De-commoditizing feeder calf market provides added value for producers

Too often, commercial cattle producers don’t think about or work hard at their marketing efforts, but Tom Brink of Top Dollar Angus, Inc. says that information is important.

He also notes that by increasing marketing, producers can de-commoditize the feeder calf market.

Commodity

“Beef is no longer a commodity as it is presented to producers,” Brink comments. “Name brands and greater differentiation are everywhere.”

He also notes that 70 percent of all fed cattle are sold on grids and formulas, meaning that cattle are priced according to their carcass value.

With the commercial bull market strongly de-commoditized, Brink says it is logical that the feeder calf market is next.

Differentiation

“That is how we distinguish one group of calves from another,” Brink says. “How do we prove our cattle are different?”

Brink references video auction catalogs, pointing out that stickers and stamps accompany many of the lots. Five and 10 years ago, those designations were there.

“These all represent an attempt to differentiate our product,” he says. “It represents an attempt to show that groups of cattle are different in a positive way.”

Brink continues, “We are using information from within our industry to differentiate the best cattle from the rest.”

What matters?

In differentiating cattle, Brink notes that producers must determine what information matters.

“What should I think and what do I need to provide to prospective buyers?” he asks. “In simple form, I think people need to know frame and flesh condition. Health program information, especially on calves, is important.”

For producers selling yearlings, less information is necessary, he says. Genetic information can be helpful in selling yearlings.

“We also need to thin about the type of information in the categories that we are providing,” Brink comments. “Is it subjective or objective? Is it hard data or just opinion?”

“We want to be in a position to have a superior product that is valuable,” he adds.

Supplementing subjective data

While some information about cattle can be subjective, Brink notes that it can be supplemented to make it more valuable.

“Let’s talk about frame condition, for example,” he says. “We have to be honest when we’re talking about it because buyers will see it as soon as the cattle show up. Frame score is also subjective unless we provide pictures or video of the cattle. Then it becomes more objective.”

Many buyers will not purchase cattle unless they are able to see at least a picture of the animals.

“Condition is always going to be very high on the buyers’ lists,” Brinks says, “and while pictures don’t tell us everything we need to know, it does give some information in terms of the current condition.”

Health programs

Providing objective information concerning the animal health program is also important, Brink says.

“Are we saying that our cattle have their shots, or do we tell prospective buyers that our cattle have had two rounds of modified live vaccine?  That doesn’t really tell us a lot,” he says.

However, Brink notes that using vaccination program details or following a well-known program is more helpful to buyers. The definition of Vac-34 and Vac-45 is well understood by buyers.

“Detailed information on treatments, timing and when cattle were weaned can be important,” he explains. “A comprehensive list allows buyers the chance to assess cattle health more fully. They can see what we did in our herd health program.”

“A good solid health program is something we can promote,” Brink emphasizes.

Genetics

Cattle genetics are also important, according to Brink.

Buyers often take generic descriptors like “front-end” or “powerful” with a grain of salt. The top end of one ranch herd might be equal to the bottom end from another herd and vice versa.

“We have a limited ability to identify superior genetics,” Brink says, noting that branded programs, such as Top Dollar Angus, can be helpful in pinpointing high-quality genetics for buyers. “The cattle at the top 25 percent of the bell curve are worth more when we sell them because they are worth more to the buyer, but without identifying them, how are we going to capture that value?”

Data

In looking at one specific example, Brink cites a group of cattle from 2014.

“The top 10 steers and the bottom 10 steers have a value difference per head of $457,” he said. “This is extremely instructive.”

The difference in the top 10 animals was that they weighed more, grew faster and probably grew more efficiently, he explains.

“Pounds translate to dollars,” he says. “They also had higher quality grades. Their marbling put those steers in the upper two-thirds of choice.”

Brink adds, “The takeaway from all of this is if we want to create valuable cattle, they need growth, pounds, marbling and muscle.”

Brink spoke during the 2015 Range Beef Cow Symposium, held in Loveland, Colo. in November 2015.

Saige Albert is managing editor of the Wyoming Livestock Roundup and can be reached at saige@wylr.net.