What’s up?

Quality grades… and a new research paper explains why

By Miranda Reiman

Three years ago, a 30-year decline in beef quality grades was apparent, with only half of fed cattle grading USDA Choice. The Choice/Select spread hit record highs in 2006, but today the picture is much different (see chart). July figures show 60.1% of the harvest mix graded Choice the first half of this year, but why?

Certified Angus Beef LLC (CAB) animal scientists recently authored a research paper on those trends. “Quality Grade: What is driving the recent upswing?” by Larry Corah and Mark McCully, delves into regional differences, how quality improved so quickly and why it changed.

Nationwide, the share of Choice grading cattle made a 7.5-percentage-point leap in just two years.

“The main reason for that rapid shift is that a large number of cattle marbling scores are very close to the USDA grading lines,” Corah, CAB vice president, says. Just adding 20 more units of marbling, going from Slight-80 to Small-0, results in 5.71% more cattle grading Choice.

“That seemingly tiny change has an even greater impact on those qualifying for the Certified Angus Beef^® brand,” he says.

After a low of 14% CAB acceptance in 2006, the brand will beat 19.5% during this fiscal year. That’s nearly a 40% increase in three years.

The Central Plains show the greatest improvement and distillers grain byproducts might be part of the answer, although potentially part of the problem if they get above 40% of the dry-matter ration content. By 2007 these byproducts were fed in 82.5% of feedlot rations, but at a moderate 15% to 30% level.

When held to those levels, research shows distillers corn byproducts actually result in higher grades, partly by increasing appetite, and especially in starter diets.

“Higher dry-matter intake, better calf health and higher daily gains support higher quality grade,” says McCully CAB assistant vice president, noting that Elanco Animal Health Benchmark® Program data reveals positive trends in all of these areas.

That’s coupled with herd liquidation, which has boosted the heifer share of the harvest mix to 37.4%, a few points above normal.

“Heifers tend to grade 9 to 10 points better than steers, so that may account for at least a half a percentage point increase overall,” he says.

Use of Angus genetics is on the rise and at the same time, the expected progeny difference (EPD) for marbling score in Angus has moved up 7 points since 2004.

“It only moved 9 points in the first 25 years of the EPD’s existence,” Corah says. Angus bull usage increased from 39% to a 55% share of all bulls from 1994 to 2008, and nearly 70% of commercial cows are now considered primarily Angus.

Iowa feedlot futurity data shows only 52.7% of calves with less than a quarter Angus breeding grade Choice, compared to their counterparts that are at least three-quarters Angus, at 86.2% Choice and Prime. CAB acceptance rate nearly quadruples with the greater Angus heritage.

Although quality grade is hard to predict, this grading surge might stick. That doesn’t mean producers counting on grid-based premiums should be discouraged.

“If quality grades do not decline within a year, it could mean the infusion of higher-marbling genetics has had a lasting effect,” Corah says. “Coupled with smaller cattle numbers, consumer demand in a recovering economy will likely drive the Choice-Select spread to higher levels.”

To read the entire paper, visit https://cabcattle.com/about/research/

Give consumers what they want

by Jackie Eager

When you walk into a grocery store, you’re surrounded by choices of several branded beef lines. That’s a relatively new development, promising better beef, and it’s most apparent in just the past 10 years.

Beef cattle specialist Gary Fike, with Certified Angus Beef LLC (CAB), is excited about the opportunities beef branding brings to the ranch. He shared that with cow-calf producers at the Oklahoma State University Master Cattleman Summit in Stillwater, Okla., last month.

“Consumers have gone from a choice of just a commodity program offering retail cuts to a range of branded beef products that offer a more consistent, high-quality alternative,” he said.

The good news for consumers is also a rewarding prospect for producers.

“There is a great opportunity for producers to get into these branded programs,” Fike said. “Most of them offer some type of premium, whether that’s for breed influence, high quality, lean yield, natural, organic or a combination thereof.”

Producers who target the 10 science-based specifications required to hit the CAB brand target can share in the market premiums that add $500 million to the cattle business each year, he said. Even if the economy suffers, cattle producers can take advantage of a stable, premium market.

“Targeting a specific market will improve producer income, and it should also give them pride, knowing when they go to the store their cattle are supplying that brand,” Fike said.

The first step for producers moving toward a branded program is to look at their herd genetics and target those to a program, he said. Next, look at how the cattle are managed and where those practices will fit within a brand. With these adjustments, a producer can market more value-added cattle to receive premiums.

“Producers who can target the genetics and production practices of branded beef can get the premiums in the marketplace,” Fike said.

There is room for growth in the branded beef market, he said, as long as consumers demand consistent, high-quality satisfaction from their beef products.

“Targeting a specific market will improve producer income, and it should also give them pride, knowing when they go to the store their cattle are supplying that brand,” Fike said.

“Producers who can target the genetics and production practices of branded beef can get the premiums in the marketplace,” Fike said.

There is room for growth in the branded beef market, he said, as long as consumers demand consistent, high-quality satisfaction from their beef products.

Behind the menu price

By Miranda Reiman

Farm and ranch freezers are often full of home-raised beef, yet producer families still enjoy the classic steakhouse experience now and again.

With a quick scan of the menu and some cowboy math, most producers figure the New York strip list price at a hefty premium to the weekly salebarn reports for beef on the hoof.

That means either A, someone in the restaurant business is getting rich or B, it takes plenty of work and capital to get beef to the consumer.

“The reality is everybody is taking a little piece of the pie all along the way,” says Mark Polzer, vice president of Certified Angus Beef LLC (CAB). “Product doesn’t go right from the packer to the plate; there are many important steps in between.”

Rick Cassara owns John Q’s, an upscale steakhouse in downtown Cleveland, Ohio.

“Theoretically you could go directly to the packers, but they would have to provide a whole host of services to me that a distributor does,” Cassara says. “One is that he cuts the steaks for me. I don’t have a butcher here and don’t want to get into that cost.” The distributor also packages the steaks to allow for some shelf life.

Another bonus is advice and market support.

“We’re more consultants than order takers,” says Ron Becker, president of Stock Yards Meat Co. of Phoenix, Ariz., a business unit of U.S. Foodservice Inc.. “We’re out there face-to-face with the customers talking about what they’re buying every single week.”

Cassara’s Midwestern-based distributor “knows the marketplace,” giving him information on price trends and new products.

The same is true in the Southwest, Becker confirms: “Really our focus is on helping our customers make more money.”

That starts with purchasing, then processing and finally service.

“We’re not just buying from anybody who comes out of the woodwork,” Becker says. Stock Yards constantly negotiates and works closely with certain packers.

“When the product hits our door, the quality control process starts,” he says. The company monitors temperatures, inspects delivery trucks and assigns tracking numbers. “We have full traceability on every case.”

The beef is aged, typically 14 to 30 days for added flavor and tenderness.

“At any given time we have about a month’s worth of inventory aging, so that ties up a significant amount of money,” Becker says.

Customers can specially request certain brands, sizes or even product sourced from a particular packer. Stock Yards is one of the leading volume distributors licensed to sell the Certified Angus Beef ^®(CAB^®) brand in the Southwest.

“That’s why on the receiving side we have to have every single case accounted for,” Becker says.

The details keep up as subprimals enter the production area, where beef is trimmed, cut, marinated or diced for accounts.

“We make each order as they come in—to do that you have to have a high level of productivity,” Becker says, crediting their people and equipment.

Customers can place orders up until 5:30 p.m. for delivery the next morning.

“They can get all the way through their lunch and have a feel for what they’re going to need the next day, but there are some expenses in that,” he says. “We’re running multiple shifts and smaller trucks to deliver that aggressive service platform.”

Becker always has one underlying concern that trumps all others: “While all that’s going on you have to be impeccable in food safety and people safety. It doesn’t matter how busy you get, those are non-negotiable.”

That vigilance takes extra training, labor, time and money.

Part of the difference in what a packer charges and what a restaurant pays is found in the cost of handling the product, from warehouse workers and cutters to packagers and truck drivers.

“We can’t forget about the overhead for that manufacturer’s plant, or the cost of buying new trucks and putting gas in them,” Polzer says. “We can’t forget about the cost of vacuum-packing film, knives and mesh gloves.”

Liability insurance, salaries for the sales force and all the related staff also must come out of the end profit, along with the ever-growing problem of “bad debt” or customers unable to pay their bills.

“The National Restaurant Association estimates 17,000 restaurants may go out of business this year, so accounts receivable is another cost,” Polzer says. “With all of those factors, a foodservice distributor would be happy to come out with 3% to 5% net profit at the end of the year.”

Restaurants generally work on similar margins.

“The cost of doing business in a restaurant is not just the plate of food and what I’m getting for it,” Cassara says. “That would be like if I had a stand outside and I grilled the steak myself and handed it to you.”

Polzer says three main factors impact expenses at foodservice venues: overhead, labor and food costs.

“What are the costs to operate your home?” he asks. “They’re going to be pretty similar, but magnified by the scope and size of the restaurant.”

Those prices can increase with a commitment to providing a special “atmosphere” for a desirable eating experience.

“Outfitting the fine-dining establishment in both the front and the back of the house would be considerably more,” Polzer says. For example, fast-food locations have a couple of flat grills, fryers and microwaves, versus the white-tablecloth category with its gas ovens, stoves, broilers and stock pots.

“It’s just a much more elaborate set of equipment,” he says. That translates to a need for more highly skilled workers, too.

“You’ve got to hire a chef, a sous chef (assistant), a dishwasher and a bus boy,” Polzer says. “Then your management team and wait staff to take care of the front of the house.”

Casual observers may not realize it, but those people are part of the fixed expense, Cassara says.

“You have to have your staff, and if nobody comes in, you still have to pay them,” he says. “If people do come in, hopefully you have enough staff to provide good service – because if you don’t, people aren’t coming back.”

Experienced kitchen help can also be an asset in managing food costs.

“You need to have skilled people who know how to take care of the product,” Cassara says. “If you burn a steak, it costs me a lot of money.”

Typically, what a diner sees on the menu is marked up two to three times what the raw products cost coming in, just to approximate that 5% projected profit.

“This is one of the few businesses where we not only sell the finished product, but we manufacture it as well,” Cassara says. “We get it as raw goods at the back door, we make it in the kitchen and then we bring it out and sell it on a retail basis. It takes a lot of capital to do all those things.”

It also takes a lot of old-fashioned hard work—not the get-rich-quick business often imagined at a first glance at menu prices.