In theory, consumers’ willingness-to-pay should rise with the quality of a cut of beef, resulting in more value for the entire beef supply chain. But do beef grading factors — both quality and yield — actually pay in the real world?
The answer is “yes,” right from the consumer back to the cow-calf producer, says Darrell Busby, manager of the Tri-County Steer Carcass Futurity and former livestock specialist at Iowa State University.
“The message for cow-calf producers is there’s a strong reward system from the consumer clear back to the cow-calf producer to produce high quality beef,” he explains in the video below, filmed during the Manitoba Beef Feedlot School earlier this fall.
Referring to two economic studies he was involved in at Iowa State, Busby says they found it doesn’t cost any more to produce high quality beef. Most of the characteristics that cow-calf producers look for are also traits that result in high quality meat and grid-pricing premiums (he says 74 percent of U.S. cattle today are sold on grid prices that account for individual carcass merit.) (continued below)
“The high quality carcasses come from cattle that are healthier. They have less health treatments in the feedlot. They’re cattle that are calmer, and they also gain faster,” he says. “Producing quality beef is a reward to all segments of the industry for doing the right thing. Give good nutrition to that cow, good nutrition to the calf, a good health management program, low-stress handling — those are all things that add up at the end that the consumer is willing to pay for.”
That’s not to say supply chain signals won’t get mixed up, as buyers at each stage in the chain may downplay the value of a desirable trait to discount the price. Busby recommends retained ownership as a mechanism for holding the supply chain accountable.
“That’s the truly clear signal. If you retain ownership you’re financially responsible for the healthcare you gave those calves, for how they were handled in terms of disposition, the genetics. You’re guaranteeing the work or you’re not going to make money retaining ownership,” he says. “And our data says in about 11 years out of 14 you’ll make money retaining ownership. So there is a reward system.”
With increased volatility in cattle markets, he says the profit-per-animal spread between high and low quality cattle has also grown, meaning there’s even more incentive to make quality a priority.