  BeefTalk:
Grid Marketing Demands Knowledge of Markets and Your Cattle
By Kris Ringwall, Extension Beef Specialist,
NDSU Extension Service
The time to implement marketing decisions is upon us in the beef cattle
business. For some, the decision was made when calves were contracted for a set
delivery time. For others, the local auction vigil has started and anxiety grows
as the expected sale date approaches. Still others will monitor the futures
market, visiting with an area broker as often as the local auction.
I have often wondered what would be left of some of the agricultural
periodical publications if weekly markets weren't reported. At the North Dakota
State University Dickinson Research Extension Center, we realize those weekly
market reports help steer (no pun intended) the ship. Number crunching can
overload the mind.
I recall sitting at sessions with the local farm management specialist who
noted the need to chart your selected information source to help make sense of
all the numbers and trends. Ingrained within these discussions is the concept of
grid marketing, or retaining ownership of your cattle and trying to meet a
specific set of specifications with your cattle. The ultimate ideal is to meet
the specs that reward you with the most dollars.
This rhetoric is good, yet two concerns immediately pop into the picture.
First, how well do producers really understand the current marketing system?
Grid marketing functions on the premise of understanding marketing beyond the
sound of the auctioneer’s gavel. Marketing is complicated enough already, is
grid marketing too complex for many producers?
Occasionally, I witness presentations at producer meetings about how to sell
cattle on the grid. Generally, there are not a lot of questions on a subject
that is quite complex. A common misconception is that the sum of the premiums in
a grid equals the potential profit in a set of cattle. In fact, I have listened
to entire presentations of cattle lot data, where the total premiums are
presented to the audience as representative of the value of the cattle.
Marketing on a grid does not assure profit. In fact, a lot of cattle may
receive all the premiums offered on the grid and still lose money simply because
the base bid is low. If fed cattle markets are low, calf prices are high and
feedlot charges are high, no grid is going to make the outcome positive.
However, the data sheet may still reflect the positive value to the grid.
Second, understanding the components of a grid and how your cattle fit the
grid is equally important. To help address this, the center has been feeding
cattle at one lot for several years. To help understand the variability of the
cattle, I looked up the percentage of steers that graded choice or prime in each
lot and the percentage that were yield grade 1 or 2.
In eight lots, the percentage of each lot grading choice or prime quality
grade were 58, 57, 65, 72, 46, 46, 53 and 66 percent for an average percentage
of choice or prime of 58 percent. In regard to yield grade, percentage of each
lot with yield grades 1 or 2 were 66, 88, 56, 61, 20, 27, 44 and 32 percent for
an average percentage of yield grade 1 or 2 of 49 percent.
This data shows a considerable amount of variability in our cattle and that
makes it difficult to predict exactly how our cattle will perform. Consequently,
I would have a very difficult time committing these cattle to a particular grid
and trying to predict premiums. We also have learned that discounts on cattle
that fall far outside the specifications, the ones that don’t grade prime,
choice or select or that have a yield grade of 4 or 5, can quickly gobble up any
money you’ve made in premiums.
Are our cattle more variable than the cattle within the industry? With the
exception of first-cross, English-bred cows mated to a terminal sire, I would
speculate the center's calves are very typical of those in the industry. The
center has not locked the cattle into a grid and won't in the near future.
May you find all your ear tags.
Your comments are always welcome at www.BeefTalk.com.
For more information, contact the North Dakota Beef Cattle Improvement
Association, 1133 State Avenue, Dickinson, ND 58601 or go to www.CHAPS2000.COM
on the Internet. In correspondence about this column, refer to BT0112.
###
Source: Kris Ringwall, (701) 483-2427, kringwal@ndsuext.nodak.edu
Editor: Tom Jirik, (701) 231-9629, tjirik@ndsuext.nodak.edu
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Graphic --
Quality and Yield Grade for Eight Lots of DREC Steers
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Lot Number Choice Yield
Number of Steers or Prime Grade 1 or 2
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6269 72 58 % 66 %
6299 89 57 % 88 %
7401 128 65 % 56 %
8328 127 72 % 61 %
9292 76 46 % 20 %
9336 56 46 % 27 %
0383 116 53 % 44 %
1476 154 66 % 32 %
Average 102 58 % 49 %
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