MARKET UPDATE

5 Area Weighted Fed Cattle Price – Last week’s 5-Area Weighted Fed Cattle live price was $128.27, with Dressed cattle at $204 – $205. The average steer dressed weight was 858 pounds, up 14 pounds from this time last year.

Wholesale (Boxed Beef) prices were up from last week with USDA Choice beef trading at $191.69, up $2.79 from the week prior. USDA Select beef traded at $188.29, down $0.53. The Choice/Select spread was $4.31.

Feeder and Stocker cattle traded sharply higher again last week, with all classes trading anywhere from $3 to $15b higher. This was in part due to the USDA Corn Crop Planting report coupled with grass fever. Slaughter cows and bulls were mostly steady with cutout value at $170.50/cwt.

Oklahoma City feeder cattle prices were $1 to $8 higher this week with prices for medium and large frame #1 steers: 450-500# $158.50-$193, 500-550# $164-$166, 550-600# $162.50-$172.50, 600-650# $151-$162.25, 650-700# $142.75-$152, 700-750# $141-$147.25, 750-800# $137-$143, 800-900# $128.50-$140.75, and 900-1000# $122.25-$126.50/cwt.

Cattle feeding margins improved $30 per head with average losses now at $74.62 per head. A year ago, fed cattle sold for $121.73 with losses of $58.73 per head.

Average Packer margin declined $10 per head last week with packers losing an average of $45.10 per head.

INDUSTRY UPDATES

A recent United Nations study states that global land degradation is increasing significantly. The study warns that without substantial changes in land management, moving towards more sustainable practices, further large scale desertification will occur. The study notes that about 5% of all global GDP is being lost because of deteriorating land quality. The UNCCD Executive Secretary stated that “Business as usual is no longer an option”. According to the economic evaluation in the study, Africa has lost 12% of its Agriculture GDP, while Paraguay has lost 6% and Guatemala up to 24%.

A new report from the USDA Economic Research Service (ERS) examines beef production systems in the U.S. and addresses specific demand niches. The report, titled “Alternative Beef Production Systems: Issues and Implications”, outlines the specific systems and the challenges and opportunities within each. The study notes that a growing number of consumers are interested in beef claims that include “Natural”, “Organic”, Grass Finished”, or even “Locally Produced”. The study notes that some of these new production systems may combine claims to produce products like “All Natural Grass Finished Beef” or “Organic, Locally Produced Grass Finished Beef”. Producers and branded programs may even bundle additional claims such as “Animal Welfare Approved”, “Humanely Raised”, or claims about environmental stewardship or even healthfulness of the product. The study estimates that beef from alternative systems represents about 3 percent of the total beef market, but that this segment has grown at about 20 percent annually over the past 5 years. Major points of the study include:

• About 80 percent of U.S. beef comes from steers and heifers finished in feedyards, with the remaining “non-fed” beef coming from older cows and bulls.
• Higher quality grass-finished beef comes from younger steers and heifers finished on high-quality forages under careful management and genetic selection. These cattle can reach Choice or Select grades.
• One study found that, when fed to the same level of backfat thickness, there was no statistically significant difference in tenderness scores between beef from cattle fed grass and silage and those fed grain. Another study reported, however, that feeding grain to cattle reduced the length of the feeding period by 21 percent which generally lowers per-unit production costs.
• Only about two-thirds of organic beef is grain-fed because of the high costs of organic feeds compared with conventionally grown feeds. One study found premiums for organic feeds were 57 percent above conventional feeds. In some years, organic grains may only carry premiums of 25 percent or so, but in other years were than 100 percent higher, helping account for the higher cost of organic beef.
• One study found that conventional grain feeding was 52 percent more profitable than natural grain feeding and 5.6 times more profitable than organic grain feeding, due to production efficiencies, shorter feeding period and lower feed costs. Grain feeding was more profitable than grass feeding for both organic and natural production, and natural grass feeding was the least profitable technology by a wide margin, largely as a result of the small premiums associated with its products.
• In one feedyard study, use of technologies such as implants and antibiotics resulted in efficiency gains of 17 percent in average daily gain (ADG) and 9 percent in weight-gain-to-feed ratios (G:F) from a single hormone implant. Further results indicated a 53-percent reduction in morbidity and a 27-percent reduction in mortality from mass treatment upon the arrival of cattle at the feedlot. These efficiency gains and other resulted in simulated cost advantages of conventionally produced cattle over others of $77 per head over non-implanted control groups and $349 per head over organically fed cattle. A 10-percent increase in the price of organic feed increased costs by $54 per head.
• Consumers will pay premiums for beef from alternative production systems, although those premiums vary and researchers find what people say they will pay on a survey and what they actually will pay do not always match up. One study found consumers willing to pay a premium of $0.76 per pound for beef produced without hormones. Another found consumers in Oklahoma City, Tulsa, and Denver paid average premiums of $1.45 per pound for ground products and $5.87 per pound for steak products labeled as for attributes such as no antibiotics, no hormones or all natural. In a survey of companies that purchased and marketed naturally produced cattle, researchers found 84 percent of the companies were willing to pay a premium of $5.95 per hundredweight for products that qualified.
• Grass-finished beef has a different flavor profile than grain finished. Some consumers prefer it and some do not. One study found 23 percent of U.S. consumers surveyed preferred Argentine grass-fed beef over U.S. grain-fed beef and were willing to pay a premium of $1.36 per pound for it. Another found consumers were willing to pay a premium of $3.44 per pound for grass-fed over grain-fed beef.
• However, consumers discounted grass-fed beef based on flavor and sensory attributes by an average of $0.36 per pound in one study and $0.55 to $0.82 per pound in another. One found that 62 percent of U.S. consumers who preferred U.S. grain-fed beef over Australian grass-fed beef were willing to pay a premium of $1.61 per pound for domestic beef.
• Cattle in grain-finished systems generate less greenhouse gas emissions than those on pasture, and efficiency gains in both dairy and beef production that have further reduced environmental impacts per unit of meat output.
• More land is needed to produce a given quantity of grass-fed beef, or less beef production will occur per unit of land, than conventional beef because of the extended periods on pasture, meaning higher ownership costs per unit of beef produced.

View the full report from USDA/ERS.

The Small Farms Institute has published online resources for farmers who wish to raise and market grass fed beef. The resources were compiled from a series of workshops in Ohio that were funded by a USDA grant titles, “Building a Grass-Fed Beef Production Infrastructure to Support Marketing and Serve Consumer Demands”. The online resource provides information intended to identify opportunities and barriers to grass fed beef production and marketing, grazing systems, processing, nutrition and carcass quality, and consumer interest. The resource can be accessed through: http://smallfarminstitute.wordpress.com/grass-fed-beef-notebook/

Several consumer survey studies over the past few years have indicated that consumers are confused and wary about food and food production. Marketing agency, Sullivan, Higdon & Sink recently released a report titled, “Building Trust in What We Eat”. The report outlines what consumers know or think about U.S. food production, and the information sources they trust. The report revealed that just 40% of consumers rated their food production knowledge as good to excellent. However, 69% of all consumers stated they want to know more and 77% of moms said it is important to learn about food production. Only 19% believe food companies are transparent about how food is produced and 22% believe the ag community is transparent. Of those who did rate their knowledge as good to excellent, a majority did express trust in the ag community or the food companies or both, indicating education can help in this regard. The majority of consumers felt that farm visits had a positive impact on their perception of food. They also wanted to know whether animals had been given hormones or antibiotics and were interested in learning about the living conditions of the animals. Almost 66% of all consumers feel that family and friends are trustworthy sources of food information, while 53% consider farmers trustworthy sources. The authors state that food marketers could benefit significantly by having farmers and ranchers tell their stories directly to the consumer.

The full report is available for download from Sullivan, Higdon & Sink.

A recent survey of farmers who direct market beef at local Farmer’s Markets are asked two primary questions by consumers inquiring about their products. One of the first questions posed will generally be an inquiry about animal welfare. How were the animals raised on that individual’s farm, what were the animals fed, were they treated humanely, were they given antibiotics or growth hormones, were they fed any GMO based feedstuffs, are they raised on pasture or get to spend time on pasture, and are they actually raised on the farm? In addition to questions about animal welfare, the consumers also wanted to know about beef cuts and proper preparation of each cut. Farmers who can provide very specific information about each cut, how to best prepare, and recipes for each cut, tended to fare better with the consumer. In other words, be the knowledge leader for your product(s) and do a great job of “Telling your story”.