Neither plant averages nor allowances generally apply to premium quality brands and grades, however, and that’s an added incentive for quality.
“Typically each Certified Angus Beef ® brand and Prime carcass would be awarded the full premium for those categories,” Dykstra says.
Some producers might think this is a new scheme, but it’s been going on since the inception of grids and really makes sense, the sources say.
“The plant management is only willing to pay a premium for those cattle that are above the average of the cattle they can go out and procure in a live market every week on their own,” Dykstra explains.
Of course, they realize monetary incentive is the best way to get the type of cattle they need.
“They know their market for beef products and they need to have a certain percentage Choice to meet customer demands,” Ward says. “If they’re not getting that on the average, they’re going to pay a premium to get more Choice.
“That’s definitely out there as a target or incentive for the producers,” he says.
So how can cattlemen figure out what that benchmark is in their region?
“The Northern cattle are going to have a higher percent Choice as a rule,” says Dykstra, who has tracked weekly grading trends for years. Nebraska, Iowa and Illinois have reached 65% to 75% Choice recently, while Kansas is in the 60% to 65% range. Texas and the “southern region” are closer to 50%, he says.
“As a seller, the further north you go, the higher the bar is set to get premiums,” Dykstra notes.
Conway says that doesn’t necessarily mean that the southern cattle are at an advantage, or that a northern feeder of high-quality cattle would be ahead to ship cattle to a southern plant.
“Once you figure trucking, regional pricing and other factors it often evens out,” he says.
Grading trends have changed over the years, and they vary seasonally, so the best way for a producer to know what they’re up against is to ask.
“Talk to whoever is offering the grid,” Conway says. “I get the question all the time, ‘What kind of cattle do I need to have just to break even on the grid?’”
Dykstra says the bottom line is that grid-sold cattle need to be above average to justify that marketing channel, and producers need to know what average is.
“This certainly points toward the importance of carcass data collection and a general awareness of what type of genetics, breeds, nutrition and management will allow you to achieve your carcass quality goals,” he says. “If your cattle aren’t better than average, then they need to be sold live or on the rail for a flat price.”
EXAMPLE LOAD:
800 lb. Carcass Weight
10 % Prime
40% CAB®
40% other Choice
10% Select
22% YG 2
70% YG 3
8% YG 4
PLANT/GRID STATISTICS:
Start price $185.00 ($1,480 for 800-lb. carcass)
Plant Avg. 65% Choice
CE/SE Spread $6.00
Prime $14.00
CAB® $3.00
Choice $187.10
Select $181.10
YG 2 $2.00
YG 3 $0.00
YG 4 ($7.00)
THE MATH;
Prime = 10 x $201.10 = $2,011
CAB® = 40 x $190.10 = $7604
Other Choice = 40 x $187.10 = $7,484
Select = 10 x $181.10 = $1,811
(2011 + 7604 + 7484 + 1811) / 100 = $189.10
YG 2 = 22% x $2.00 = $0.44
YG 4 = 8% x -$7.00 = ($0.56)
$189.10
+ $0.44
+ ($0.56)
= $188.98 ($1,511.84 for 800-lb. carcass) $31.84 premium per head over market average