Quality Grade: What is driving the recent upswing?

Similar documents
Traits of Cattle That Hit the Quality Target Gary D. Fike Feedlot Specialist Certified Angus Beef LLC

HOW DO I PROFIT FROM REPRODUCTION? HITTING THE TARGET FOR HIGH-QUALITY PRODUCT. L.R. Corah. Certified Angus Beef LLC Manhattan, KS.

Considering all of the factors that combine

Factors Affecting Lot Low Choice and Above and Lot Premium Choice Acceptance Rate of Beef Calves in the Tri-County Steer Carcass Futurity Program

Amazing times For years. Using the Missouri Recipe for Hitting the Quality Target. Today. Amazing times For years

University of Florida Presentation. By: Jerry Bohn

Is Marbling Important

Positioning for the Future of Beef Production Focus on Quality

FEEDLOT AND CARCASS DATA: MAKING CENTS AND MAKING DECISIONS

The Big Picture: Road ahead for the cattle business

More cattle are being marketed on carcass. Selection for Carcass Merit. Texas Adapted Genetic Strategies for Beef Cattle IX: Genetics of Carcass Merit

Mark McCully Nov. 4, 2014

Performance of SE Cattle When Placed on Feed. Gary D. Fike Beef Cattle Specialist Certified Angus Beef LLC Manhattan, KS

Declining Quality Grades: A Review of Factors Reducing Marbling Deposition in Beef Cattle.

Effects of Backgrounding and Growing Programs on Beef Carcass Quality and Yield

Distillers Grains Feeding and Beef Quality

What Value Looks Like to a Feedyard. By Tom Brink

A Seven Year Summary of Feeding Cull Market Cows

Cow-calf Producer (700,000) Feedlot (2,000) Packer (8)

The Cattle Feeding Industry

Strategies for Optimizing Value of Finished Cattle in Value-Based Marketing Grids

Wagyu 101. Michael Scott Certified Executive Chef Academy of Chefs Corporate Chef for Rosewood Ranches Texas Raised Wagyu Beef

Value-Based Marketing for Feeder Cattle. By Tom Brink, Top Dollar Angus, Inc.

Application of Carcass Ultrasound in Beef Production. T. Dean Pringle Animal and Dairy Science University of Georgia

Commentary: Increasing Productivity, Meat Yield, and Beef Quality through Genetic Selection, Management, and Technology

Effect of rotation crop, cover crop, and bale grazing on steer performance, carcass measurements, and carcass value

Performance and Economic Analysis of Calf-Fed and Yearling Systems for Fall-Born Calves

Less Obvious Market Impacts of the Zilmax Situation

The Value of Preconditioning Programs in Beef Production Systems. D.L. Roeber and W.J. Umberger 1

FACTORS INFLUENCING PROFITABILITY OF FEEDLOT STEERS

Understanding and Using Expected Progeny Differences (EPDs)

A Summary of Feeding Market Cows for the White Fat Cow Market

BEEF FACTS. The goal of the Center for Research and Knowledge Management at the National Cattlemen s Beef. Product Enhancement/Beef Safety

Pillars of Beef Chain Success

EPD Info 1/5. Guide to the American Gelbvieh Association Expected Progeny Differences (EPDs)

Proceedings, State of Beef Conference November 2 and 3, 2016, North Platte, Nebraska OPTIMUM MANAGMEMENT FOR BACKGROUNDING SYSTEMS

Breeding for Carcass Improvement

Value of Modified Wet Distillers Grains in Cattle Diets without Corn

Iowa 4-H Beef Carcass Summary

Canfax Research Services A Division of the Canadian Cattlemen s Association

Key Points. Introduction. Materials and Methods. Sides G, PhD * ; Swingle S, PhD ** January 2008

Proceedings, State of Beef Conference November 7 and 8, 2018, North Platte, Nebraska COW SIZE AND COWHERD EFFICIENCY. Introduction

GREGORY FEEDLOTS, INC. Custom Cattle Feeding

The Angus BRS recordkeeping system provides an easy-to-use format for producers to access a wealth of information about their herds.

Utah State University Ranch to Rail Summary Report

Ultrasound feedlot sorting. Evaluation of feedlot sorting system using ultrasound and computer technology

Tri-County Steer Carcass Futurity Data

Pricing/Formula Grids: Which Fit and Which Don't Fit

2003 Spring Indiana Beef Evaluation and Economics Feeding Program

Opportunities and Challenges for Cow/Calf Producers 1. Rick Rasby Extension Beef Specialist University of Nebraska

Beef & sheep business management

EFFECT OF SIRE BREED ON STEER PERFORMANCE, CARCASS CHARACTERISTICS, BOXED BEEF YIELDS AND MEAT TENDERNESS

Why Do They Discount My Heifers So Much? T.A. Thrift and J. Savell University of Florida

Beef & sheep business management

Indiana Beef Evaluation and Economics Feeding Program

Heterosis and Breed Effects for Beef Traits of Brahman Purebred and Crossbred Steers

BEEF South Dakota State University, Brookings, SD 2. South Dakota State University, Rapid City, SD 3

How Much Progress Can Be Made Selecting For Palatability Traits?

Jesse D. Savell University of Florida

Factors Increasing Quality Grades in U.S. Fed Cattle

Managing Your Cowherd for Retained Ownership

Making Beef Out of Dairy

Animal response or performance is determined. Genetic-Environmental Interaction. Texas Adapted Genetic Strategies for Beef Cattle II:

Silage for beef cattle 2018 CONFERENCE. sponsored by: LALLEMAND ANIMAL NUTRITION

Goal Oriented Use of Genetic Prediction

September Implications of Postweaning Nutrition on Carcass Characteristics and Feed Costs. Calendar. Dan Drake, Livestock Farm Advisor

Key words: Beef feedlot, performance, natural supplement

Indiana Beef Evaluation and Economics Feeding Program

Update on Preconditioning Beef Calves Prior to Sale by Cow Calf Producers. Objectives of a Preconditioning Program. Vac-45 Calves

Canadian Hereford Association

US ranchers face a big challenge in the years

Impact of Selection for Improved Feed Efficiency. Phillip Lancaster UF/IFAS Range Cattle Research and Education Center

CATTLE MAY HAVE A DECENT, BUT VOLATILE YEAR

Do EPDs Work? 6/2/17. Tom Brink, Red Angus Association of America BIF Symposium, Athens, Ga. 1. Field Testing $Beef in Purebred Angus Cattle

Ranch to Rail Summary Report

Breeding Objectives Indicate Value of Genomics for Beef Cattle M. D. MacNeil, Delta G

Cattle Market Situation and Outlook

Finishing Beef Cattle on Grass Supplemented with Self-fed By-Products

Retained Ownership an Attractive Opportunity this Fall

co-products ethanol for cattle Distillers Grains for Beef Cows

Jane Parish Extension Beef Cattle Specialist, Mississippi State University

Controlling the Cost of Beef Production through Improving Feed Efficiency

Feeder Calf Grading Fundamentals

FUNDAMENTALS. Feeder Calf Grading. Jason Duggin and Lawton Stewart, Beef Extension Specialists.

Seasonal Trends in Steer Feeding Profits, Prices, and Performance

Montgomery County Beef Improvement Association Members

TOPICS IN NUTRITIONAL MANAGEMENT OF FEEDLOT CATTLE

Cattle Outlook. January, 2018

Progress Report. S. Şentürklü 1,2, D. G. Landblom 1, and S. I. Paisley 3. Animal Science Department, University of Wyoming, Laramie, WY

Hitting the targets. Manufacturing Beef 11/9/2010. Manufacturing. The process of turning grass into high quality, edible protein

SDSU Sheep Day andusssa Regional Workshop

Understanding EPDs and Accuracies

The Effect of Winter Feed Levels on Steer Production

Indiana Beef Evaluation and Economics Feeding Program

Market Outlook For 2002 And Beyond

Effects of a High-linoleic Sunflower Seed Supplement on Performance and Reproduction of Primiparous Beef Cows and their Calves

56% 64% of farms are owned by the same family for 3 generations

Effect of Angus and Charolais Sires with Early vs Normal Weaned Calves on Feedlot Performance and Carcass Characteristics

Welcome to Igenity Brangus and the Power of Confident Selection

TECHNICAL BULLETIN GENEMAX ADVANTAGE IS DESIGNED FOR COMMERCIAL BEEF HERDS. August Zoetis Genetics 333 Portage Street Kalamazoo, MI

Transcription:

Quality Grade: What is driving the recent upswing? Quality Grade concerns addressed in this paper: What are the regional trends? What about levels of Premium Choice (CAB ) and Prime? How can these shifts occur so rapidly? Why are cattle grading so well? - Distiller s by product influence - Improved feeding conditions - Change in cattle genetics - Increase in heifers on feed - Changes in USDA Choice grading - Changes in compositional end point Other considerations - Increased in-weight of feedlot cattle What does the future hold for Quality Grade? Authors: Larry R. Corah, Vice President, Certified Angus Beef LLC Mark A. McCully, Assistant Vice President, Certified Angus Beef LLC Appreciation is expressed to the following meat scientists for their contribution to the paper: Glen Dolezal, Cargill Meat Solutions Gary Smith, Colorado State University Daryl Tatum, Colorado State University Brad Morgan, Oklahoma State University Duane Wulf, South Dakota State University Davey Griffin, Texas A&M University Dan Hale, Texas A&M University Chance Brooks, Texas Tech University Chris Calkins, University of Nebraska, Lincoln Special appreciation is expressed to Elanco Animal Health for its feedlot performance data gathered in the Benchmark Program. Figure 1 % Choice 60.0% 55.0% 50.0% 45.0% 40.0% 2000 Weekly % USDA Choice 2001 2002 2003 Perspective Since its inception in 1923, the marbling-based USDA quality grading system has become a key economic driver for the beef industry and an even more vital indicator of eating satisfaction for the beef consumer. Speaking at the 2009 Reciprocal Meat Conference, scientists (Johnson, 2009; Hocquette, 2009) illustrated the important contribution marbling makes to the three key components of consumer satisfaction tenderness, flavor and juiciness. When tenderness is acceptable, the ultimate demand driver is beef s unique flavor, and perhaps the most significant contributor to that flavor profile is marbling. 2004 Of concern to the beef industry was the documented fact (BIF, 2006) of a USDA-adjusted 30-year decline of 1 percentage point (ppt) in Prime and 6.2 ppt in Choice for all fed steers and heifers from 1975 to 2005. As described by Corah and McCully (2006), numerous factors contributed to that decline. Cattle feeders selling on quality-based grids had been equally affected by the 25% to 30% decline in cattle qualifying for Premium Choice. As an example, Certified Angus Beef (CAB ) brand acceptance declined from a peak of 20% in 1999 to months of acceptance rates under 14% by 2005. The bottom for the Choice grade share, as reported by Cattle-Fax (Sept. 1 2005 2006 2007 2008 2009 Source: USDA data

Table 1 USDA 6-Month Average Weekly % Choice 2006 1st Half 2007 1st Half 2008 1st Half 2009 1st Half Change (ppt) 07-08 Change (ppt) 08-09 Change (ppt) 07 to 09 Nebraska 58.7% 57.8% 61.4% 68.0% +3.6 +6.6 +10.2 Kansas 43.1% 44.8% 54.4% 58.4% +9.6 +4.0 +13.6 Texas 43.1% 43.6% 46.9% 47.4% +3.3 +0.5 +3.9 All U.S. 51.7% 52.7% 56.6% 60.1% +3.9 +3.5 +7.5 2005) under the heading of Where have all the Choice cattle gone, had reached 50% by 2005. Not surprisingly, the Choice-Select spread averaged an unprecedented level of $15.35 per hundredweight (cwt.) by 2006. In the six months ending July 1, 2006, 51.7% of cattle graded USDA Choice. This had increased by a point to 52.7% by July 1, 2007, foreshadowing greater movement. After years of stasis or decline, a remarkable change in quality grade started to occur in late summer and fall of 2007 (Figure 1). By July 1, 2009, 60.1% of the federally graded cattle for the year to date had been given the USDA Choice stamp. It was a 7.5-ppt shift in grade in only two years (Table 1). Why? Regionality of the Shift To understand this transition, it is important to study the trends by region. Although nearly all packing plants in North America are showing some increase in quality grade, the most dramatic shift has been for cattle harvested in plants located in Kansas and Nebraska. In the short span of two years, the percentage of Choice grading cattle increased by 13.6 points in Kansas plants and 10.2 in Nebraska plants. In contrast, there was only a 3.9-ppt increase in Texas plants. The most significant shift started with cattle harvested in Kansas in the first six months of Source: USDA data 2008 (Figure 2), where in the first half of the year, the Choice share of the mix increased by 9.6 ppt over the same time period of 2007. For the entire year of 2008, the average weekly Choice grade in Kansas had increased 8.4 ppt over 2007 (Table 2). Speculation as to why such a large change occurred ranges from an adjustment in the USDA Choice grading line coupled with the presence of instrument-grading devices (under test), to a simple improvement in cattle quality. A documented cause remains unknown at this time. The second major shift in the USDA Choice grade share occurred the first half of 2009 when the industry improved another 3.5 ppt and posted a 63.2% Choice grade one week in late February. This level had not been reached in at least 15 years. Nebraska showed the largest increase of 6.6 ppt, and Kansas was up 4.0 ppt, but Texas was essentially unchanged. Figure 2 % Choice Table 2 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 2006 Weekly % Choice by State 2007 USDA Annual Average Weekly % Choice by State 2006 2007 2008 Change (ppt) 07-08 Nebraska 59.9% 57.9% 61.8% 3.9 Kansas 43.1% 46.0% 54.4% 8.4 Texas 42.0% 43.3% 45.3% 2.0 All U.S. 51.7% 52.8% 56.2% 3.4 2008 2009 NE KS TX 2

What about the levels of Premium Choice (CAB ) and Prime? As striking as the 15% to 16% actual increase in supply of Choice cattle has been, the accompanying increase in Premium Choice and Prime has been even more significant. In 2006 to 2007, the share of Prime cattle in the fed mix averaged 2.2%, which has increased to 2.9% in 2009, representing a nearly 30% change. The acceptance rate for the Certified Angus Beef program reached a low point in 2006 of 14%, but will average more than 19.5% in fiscal 2009, representing a nearly 40% increase in three years (Figure 3). It should be noted that about 1.5 to 1.8 points of that increase occurred due to the change in the brand s yield grade specifications that went into effect January 23, 2007. The overall quality grade trend over the past two years is even more remarkable when one considers that economic conditions in the cattle feeding industry have stimulated more aggressive use of implant technologies. Equally, the clearance of a beta-i agonist in 2003 and a beta-ii agonist in 2007 has resulted in 40% to 45% of the feedlots using these new repartitioning agents (Tatum, 2009). While the data suggest beta-i agonists have little to no impact on marbling, the more aggressive beta-ii agonists can reduce marbling by 10 to 40 units (Tatum, 2009). Figure 3 % CAB Certified Angus Beef Acceptance Rate 25.0% 17.6% 19.5% 20.0% 15.8% 13.9% 15.0% 10.0% 5.0% 0.0% 2006 2007 2008 2009 How can these shifts occur so rapidly? The main reason for rapid shifts in quality grade is the percentage of cattle whose marbling level resides very close to each of the USDA grading lines. For example, the seemingly tiny change of 20 units of marbling, such as Slight-80 to Small-0 (380 to 400), results in a change of 5.71% more cattle grading Choice (Figure 4). A similar or even greater impact may be seen in cattle qualifying for the CAB brand, as a 20-unit change (Small-80 to Modest-0, or 480 to 500) in marbling results in a 7.35% shift (Figure 5). Year Figure 4 Percentage of Carcasses Falling Near the Choice-Select Grade Breakpoint Select 380 390 400 410 Low Choice 4.37% 1.34% 2.86% 3.18% 5.71% 6.04% Figure 5 Percentage of Carcasses Falling Near the Choice-CAB Breakpoint Low Choice Average & Upper Choice (most YG 1-3 are CAB eligible) 480 490 500 510 5.72% 1.63% 1.89% 2.49% 7.35% 4.38% Source: 2004-05 Certified Angus Beef LLC Packing Consist Study Source: 2004-05 Certified Angus Beef LLC Packing Consist Study Why are cattle grading so well? Key Drivers Although the growth in percentage of cattle grading Choice is a national phenomenon, the most dramatic change has occurred in cattle harvested in Kansas and Nebraska. As previously discussed, the first surge occurred in Kansas in the winter of 2008, with the largest recent change occurring in Nebraska. So why has this transition been so large in the Central Plains states? 3

The distiller s by-product impact In the 2006 quality grade decline paper (Corah and McCully, 2006), Reinhardt conducted a meta analysis of 13 studies, using yield grade as a covariate, and suggested distiller s levels above 30% could reduce quality grades. This and other early inquiries stimulated a plethora of research projects which, in general, support Reinhardt s initial summary suggesting a negative quality grade impact when distiller s by-products exceeded 30% to 40% of the ration s dry matter content. But this same research may also explain why distiller s by-products could have a positive impact on quality grades. A feedlot survey (Vasconcelos and Galyean, 2007) reported that 82.5% of all feedlots were feeding byproducts with an average inclusion rate of 16.5% of the dry matter intake (DMI). A greater availability of by-products likely has increased both of these percentages by 2009. So how are the distiller s by-products exerting a positive influence? Utilizing a meta-analysis of the numer ous distiller s by-product studies, Calkins reported at the 2009 Joint ASAS ADSA CSAS meeting that feeding 20% to 30% (dry matter basis) of distiller s by-product, resulted in a 14- to 15-point increase in marbling score (Table 3). This same research shows a varying effect of distiller s by-products on feed intake during the full feeding period, but recent Nebraska research has shown these products will have a big influence on the feed intake in starter feedlot rations (Table 4). This study shows a nearly 30% increase in DMI, partially associated with an increase in how often the cattle eat. Scientists speculated that more frequent eating likely reduces potential levels of acidosis, a theory that is supported by the observed rumen ph values. Recent communication with feedlot consultants supports this concept as well, with nearly all suggesting that the use of byproducts in starter diets has increased intake and reduced health problems in newly received cattle. Bottom Line These data would strongly suggest a key portion of the increase in cattle grading Choice and higher can be directly attributed to expanded availability and usage of distiller s by-products, especially in central states like Nebraska and Iowa. Using the packing consist data (Figure 4), the 14- to 15-point increase in marbling scores reported by Calkins means this ration change alone could result in a 5- to 5.2-ppt increase in the share of Choice grading cattle. Table 3 Table 4 Effect of Dietary Inclusion of Distiller s By-products % Distiller s By-product (DM) 0 518 10 528 20 533 30 532 Marbling Score Source: Calkins, 2009 Effect of Adding Distiller s Grains to Starter Rations Control Corn Wet/distillers DMI lb./day 16.14 21.78 Meals/day 4.96 6.25 Source: 2009 Nebraska Beef Cattle Research Report 4

In general, feeding conditions for cattle the past two years have been very good Trying to differentiate the impact of feeding conditions from other factors is impossible, but likely a factor in the net change. Here are a few indicators of feedlot performance. a. Dry matter intake (DMI) Utilizing excellent feedlot data shared from the Elanco Animal Health Benchmark Program, we can see that DMI of feedlot cattle has shown a steady increase the past two years (Figure 6). The percentage of Choice grading cattle is influenced by DMI (Figure 7). Figure 6 Daily FeedIntake, lbsdmb 23 23 22 22 21 21 20 20 19 19 18 Average Daily Feed Intake Nebraska, Kansas & Texas, 700-799 lb initial weights 2006 2007 2008 2009 January 2006 through December 2008 Linear () Linear () The relationship between DMI and marbling is not surprising, considering that added starch intake should result in more marbling. As reported by Enns (2009), there is a positive genetic correlation between marbling and DMI. b. Feedlot ADG The correlation between feedlot ADG and marbling is not large (correlation = +0.1), but it is slightly positive (Figure 8). Again, as reflected by the Elanco Animal Health Benchmark Program data, the past two years there has been a slight increase in ADG of feedlot cattle, especially related to heifers, likely related to feeding conditions, genetics and implant programs. c. Feedlot health Previous research (Busby, 2004) illustrated that those feedlot cattle which do not require treatment will have 16.5 ppt more Choice and higher (74.2% vs. 57.5%) when compared to cattle treated two or more times while on feed. This is confirmed by the Elanco Animal Health Benchmark Program data relating percent Choice to feedlot mortality rates (Figure 9). Although slight (Figure 10), the mortality rate the last two years is down (2009 Bench mark data). Figure 7 Choice, pct 70 65 60 55 50 45 40 35 30 Figure 8 Choice, pct Percent Choice vs Daily DM Feed Intake 60 55 50 45 40 35 30 Nebraska, Kansas & Texas, 700-799 lb initial weights 18 19 20 21 22 23 24 Daily Feed Intake, lbs dmb Nebraska, Kansas & Texas, all initial weights 2.00 2.25 2.50 2.75 3.00 3.25 3.50 3.75 4.00 Lbs/hd/d Percent Choice vs Average Daily Gain 5

Bottom Line While there are no definitive correlations, the trends within DMI, ADG and feedlot health would all suggest improved feeding conditions have had a positive influence on quality grade. Change in cattle genetics likely an important factor The impact of change in the genetic make-up of cattle is somewhat hard to measure, but three changes have occurred that must be considered. a. A rapid increase in the marbling EPD (expected progeny difference) values for Angus bulls Figure 9 60 55 Choice, pct 50 45 40 35 30 Percent Choice vs Mortality y Nebraska, Kansas & Texas, 700-799 lb initial weights 0 1 2 3 4 5 6 7 8 Feeding Period Mortality, pct of beginning inventory b. The past 10 years have seen a steady increase in the percentage of Angus bulls being used Utilizing bull turnout survey data, a 1995 national survey by the ABG Inc. research firm showed that 39% of bulls utilized were Angus, while a 2008 national Drovers survey showed that 55% of the bulls used were Angus, and that 70% of producers used at least some Angus bulls. Not only has the use of Angus sires increased, but the ratio of commercial cows being designated as Primarily Angus is nearing 70%. The Iowa Tri-County Steer Carcass Futurity (TCSCF) data allow analysis of the percentage of Angus in the fed cattle mix. Even though the cattle were black-hided, only 52.7% of the calves with less than 25% Angus genetics graded Choice while those calves featuring 75% or more Angus genetics recorded a Choice and Prime ratio of 86.2%. The figures are even more dramatic for CAB acceptance rates (Figure 12). c. The percentage of cattle with black hides has increased greatly Starting in 2000, USDA has reported the percentage of cattle in the harvest mix that are black hided. The 48% share of blackhided cattle in 2000 increased to 60% in 2009. More important to the recent quality grade trend, those USDA numbers indicate Figure 10 pct of beginning inventory 2.1 1.9 1.7 1.5 1.3 1.1 0.9 0.7 0.5 Figure 11 Marbling EPD Nebraska, Kansas & Texas, 700-799 lb initial weights 2006 2007 2008 2009 0.3 0.25 0.2 0.15 0.1 0.05 Average Feeding Mortality January 2006 through December 2008 +0.17 +0.19 Linear () Linear () Marbling EPD Change in Angus Sires +0.26 0 1999 2004 2009 Source: 2009 American Angus Association AHIR Sire Summary 6

that from 2000 to 2007, the annual increase in percentage black-hided cattle averaged 1 ppt per year, but in the past two years that increase has been 2.5 ppt per year (Figure 13). Industry observations would also suggest that this change has been more pro nounced in the Central Plains than in the South. Utilizing the TCSCF data on 28,350 calves, there is an 18-point difference in the percentage of Choice or higher grade from black-hided vs. non-black cattle (Table 5). Bottom Line Quantifying the genetic impact is difficult, but it is definitely a factor in the trend toward higher quality grades. Using the past two years percent age black at nearly 2.5 times the previous seven years annual change and extrapolating from the TCSCF data, at least a half a percentage point of the Choice increase is due to the increase in black hides alone. The 10-ppt increase in Angus bull usage likely is having another.5- to 1-ppt impact on the Choice grade ratio. An increase in the percentage of heifers on feed traditionally out-grade steers by 9 to 10 ppt Choice or higher (Figure 14). With the cowherd liquidation occurring in the beef industry, heifers have constituted a higher proportion of the fed cattle mix, 37.4% vs. the traditional 34% to 35%. Calculating the impact this had on the overall increase in percentage Choice is an estimate, but likely in the.3- to.5- ppt range. Bottom Line The increase in heifers in the feeding mix has had a positive, possibly as much as half a percentage-point, impact on the Choice proportion of the mix. Figure 12 Impact of Angus Genetics on Percent Choice and CAB Acceptance Rates % CAB Acceptance Rate and % Choice 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 9.7% 52.7% 34.3% 86.2% Under 25% Over 75% % CAB Acceptance Rate % Choice Source: Busby, 2004, Iowa Tri-County Steer Carcass Futurity data Figure 13 75% 65% 55% 45% 35% 25% Table 5 60.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009* *YTD Through May Factor Trends in % Black From 2000 to 2007, a-1 ppt /year increase in % black From 2007 to 2009, a 2.5-3 -ppt/year increase in % black Quality Grade by Hide Color Non-black Black Prime.046 1.31 Premium Choice 7.73 19.70 Choice 48.08 53.15 Select 38.82 24.08 Standard 4.91 1.76 The total of 28,350 calves used in these analyses included 7,450 non-black calves and 20,900 black calves from 2002 to 2007. Source: Busby, 2007, Iowa Tri-County Steer Carcass Futurity 7

A possible change in the USDA Choice grading line Many cattle feeders and industry professionals suggest much of the change in percentage Choice relates to a USDA grading change in the marbling levels needed for the Choice grade. Cameragrading data collected by packers would strongly refute that being a factor in the 2008-2009 quality grade increase trend. Hard to explain, how ever, was the dramatic increase (9.6 ppt) in Choice grading cattle that occurred in Kansas-harvested cattle in the first half of 2008, which was triple the increase occurring in any other region. It is difficult to determine whether that phenomenon was in any way related to the USDA grading system. Figure 14 Percent 65 60 55 50 45 40 35 30 Average Percent Choice Nebraska, Kansas & Texas, 700-799 lb initial weights 2006 2007 2008 2009 Linear () Linear () Bottom Line Although many equate the increase in quality grade to a change in the USDA grade line, definitive supporting data does not exist. As instrument grading is implemented, we will have greater knowledge of potential effects, if any. Changes in the compositional end point of the fed cattle mix a. Previous research has shown that the compositional end point (backfat) is a key influencer of quality grade As the fed cattle compositional end point moves from.4 inches of fat cover to.6 inches fat cover, there is a corresponding increase in the population share of Prime and Choice grades amounting to 13.5 ppt (Figure 15). Historically, the average fat thickness at harvest has been.50 to.55 inches. When fat thickness shifts from.5 inches to.7 inches, the incidence of YG 4 and 5 carcasses increases from 2% to 18.8%, with a corresponding increase of 6.2 ppt in Prime and Choice grading cattle. But a population analysis does not necessarily establish cause and effect. Figure 15 Impact of 12th Rib Fat Thickness on Quality Grade Fat Thickness (in.).1.2.3.4.5.6.7.8.9 Marbling Score 368 392 409 430 450 460 470 478 477 Choice and Prime, % 28.3 42.4 50.4 60.1 69.2 73.6 75.4 79.8 79.6 CAB Acceptance Rate, % 2.2 4.5 9.0 13.2 17.7 22.0 21.4 17.4 12.7 Yield Grade, % 4 and5 s 0.7 0.2 0.3 0.7 2.0 5.6 18.8 35.2 56.1 23.7% 52.7% 23.6% % Choice 44.5 66.8 78.3 % Premium Choice and Prime 10.1 21.7 27.1 Source: 2005 Certified Angus Beef LLC Packing Consist Study 8

b. Compositional changes have occurred, but the quality grade impact is unclear With the trend toward higher quality grades, a logical question to ask is, Are the cattle being marketed with more fat cover, especially in 2009? Most packers are reporting the answer is yes. In theory, YG 4 and 5 data should provide that information. Yet, in the time period of the drastic quality grade increase (2006 to 2008), the percent of cattle grading YG 4 and 5 actually decreased in Nebraska and Texas (Tables 6 and 7). Analyzing data collected in the CAB Feedlot Licensing Program, similar trends appear (Figure 16). Figure 16 % YG 4 and 5 Percent YG 4 & 5 Trends in CAB Feedlot Database for Conventional Raised and 30.0 20.0 10.0 0.0 2006 2007 2008 2009 Source: 2005 Certified Angus Beef LLC Packing Consist Study KS NE TX However, from 2008 to 2009, the largest quality grade increase (7.3 ppt) occurred in Nebraska, providing an opportunity to test the theoretical link to higher YG. Using Nebraska-harvested cattle as an example (Table 6), we have seen an increase in percentage YG 4 and 5 in cattle (3.5 ppt). Texas-harvested cattle provide another test: since the percentage of Choice grading cattle in Texas was lower, there should be less change in % YG 4s and 5s. That is the case (Table 7), as there was only a 0.7-ppt increase in YG 4 and 5 cattle. Table 6 Yield Grade 4 & 5 Levels in Nebraska-harvested Cattle National Avg. Nebraska National Avg. (minus NE) HCW %4-5 HCW %4-5 HCW %4-5 FY-06 806 15.4 795 9.6 794 9.2 FY-07 801 12.6 791 8.8 790 8.5 FY-08 806 11.9 809 8.4 810 8.1 FYTD-09 812 15.4 811 9.4 811 8.9 Table 7 Yield Grade 4 & 5 Levels in Texas-harvested Cattle National Avg. Texas National Avg. (minus TX) HCW %4-5 HCW %4-5 HCW FY-06 794 7.4 795 9.6 795 11.3 FY-07 794 7.3 791 8.8 788 10.2 FY-08 810 6.8 8.09 8.4 809 9.9 FYTD-09 508 7.5 811 9.4 815 10.9 9

Bottom Line Cattle entering the packing plants are heavier. Heavier placement weights, ideal feeding conditions, market conditions and feedlot economics have contributed to the increase in weight. One theory would be that these heavier cattle have reached a higher percentage of their mature weight potential and therefore have deposited more marbling. Others would suggest that the fed cattle population is comprised of more Angus and British cattle and those cattle are simply fatter. While logical, USDA yield grade data does not support this theory. Cattle are certainly heavier, but the compositional changes and the resulting effect on quality grade are unclear. Factor likely not important The increased in-weight of feedlot cattle has been neutral on quality grade As corn price escalated, numerous theories persisted about shorter days on feed and heavier placement weights likely having a negative impact on quality grade. In contrast, placement weights did increase (Figure 17), but days on feed stayed constant, resulting in little or no effect on quality grade (Figure 18). Figure 17 850.0 800.0 750.0 700.0 650.0 Average Initial Weight Nebraska, Kansas & Texas 600.0 2006 2007 2008 2009 Closed Dates, January 2006 through December 2008 Figure 18 60 Percent Choice by Quarter Closed and Initial Weight and 2006-2008 (10.1 million head) 55 50 45 40 35 500 550 600 650 700 750 800 850 500 550 600 650 700 750 800 850 500 550 600 650 700 750 800 850 500 550 600 650 700 750 800 850 Pounds Linear () Linear () Choice (%) Q1 Q2 Q3 Q4 Quarter Closed and Initial Weight (lb.) 10

So what does the future hold for quality grade? This question was posed to eight meat scientists who contributed ideas to the paper, and their responses included the following: The current levels of Choice and Prime will likely decline The factors driving grade today will likely keep the percentage above 2006 levels The Positives There are a number of reasons cattle will continue to grade well. Genetics All indications are that Angus will continue as the favored breed, and bull turn out data would suggest 70% black-hided cattle is a likely share by 2015. Knowledge of early marbling differentiation is just beginning to open new windows. Recent research by meat scientists is starting to create an understanding of how early marbling deposition occurs and how we can change that process. Companies are even talking about developing products that will enhance marbling deposition. The extensive use of distiller s grains will likely continue and, when fed at moderate levels (under 40%), they appear supportive to quality grade. At least short term, corn prices will likely favor a continuation of current feeding programs. Long term is anybody s guess. The Negatives Corn prices long term may pose a challenge. Percentage heifers in the mix will decline. Positive feeding conditions may not persist. Flat economic premiums for quality cattle do not encourage a focus on marbling. Continued aggressive use of growth technologies may sidetrack genetic potential. The Unknown Instrument grading may have an impact on percentages of quality grades in the consist. Best Guess Grading levels likely will hold for 2009 and into 2010. If quality grades do not decline after that, it could mean that the infusion of higher-marbling genetics has had a lasting effect. Coupled with the smaller cattle number, consumer demand in a recovering economy will likely drive the Choice-Select spread to higher levels. 206 Riffel Rd., Wooster OH 44691 www.certifiedangusbeef.com 330-345-2333 11

Works Cited American Angus Association. 2009. Sire Evaluation Report. Beef Improvement Federation (Smith et. al.) 2006 Proceedings. Busby, W.D., D. Strohbehn, P. Beedle and L.R. Corah. 2004. Effect of postweaning calf health on feedlot gain and quality grade. J. Anim. Sci. (Suppl. 2): 83. (Abstr.) Calkins, C.R., A.S. demello, Jr. and L.S. Senaratne. 2009. Effect of distillers grains on beef carcass quality and palatability. J. Anim. Sci. (Suppl. 2): 87. (Abstr.) Cattle-Fax weekly report. Sept. 2005. Where have all the Choice cattle gone? Certified Angus Beef LLC Packing Industry Consist Report. 2004-05. Corah, L.R. and M.A. McCully. 2006. Declining quality grades: A review of factors reducing marbling deposition in cattle. Certified Angus Beef LLC white paper. Drovers-Certified Angus Beef LLC survey details Angus influence. Drovers Journal. Nov 13, 2008. Hocquette, Jean-Francois. 2009. Markers for intramuscular fat. Reciprocal Meat Conference proceedings. Huls, T.J., N.R. Meyer, G.E. Erickson, T.J. Klopfenstein and R.A. Stock. 2009. The effects on ruminal ph, feed intake and digestibility when using wet corn gluten feed to adapt cattle to finishing diets. U. of Nebr. Beef Research Report MP92. Pages 56-58. Johnson, B.J. 2009. Bovine satellite cells as precursors of intramuscular adipocytes. Reciprocal Meat Conference proceedings. Tatum, J.D. 2009. Growth technologies: Performance benefits and quality considerations. J. Anim. Sci. (Suppl. 2): 87. (Abstr.) USDA beef grading reports. AMS Section 2009. Vasconcelos, J.T. and M.L. Galyean. 2007. Nutritional recommendations of feedlot consulting nutritionists: The 2007 Texas Tech University survey. J. Anim. Sci. 85: 2772-2781. Weaber, R.L. and R.M. Enns. 2009. Managing genetic antagonisms between economically important beef production traits and marbling. J. Anim. Sci. (Suppl. 2): 87. (Abstr.) 12