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Doug Steele, Vice Provost & Director
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> Department > Home > Beef > Beef/Cattle > BQA
Beef/Cattle Extension Program

How valuable is the Montana Beef Network? What the data tell us

by Gary W. Brester, MSU Department of Agricultural Economics and Economics

"Such a system would be very useful to those ranchers with relatively small herd sizes, as it would make it easier to gather full truckloads of similar-quality calves."

Q: You have been conducting research related to the Montana Beef Network and the Beef Quality Assurance program. What is the purpose of your research?

The purpose of our research is to try and identify if additional value is received for feeder calves by those who are enrolled in the Montana Beef Network and the Beef Quality Assurance program. Ranchers want to know if the benefits of these programs are greater than the costs.

Q: How can the results of your research be used by ranchers?

The results should help ranchers decide whether they should be involved in such programs. In addition, quantitative information regarding the end-use quality and/or feedlot performance of their calves is crucial for negotiating feeder cattle prices and making decisions regarding retained ownership opportunities. Finally, that information is also vital to cattle buyers, auctions, and feedlot operators because it can help reduce risk and uncertainty.

Q: Can you describe the general research approach you are using to quantify value of these programs?

The general approach is actually multi-faceted as it involves a statistical evaluation of several sources of data. For example, we just completed a statistical analysis of a survey conducted by Sweetgrass County Extension Agent Marc King. Marc conducted a mail survey in the fall of 2000 of 400 BQA members and 400 non-BQA members. He received responses from 147 members and 69 nonmembers. Econometric regression techniques have been used to analyze the data.

Q: What were you able to conclude from the survey?

We found that BQA members averaged $98.04/cwt for steer calves in the fall of 2000, and non-members averaged $96.42/cwt with the differences being statistically significant. BQA members averaged $93.28/cwt for heifer calves while non-members averaged $91.82/cwt with the differences again being statistically significant. We did not find any statistical differences between BQA members and non-members in terms of calf sale weights, sale methods or number of calves marketed. BQA members used modified live vaccines relative to killed vaccines much more frequently than non-members.

Q: Can you determine if the BQA program was responsible for these differences?

After accounting for calf sale weights and the number of years out of the last five that ranchers had marketed cattle to the same buyer, it appears that the BQA program added $1.56/cwt to steer calf prices and $1.09/cwt to heifer calf prices.

Q: You mentioned that your research was evaluating other sources of data. Can you elaborate?

We have also been evaluating data provided by the Montana Beef Network. Data for over 13,000 animals during the 1999-2001 period are currently available to us. Of these, approximately 4,700 animals had associated carcass data indicating yield and quality grades. The data indicated that 62% of the animals graded Choice; 36% graded Select; 1% graded Prime; and 1% graded Standard. In addition, 85% of the yield grades were between 2 and 3.99.

Q: Specifically, what value-based aspects of these animals have you considered?

Perhaps the most interesting value-based result is generated by simulating the value of each animal if it were sold under alternative marketing conditions. For example, if all animals had been sold on a grid based upon the USDA average grid that existed at the time each animal was slaughtered, gross revenue would have averaged $858.29/head. If each animal were sold on a live basis, gross revenue would have averaged $898.12/head. If animals could have been perfectly sorted so that discounts were not incurred, gross revenue would have averaged $900.83/head (only slightly more than the liveweight value). Although the average USDA grid is not something that most producers would use to market cattle, the exercise underscores the importance of knowing the historical performance of animals (both feedlot gains and end-use quality) and selecting grids which reward that performance.

Q: Could producers have increased revenues if they had used grids which were more suitable to their individual animal characteristics?

Yes. We are currently researching how to help producers choose grids that best match their animals' characteristics. In addition, we have data regarding end-use quality and feedlot performances of pens of cattle that have been pre-sorted for a premium market.

Q: Ultimately, what do you hope your research can tell us about value-based marketing?

First, if one is going to market cattle based upon value, then it is critical to know the true value of those cattle. Second, understanding the historical feedlot performance of calves should prove valuable to those purchasing cattle and for making retained ownership decisions. Third, although BQA members appear to receive some premium for their calves, this part of the research project should help identify if that premium is consistent with actual animal performance.

Q: Do you think that your research may prove to be useful to ranchers with smaller cow herds?

Conceptually, one can envision a performance-based marketing system for feeder cattle similar to that used to market bulls. Such a system would be very useful to those ranchers with relatively small herd sizes, as it would make it easier to gather full truckloads of similar-quality calves. It could also help negotiate more favorable prices and allow such producers to manage their operations to target premium markets.

Ultimately, such systems would reduce transaction costs and uncertainty, increase the price competitiveness of beef, and improve the beef industry's ability to meet consumer demand.

 

View Text-only Version Text-only Updated: 08/14/2009
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