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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.
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