Kansas

Pricing fed cattle on a value-based quality Recently, several value-based, fed cattle, and yield grade grid provides the best opporpricing systems have become more promitunity for cattle producers to recieve preminent, including formula pricing, price grids, ums associated with high quality cattle. and alliances. Is there one “best” pricing However, grid discounts for cattle not desired method? How are live weight, dressed by the particular packer are often quite subweight, and grid or formula prices related? stantial. Thus, cattle producers targeting The purpose of this report is to assist produccattle for specific grids need to have considers in evaluating which form of fed cattle erable knowledge regarding the quality attribpricing may be most profitable for them. utes of their cattle. This study compared pricing of 202 pens of fed cattle on a live Should you market your cattle on a carbasis, a carcass (dressed) basis, and using cass merit basis? If so, does it matter which four different packer grids. Results indicate pricing system or packer you sell to? The that no single pricing method is optimal for answer to both questions is, “it depends.” It all cattle. Producers need to know the quality depends on several things, but the most of cattle they have, be willing and able to sort critical factors that influence the profitability those cattle, and compare the various selling of these decisions include: 1) the quality options and grids before deciding upon the grade, yield grade, and dressing percent of pricing method that generates the highest the cattle you produce; 2) the price spread revenue. between Choice and Select; 3) the particular


Introduction
Value-based marketing refers to pricing cattle on an individual animal basis with prices differing according to the underlying value of beef and by-products produced from each animal.Achieving value-based marketing of fed cattle has been difficult.Incentives to sell cattle on averages and problems asso-ciated with identifying beef quality have inhibited development of value-based pricing.
packer or alliance premium/discount price grid for which you target your cattle; 4) production and feeding cost differences associated with targeting your cattle to a particular price grid or packer; and 5) most importantly, your knowledge about the price/quality distribution of your cattle.The average revenues per head under the Choice live steers; $67.00/cwt for 35-65% alternative selling methods are reported in Choice live steers; $109.28 for 80-100% Table 2. Given the prices and spreads used Choice dressed steers; $108.12/cwt for 35-in this simulation, live pricing had the lowest 80% Choice dressed steers.

Experimental Procedures
overall mean revenue per head, and dressed pricing had the highest average price.Steers in the 202 pens were predominantly English and English-Exotic cross The implied dressing percentage between breeds.The cattle had varied quality, with the live price ($68.65/cwt) and the dressed pens ranging from largely Choice and higher price ($109.28/cwt) is 62.8% ((68.65/ to largely Select and lower.Hot yield dress-109.28)×100).This suggests that cattle with ing percentage averaged from as high as a dressing percentage greater than 62.8% will 65.6% to as low as 61.2% with an overall net a higher revenue per head when sold on a average of 63.8%.Under assumptions that dressed basis than live basis.Depending the four packers used a $109.28/cwtChoice upon the distribution of the remaining quality yield grade 3 base price and the Choice to traits, and the particular packer grid, selling Select price spread was $6.25/cwt, the aver-on a grid can result in higher or lower reveage revenue per head was calculated for live nue than either live or dressed pricing.Albasis, dressed basis, and each of the four though the average revenues across all 202 grids.
pens were a little lower with the grids than

Results and Discussion
Most packer grids are based price on a Overall, 2.5% of the pens would have had Choice, yield grade 3, 550-950 lb, steer the highest price by being sold on a live basis, carcass.An example of a typical price grid whereas 58.9% would have secured the offered by beef packers is presented in Table highest price when sold on a dressed basis 1.The price received for each carcass is the (Table 2).The remaining 38.6% would have base price plus the particular premiums and received the highest price if sold using a grid.discounts.For example, assume a Choice This is an important result because it indiyield grade 3, 550-950 lb carcass would cates that there is no single best pricing receive the base price of $105/cwt.A Select yield grade 4 carcass would receive a price of with dressed selling, some pens received higher prices when sold using a grid.
method.Which method results in the highest considerably better than live pricing but price depends upon the type of cattle.In similar to dressed pricing.addition, only two of the individual packer Pens that received the highest price on a grids (among four) had any pens in which that live basis were those with the lowest average bid resulted in the highest price.Of course, dressing percentage.Quality traits were less this result would change as premiums and important in distinguishing between live and discounts for specific traits change or base dressed or grid net revenues.In fact, pens prices differ.For pens in which live price receiving the highest price on a live basis resulted in the highest revenue, this was the were on average 69% Choice or higher qualbest pricing method on average by $8/head or ity grade compared to 57% for cattle in more compared to the others.However, for which dressed pricing resulted in the highest pens in which dressed pricing resulted in the price.Cattle that received the highest price highest price, on average, it was best by under packer grids tended to have a lot of $15/head or more.For pens in which grid yield grade 3 or better and Choice and CAB pricing was best, this method was (Certified Angus Beef) type cattle.

Table 1 . Example Premium and Discount Schedule for Grid Pricing a
Premiums and discounts are all adjustments to the Choice, Yield Grade 3 base price.a