Value-Based Marketing

Beth Doran, Extension Beef Field Specialist

Situation:

Last year, the Iowa Cattlemen's Association unveiled the Iowa Quality Beef Supply Network (IQBSN). The goal of the IQBSN is to develop a business plan with Excel Corporation to construct a jointly-owned packing plant and to provide a special grid for Iowa members to market cattle. The mission is to strengthen the profitability and viability of cattle feeding in Iowa through value-based marketing. However, for producers to reap the benefits of this grid marketing system, it is imperative that they understand the carcass merit of the cattle they sell.

Response:

To help producers learn how to market cattle on this grid, the Sioux County Cattlemen's Association made major changes in this year's carcass contest. Cattle were tagged with a special electronic ear tag and marketed through Excel Corporation in Schuyler, NE on the new IQBSN grid. Placings were determined by carcass value/cwt. for the pen. Twenty-seven producers from 4 counties marketed 30 pens of cattle (240 head). This was an increase of 225% and 250% in producers and cattle, respectively, compared with 1999's show and was an all-time record in the history of the carcass contest (past 8 years).

Impact:

The changes in this year's show were positive. Not only were the numbers of exhibitors and cattle increased, but there were 11 new exhibitors. Over the past 8 years, 114 feedlot producers have participated. Five of these exhibitors have exhibited five or more years.

The par price for the cattle was $119.10/cwt. Only 9 pens (30%) matched this price or were greater. Among the 7 pens of heifers, 5 pens (71.4%) were greater than the par price. Only 4 of the 23 pens of steers (17.4%) exceeded the par price. This indicated that perhaps the IQBSN more closely matches heifers.

While only 30% of the cattle were higher than the par price, prices received were greater than if the cattle had been sold on the open market or in-the-beef. The average live cost was $75.13/cwt. The live price on the open market that week was less than $72/cwt. Hence, the producers received a $3.13/cwt live premium. On the 305,508 pounds of live weight, this amounted to an extra $9562 for the group of cattle or $39.84 per head.

The Nebraska weighted average (or in-the-beef price) that week was $112.71/cwt. The IQBSN grid marketing system paid $116.81/cwt. or an extra $4.10/cwt of carcass. On the 196,496 pounds of carcass, this amounted to a premium of $8056 for the group of carcasses or $33.57 per carcass.

Reasons for not exceeding the par price included carcasses that were lower yield grading or a 3B (6.3%), greater than 950 pounds (1.7%) and lower quality grading (33.3%). By far, the biggest deterrent was the 30.8% of the cattle that graded Select. Possible reasons for this include genetics, type of implant and energy density of the ration.