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What We are Learning from the Retained Ownership Program

Posted Oct. 31, 1999

For the past three years, the Noble Research Institute has conducted the retained ownership program to allow producers to evaluate the performance of their calves from weaning through slaughter. The Foundation arranged for pasture, transportation, feeding, and marketing. Data were collected and tabulated on individual animals, and carcasses were sold to packers on a "formula" or "grid" basis. Prices were based on carcass weight, USDA quality grade (prime, choice, select, and standard), and USDA yield grades (1, 2, 3, 4, 5).

In theory, quality grades reflect the palatability of the meat, with prime being the highest and standard the lowest. Yield grades reflect lean yield (1 = highest lean yield, 5 = lowest). The grid system provides premiums (between $1 and $10 per hundredweight) for USDA choice and prime grades relative to a base of USDA select.

Premiums also are paid for USDA yield grade 1 and 2 carcasses relative to a base of yield grade 3. Carcasses that are too heavy (950 pounds or more) or too light (550 pounds or less) are discounted. Those that are standard or grades 4 or 5 also are discounted, usually by at least $20 per hundredweight.

When cattle are sold in a value-based marketing system (grids or formulas), one can examine profit-affecting factors more closely. Gross feedlot margin was selected as our measure of profit or loss and was derived by taking the value of the carcass and subtracting the value of the animal upon arrival at the feedlot and the cost of all inputs (feed, medication, processing, freight). We were interested in determining which measurements taken in the feedlot and packing plant had the greatest impact on gross feedlot margin. Data from the first three years of the program were analyzed.

Consistently, the two traits with the closest relationship (across sexes and years) to gross margin were feedlot average daily gain and carcass weight. Both are measures of growth, with average daily gain reflecting rate and carcass weight reflecting accumulation. An increase in either average daily gain or carcass weight was associated with an increase in gross margin. Traits such as marbling, back fat, and rib eye area had very weak relationships with gross margin.

We also used a technique that allows us to look at multiple predictors of gross margin. Our model could account for up to 68% of the variation in gross margin, with four to five traits used as predictors. But in all cases, we could predict gross margin almost as well with either average daily gain or carcass weight alone.

Please keep in mind that our results are based on only three years of data. If market pressures remain the same, our information suggests that it is much more beneficial for producers to strive to improve growth rate than carcass measurements.

Of course, selection for additional growth does not automatically rule out improvement in carcass merit or lean yield but traits that are most economically important need emphasis. On a cautionary note, we did not measure any characteristics related to fertility.

The relationship between fertility and profitability is well established, and fertility doubtless is the most economically important trait in cow-calf operations. Producers should avoid making any herd changes that negatively affect the ability of the cow to breed on a regular schedule.

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