Live Beef Evaluation & Pricing

History 1916 Standards for U.S. grades developed 1924 Market classes and grades of dressed beef developed 1927 Voluntary grading specifications 1941 Adopted Prime, Choice, Good Comm., Utility, Cutter, Canner 1956 Commercial spilt by age into Standard & Commercial 1965 Adopted standards for cutability “Yield Grades” 1973 Changed “Bull” grade to “Bullock” 1975 Elimination of conformation – Changed Good to be leaner minute minimum required after ribbing 1987 U.S. Good to Select 1989 Only Quality or Yield Grade assigned – “No Rolls” 1997 Select Grade restricted to A maturity; B maturity - Standard

History 1930’s 1950’s 1900’s 1940’s

History Early 1960’s Late 1960’s

History Early 1960’s Late 1960’s

History 1970’s 1980’s

History 1990’s 2000

History 1990’s 2000

National Beef Quality Audit’s Carcass wt Fat thickness, in REA, sq in USDA Yield Grade Quality GradeCh-Sel86Sel79Sel85 % Prime &Choice75%55%48%51% % YG 1 & 2’s30%44%58%49.2 USDANBQANBQANBQA

Market Animal Evaluation USDA Grading Service –Livestock & Grain Market News Branch –Voluntary –Paid for by the packer USDA Grades –Yield grade – measures the lean to fat ratio –Quality – measures the palatability of the meat

Evaluation Factors YieldDressing Percent YieldYield Grade PalatabilityQuality Grade

Dressing Percent Dressing Percent = Hot Carcass Weight Live Weight X 100

Dressing Percent

- Fill - Hide - Mud - Fill - Sex - Fatness - Muscle Avg 62.5%

Dressing Percent Live PriceDressing %Carcass Price $ % $ $ % $

Dressing Percent Carcass PriceDressing %Live Price $ % $ $ % $ $ % $ Live PriceDressing %Carcass Price $ % $ $ % $

Market Cattle Evaluation USDA Yield Grade –Measures cutability or the amount of lean to fat –Classified from 1 (High % Lean) to 5 (high % fat) % Boneless Trimmed Yield Grade % Retail Cuts

Yield Grade Factors HCW Weight 12 th Rib back fat Ribeye area Internal fat – kidney, pelvic, heart fat

Yield Grade Factors HCW Weight 12 th Rib back fat Ribeye area Internal fat – kidney, pelvic, heart fat

USDA Yield Grade Step 1: Determine back fat – starting point for determining Y.G. 12 th rib depth inchesPreliminary Y.G..0”2.0 Most desirable.2”2.5.4”3.0.6”3.5.8” ”4.5Least desirable

USDA Yield Grade Step 1: Determine back fat – starting point for determining Y.G. 12 th rib depth inchesPreliminary Y.G..0”2.0 Most desirable.2”2.5.4”3.0.5”3.3.6”3.5.8” ”4.5Least desirable Avg.50 Currently Avg.4

USDA Yield Grade Step 2: Determine Muscling –Average muscling 1.1 sq. inches of REA per 100 lbs live wt. –1200lb steer should have 13.2 sq. in. REA –Greater than 1.1 sq. in. then Lower the Y.G. (Desirable) –Less than 1.1 sq in. then Increase the Y.G. (Undesirable) –For every 1” difference +.3 from PYG

USDA Yield Grade Step 2: Determine Muscling HCWRequired REA

USDA Yield Grade Step 3: Determine Internal Fat (K.P.H. fat) –Most cattle have 2.5 % internal fat. –If cattle have less than 3.5% internal fat then lower Y.G. by.2 for every 1% decrease KPH,% Adjustment none

Quality Grade Evaluation USDA Quality Grade –Estimates the palatability (eating quality) of the meat Factors to consider when estimating Q.G. –Maturity – Young to Old – 5 classifications –Marbling – 10 degrees of marbling

USDA Quality Grades Prime Choice Select Standard

309642Age

Practice Comparisons Heifer – 1365 lbs

Practice Comparisons Steer – 1350 lbs

Cattle Maturity Past –Ossification of vertebrae Post-BSE –Dentition to identify cattle 30 mo of age –FSIS as set the following… Cattle with a full set of the first incisors are mo Cattle with at least one of the second set of incisors are considered 30 mo of age or older

?

750 lbs Choice- Y.G lbs Prime Y.G lbs Select + Y.G lbs Select - Y.G lbs Choice- Y.G lbs Prime - Y.G lbs Select - Y.G lbs Choice O Y.G lbs Select + Y.G lbs Select - Y.G lbs Choice - Y.G. 3.5

USDA Certified or Verified Certified - 52 –Specifications – ie. CAB –Company requests – Government Issues –Reviewing requirements Process Verified - 4 programs –Process (origin, handling, carcass cuts, ect.) –Simple - Nolan Ryans Tender Aged Beef

Alliances/Branded Beef Programs 52 Programs Currently Four Categories –Breed Associated –Commercial Beef Carcasses –Natural/Implant-Free –Vertical – Integrated Beef Cooperatives

Breed Breed Associated Angus – CAB –Supreme Angus Beef –Angus Alliance Hereford Limousin –Laura’s Lean –Nebraska Lean Limousin

Beef Breed Associated Dominated by British breeds –of 52 programs 40 Angus based Provided by USDA Marketing & Regulatory Programs

Commercial Beef Western Beef Alliance Montana Beef Network Fewer Specifications Pay fee for data

Natural/Implant Free Laura’s Lean 20-30,000 Colman Natural Beef Maverick Ranch 30-40,000

Vertical Integrated Alliance Northern Plains Premium Beef U.S. Premium Beef –Share holders Future Beef –Selected producers Ranchers Renaissance –Share profit or loss

Current Methods of Marketing Live Price Bids Carcass Price Bids – “In the Beef” Grade & Yield – “Grid Pricing” Formula Pricing

CERTIFIED ANGUS BEEF ® Product Sold by Program Licensees* * Fiscal Year (October 1 - September 30)

The Big Three’s Grids IBP – Real Time Market Value – RTMV Monfort – “Cutability” & “Quality” –Nebraska average for base - Adjusts to Choice Y3 Excel - Many Breed specific –Angus based on Quality no Premium for Sel Y1&Y2 Angus Gene Net, Angus Alliance etc. –Sterling Silver, Iowa Quality Beef, Nebraska Corn Fed –Ranchers Registry / Ranchers Renaissance

Figure 1. Quality Premiums and Discounts

IIIIIIIV

Figure 2. Cutability Premiums and Discounts

Figure 3. Carcass Weight Discounts