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Premiums Being Offered for Natural Beef Cattle

Posted May 1, 2009

An increasing number of beef cattle producers have expressed an interest in understanding more about the emerging market surrounding naturally produced beef. Unlike organically grown beef which has a specific set of mandatory standards set by the United States Department of Agriculture (USDA), natural beef only has a voluntary marketing claim standard that was established by the agricultural marketing service on Jan. 21, 2009 (edocket.access.gpo.gov/2009/E9-1007.htm). In short, the voluntary standard promotes the production of beef without the use of growth promotants, antibiotics, animal by-products or aquatic by-products.

The Noble Research Institute recently conducted a survey of 32 companies that purchase and market naturally produced cattle. The goal of the survey was to discover the attributes that these marketing companies prefer in the naturally produced cattle they purchase and to obtain the price premiums being offered for cattle that possess these attributes. During the phone survey, marketing companies were asked a series of questions.

Several useful pieces of information were discovered. First, we found that 23 out of the 32 companies (72 percent) surveyed are classified as natural beef marketing companies. The other 28 percent of the companies that purchase naturally produced cattle are classified as feedyards. Second, these companies are scattered from the east coast to the west coast of the United States.

The results also show that 44 percent (14 out of 32 companies) of the businesses we interviewed were interested in purchasing naturally raised feeder calves. Of the interested companies, 85 percent (12 of the 14) wanted feeder cattle that weighed at least 600 pounds. In addition, 72 percent (23 of 32) of the businesses surveyed were interested in purchasing cattle at the point of finishing.

We found 84 percent (26 of 31) of the companies with restrictions on the use of antibiotics prefer natural cattle that have never received any type of antibiotic. In contrast, we discovered 94 percent (30 of 32) had no restrictions on fly control, suggesting that marketing companies are more concerned about antibiotic use than other chemical residues. It is interesting to note that 97 percent (31 of 32) of those surveyed said they had no restrictions on mineral supplements even though there are many mineral supplements available that contain antibiotics.

Most businesses (78 percent or 25 of 32) had an established target for quality grade. Sixty-eight percent (17 of 25) preferred mainly choice cattle, while 44 percent (14 of 32) required cattle they purchased be Angus or black-hided. Of those companies preferring mainly choice cattle, 79 percent (13 of 17) also required that cattle be Angus or black-hided. This suggests that these businesses perceive Angus and black-hided cattle to predominantly grade choice. Incidentally, eight percent (2 of 25) of the companies were interested in purchasing cattle that were expected to grade select or less.

The results of the survey show that the premiums offered by companies for naturally produced cattle vary substantially as do the preferred attributes. The premiums ranged from 25¢ per cwt to $15.75 per cwt on a live-animal basis. This variation is likely due to the absence of an official, standardized definition for cattle that are "naturally produced." The average premium being offered by marketing companies is $5.79 per cwt while feedyards are paying $4.76 per cwt. Twenty-seven of the 32 companies reported their willingness to pay a premium of $5.95 per cwt for cattle that have never received antibiotics, ionophores, hormones or animal by-products.

It is important to note that the results of the survey provide only a portion of the information that producers need to know in order to help them decide whether or not to produce cattle naturally. Information about animal performance and the cost of producing cattle naturally remains limited. Future research at The Noble Research Institute will focus on both of these issues.