day, but more than half of the value was due to carcass quality.”

Triangle H is working to reduce that variability and “narrow the gap” between the top cattle and the bottom groups of cattle. 

“We sort the cattle multiple times to market them when they are ready. That helps reduce the variations,” he says.

Still, not all cattle are created equal. 

“Genetic selection, calving season and health programs are the main sources of variability on the ranch,” Hands says.

The top grid evaluation was designed to help more cattlemen understand what it takes to earn premiums in today’s market. Of the 15,000 cattle that earned $125 per head over the average market, Brink says, “What these cattle did right is worth understanding.”

Cattle selected for evaluation must have earned a minimum $100 or more above the live market. Additionally, qualifying cattle must have been conventionally-fed and marketed in groups of 30 head or more from 2011 to 2014. Steers, heifers and mixed-sex groups were accepted, but natural and non-hormone-treated cattle were excluded. 

The final data set included 146 groups of cattle, with a mean group size of 104 head. Steers comprised 47.3% of the groups, with heifers at 37% and mixed groups at 15.7%. Cattle were marketed on a variety of grids to four major packers in the Central Plains. 

“The analysis revealed an impressive $125.04 average premium per head versus the live market,” Walter 
explains. “That equates to a 7.2% value-per-head advantage over the live market. We believe that premium suggests these cattle ranked in the top few percentage points for most valuable animals produced in the U.S. during recent years.”

An analysis of 15,164 high-quality cattle sold on marketing grids revealed a $125 average premium over the live market.

Pushing cattle to earn top grid premiums requires utilization of modern selection tools.

“Commercial ranchers realize their selection criteria are becoming more demanding, but they have the selection tools today to be successful,” says Ken Conway, who operates GeneNet, an integrated marketing alliance that has sold nearly 1.5 million fed cattle and worked with more than 2,000 cow-calf producers, feedlots and seedstock producers throughout the U.S. 

What propels cattle to the top of grid premiums? Brink and Walter identified four major observations demonstrated by the top grid-performing cattle:

1. Superior quality grades and quality-oriented brand premiums.
2. Above-average dressing percent.
3. Industry average Yield Grades.
4. Small percentage of non-conforming carcasses (other than Yield Grade 4).

The results of the study are consistent with the structure of virtually all industry grids. Quality grade, for instance, is a major characteristic of top grid premium cattle. Cattle in this evaluation averaged 12.2% Prime, about three times the industry norm. Prime carcasses earn $10 to $25 per cwt premiums. 

Brink notes the analysis also found 42.2% of carcasses qualifying for Certified Angus Beef (CAB), which requires carcasses to be in the upper two-thirds of Choice or higher. The national acceptance rate for black-hided cattle is 26%.

Overall, 90.3% of the cattle in the evaluation graded Choice or Prime, well above the current industry average of 68%. 

“Marbling is the key to unlocking grid marketing success,” Brink says. “The cattle in this study, on average, were about 20 percentage points better for the top two quality grades. Cattle with superior marketing 
genetics have what the market pays extra dollars to get.”

At Triangle H, Hands says achieving marketing success with their products is an ongoing process.

“Cattle are viewed as a marketing tool of our farming operation,” he says. “Some grain goes to ethanol plants, others to feedyards and dairies. But to gain maximum return through our cattle we need to produce quality.”

Hands said a friend in the packing industry always told him, “the profit is in quality cattle.” 

Decades of data collection and analysis at Triangle H has proven that advice true.

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