In the recent article, Profit Trends for Fed Cattle I: Performance, we referenced the Professional Cattle Consultants’ (PCC) recent analysis of over 440,000 head of cattle all sold on a grid from 2004 to 2009 that segregated lots of cattle into the top 1/3 most profitable and bottom 1/3 least profitable by month.  Over the five years when the data were collected, the top 1/3 of cattle had an average profit of $90.26/head and the bottom third lost $39.15/head.  During this time period, the Choice-Select spread ranged from $0 to $23 per cwt.  Last time we observed that the most profitable lots of cattle gained significantly better in the feedlot and the difference in gain between high and low profit lots of cattle was even more substantial during times when feed costs were the greatest.  In this article, we’ll look at the carcass characteristics of the top and bottom profitability pens of cattle in the database.    In the early years of the analysis, the Quality Grade premiums were greater and feed costs were lower, but as feed costs increased after 2006, the impact of performance on quality increased.  However, average quality grade across all the cattle improved over the 5 years.

In the database, the most profitable pens of cattle were associated with higher (better) quality grades, but also higher (poorer) yield grades (Table 1).  The quality grade relationship makes sense, but the yield grade relationship seems counterintuitive.  In a grid marketing situation (http://igrow.org/livestock/beef/grid-marketing-considerations/), cattle typically receive a premium, or at least no discount, for grading US Choice or Prime, and some cattle will receive a premium for falling into the upper 2/3 of the Choice grade with programs, such as Certified Angus Beef (CAB).  However, cattle with Yield Grades 4 or 5 will also be discounted.  Because quality grade is based on intramuscular fat and higher yield grades are due to fatter carcasses, it makes sense that fatter carcasses will tend to have better quality grades and worse yield grades.  To really understand what is happening, it is important to highlight the fact that the PCC analysis is based on pens of cattle, not individuals.  Therefore, as a pen of cattle is fed longer and another couple of cattle fall into yield grade 4, the entire pen will also weigh more, and the extra weight supplied by 97 cattle, for instance, will likely bring sufficient extra revenue to more than pay for a YG 4 discount on 3 carcasses. 

In summary, the PCC analysis demonstrates that the most profitable pens of cattle are associated with both high performance and high quality, and this will be more evident with today’s quality grade premiums.  However, they were also associated with poorer yield grade.  Carcass discounts are definitely something that cannot be ignored, but it is important to remember that there can be considerable variability in a pen of cattle.  Striving for no carcass discounts could mean leaving performance and money on the table if the remainder of the pen cannot reach their potential.  Perhaps the best approach would be to reduce the variation in a pen, so that the weight of the pen can be increased and number of high quality grade cattle can be maximized, but discounts due to overweight carcasses and poor yield grade can be avoided.