Interesting Article: Packing industry trends.
Monday, March 1st, 2010 From the GM by j.cummerThis article, which was forwarded to me by Garner Deobald emphasizes the packer shift to traits consistent with the use of Charolais bulls as a terminal sire. Obviously other factors are at play with this shift, however it further illustrates the financial benefits that are added by the utilization of crossbreeding in the commercial sector.
The Choice/Select Collapse
Anyone selling on a grid certainly has noticed that the Choice/Select spread isn’t what it used to be. In fact, at the time I was writing this, the Choice/Select spread was standing at 50¢/cwt.
Certainly, there’s a whole host of reasons for the Choice/Select spread narrowing. The easy reason is that cattle are grading better. There are several factors contributing to this – better genetics, an increase in yearling cattle, the implementation of instrument grading, the shifting of breed makeup in the Southeast, and maybe even learning how to feed and utilize the distiller byproducts that were initially thought to reduce quality grade.
The issue isn’t so much the confluence of these factors to form the perfect storm, but rather whether it represents an anomaly or a long-term trend. I think it’s the latter.
Here are a few points: The genetic component is unlikely to go away. Selection pressure for improved carcass merit is now well ingrained in virtually all major breeds. We’ve already seen that normal seasonal weather patterns are back. In the post-ethanol-subsidized world, we’re going to have a smaller beef industry, and that means plenty of demand, more yearling placements and longer feeding periods as feeders struggle to utilize capacity.
Instrument grading is likely to continue and will forever change the moving line that kept grading percentages relatively constant. While the economy is showing signs of improvement, runaway spending and government interference in the marketplace virtually guarantees that growth won’t be as robust as it has been in the past.
Considering these factors, it looks like the economic incentive has and will continue to move away from quality grade, with more emphasis being placed on averaged daily gain, dressing percentage, and feed conversion/efficiency. Compositional endpoints will remain critical to profitability, but the emphasis will continue to shift away from quality grade and more to compositional endpoints, efficiency and weight.
– Troy Marshall
