Beef Cattle Marketing For Ranchers
Marketing beef cattle is a make or break enterprise for many
ranchers and farmers. Management decisions need to be made on an almost daily basis. Proper marketing requires
knowing the latest prices and being able to interpret current trends.
For a profitable operation in the beef cattle industry, the
following are a few of the considerations that must be carefully thought out and planned.
• Deciding if the present prices justify changing cattle production
• How to get the most money for the stock being sold
• How to pay the lowest cost for additional cattle
• How to operate the cattle production in the most cost efficient manner
• Choosing when, where and how to market current stock
• Calculating profit margins
• Weighing both long term and short-term production needs
• Choosing the types of beef cattle to produce
Cattle prices depend largely upon the performance of the beef and
slaughter market. One of the top factors that impacts the prices paid for cattle is the present demand and supply
levels. The retail area is where the negotiations for beef cattle prices constantly fluctuate. There are several
large beef sellers who are consistently involved in this mix. These organizations include giants like IBP, ConAgra,
and Smithfield. They are creating prices based on their own negotiations with big retail outlets like Publix,
WalMart, Meijer’s, and Food Lion.
While the suppliers of fresh beef understand the prices and costs of
supplies, feed and quality meat it is the retailers who understand the price consumers will pay. It appears that
new negotiations can occur at any time but most of these discussions and pricing agreements take place weekly. It
is important that everyone understand that the decisions made by the major packers and distributors and the largest
retailers is the beginning point for the remainder of people involved in the beef industry. The price point that is
established between retailer and packer will then be used to establish prices for all remaining players. This is
known as “the trickle down effect”.
The Packer/ Producer Level
Beef cattle prices at the market level may be set a few weeks ahead of
time. This means that all of the packers should be aware of what prices the different cuts of beef will actually
bring. The “Cut out Value” is the price that will be brought by all of the different beef cuts. A shift in market
price of only a nickel a pound can mean $40 dollars more a head for producers of cattle with 800-pound carcasses.
Producers who are in the loop and keeping up to date on the latest price can be paid the extra money if the market
is not flooded with extra beef products already. Savvy cattlemen who know how much money the packers are being paid
can determine if the market prices will support their own higher price demands. They can negotiate with the packers
of their choice if they are not locked into iron-clad contracts with one particular company.
Meat Packers Pay -2 different Ways
There are 2 different methods used by packers who are purchasing marketed
beef cattle. The first is the live-weight, cash transaction and the second method is called grid pricing.
• Live-weight pricing is when the packer buyers check out a group of cattle brought in as a
single lot. They will estimate the value and quality and then they will present the producer with a price offer
for the whole lot. If a cattleman places a group of cattle in one of the pens and the buyer figures that 90% of
the lot will be Certified as Angus Beef, he will calculate a price for all of the group. Let’s say that the
going price for USDA Choice Cattle is presently $70 per each hundred pounds of weight. This means that Angus
Beef Grade might fetch an additional $3 per hundredweight for $73. An adjustment will have to be made for those
animals that will not make the grade as Angus Beef. The packers may average the price for all of the animals to
$72, which would make a 1000 pound steer worth $720. If there are 10 animals in the group and the total weight
is 10000 pounds the cash price paid to the producer would be $7200. This means that more money will be paid out
for per head to compensate for the increased quality of the higher graded cattle.
• The grid pricing method is becoming more common and this is money paid per carcass pound. All
of the animals are graded and the prices are calculated based on quality, the grading yield, the weight of the
carcasses and whether or not any Angus grades or dark cutters are in the lot group. Because there are so many
individual factors taken into consideration with grid pricing the per head price can vary by as much as