Last Updated: 9 March 2010

CATTLE BUYERS WEEKLY

CAB And GeneNet Offer Added Premiums

MORE Angus genetics in the national herd have helped boost the number of carcasses that grade USDA Choice. This, as previously reported, has reduced quality premiums for producers. But there are other ways those with Angus-based cattle can get premiums for their cattle. One way is to market them to the Certified Angus Beef (CAB) program. Packers first started paying premiums for CAB-qualified cattle in 1997-98. Cumulative grid premiums by the end of 2009 totaled nearly $300M and they keep growing at a rate of about $25M per year, says CAB.

That’s the five-year average, according to a January 2010 CAB survey of leading CAB-licensed packers. The average payout of $98,000 per working day for the last three years shows the continuing relevance of CAB as a producer target, says CAB’s Brent Eichar. Although average CAB premiums through all grid and formula selling have declined a bit, some price grids pay $5 per cwt in premiums, it says.

CAB’s survey included Tyson, Cargill, JBS USA and National Beef. The CAB premiums do not include those for yield grade, Choice over Select, Prime over Choice, source and age-verified or cash live bonuses often paid for expected CAB acceptance. Licensed packers through the years have also been the source of CAB’s funding, based on fees that average two cents per lb of CAB product sold. That’s a cumulative $167M in commissions on 8.3 billion lbs sold in the life of the program, says CAB.

The fact that cattle keep earning premiums says the industry’s herds continue to improve, says Clem Ward, professor emeritus at Oklahoma State University. If packers are paying premiums above the average cash price, it suggests premiums are exceeding discounts. One might argue it means the industry is moving toward desired quality cattle, or moving away from those discounted by the marketplace, he says.

GeneNet, based in Hays, Kan., has paid producers more than $17M or $17.17 per head in premiums on 1M-plus cattle since the late 1990s. GeneNet founder-operator Ken Conway has worked with more than 2000 producers and feeders of high-quality cattle. GeneNet started with Angus-based cattle and negotiated a progressive pricing system that helped seedstock producers channel genetics from their customers into a premium market while getting feedback on harvest results.

All GeneNet cattle go through JBS USA plants in Greeley, Colo., Grand Island, Neb., or Dumas, Texas. Like all marketing grids, this one awards premiums and discounts from a base price. Premium Choice and Prime cattle earn rewards, as do Yield Grade (YG) 1 and 2. Select grade animals are discounted by the Choice-Select spread. More discounts are calculated for YG 4s and 5s, Standard and Commercial grade cattle or other outliers. Apart from the premiums, producers also have the information they need to add still more value in the future, says Conway.

Fiasco Might Damage Australian Beef Industry

AUSTRALIA’S beef industry faces a public relations nightmare that might damage domestic beef consumption and hurt its exports. The fiasco is over the Australian government’s decision to start accepting beef from countries that have had BSE cases. The decision, which took effect March 1, became known last November and set off protests from fringe producer groups. They solicited support from state politicians and even a shock-jock DJ to whip up the issue. The result has been a national media frenzy the past two weeks.

The hysteria about the issue might seriously hurt beef sales in Australia for the next six months, says top industry writer Jon Condon of the Queensland Country Life. The main industry groups unfortunately did not handle the issue very well when it first emerged. The issue got out of control when groups such as the Australian Beef Assn began to exploit it, he says. ABA has been the most vocal in making it a national issue, at the same time as beef producers are frustrated about low cattle prices and the impact on beef exports of the high Australian dollar. The tragedy is that none of the opposition to the import decision is based on any facts but it will erode confidence in Australian beef. Opponents of the BSE decision have not put forward a single argument based on science, he says.

After imposing a ban in 2001, Australia agreed to start accepting beef from countries with “BSE minimum risk” status conferred by the World Organization of Animal Health. Under the new rules, only imports of muscle meat or products of muscle meat will be allowed in. Australia will also require exporters to meet or exceed its traceability standards. Virtually all the outrage over the decision has focused on possible imports of U.S. beef. Japanese beef is scarcely mentioned although Japan has had many more BSE cases than the U.S.

That’s because there are claims the U.S. might export large quantities of beef, says Condon. ABA claimed the U.S. might send 50,000 MT per year. That’s absurd and was a fabricated number, he says. The U.S. in all the years before 2003 never sent more than 40 metric tons of beef to Australia per year and usually far less than that, he says. Another twist is that nearby New Zealand started accepting U.S. beef three years ago. Exports have totaled just 29 MT over the three years. The irony is that Australia and New Zealand share a common foods standards body.