The beef industry has three main ways to market fed cattle, live weight, dressed weight, and grid pricing. Past studies have evaluated the benefit of using readily available information such as visual assessment of weight and body condition and additional information such as, ultrasound technology and genetic marker panels. A study published in the Journal of Agricultural and Resource Economics assessed the value of using genetic information provided in the form of molecular breeding values (MBVs) for seven traits (yield grade, marbling, average daily gain, hot-carcass weight, rib-eye area, tenderness, and days-on-feed) to inform decisions about the optimum marketing method as well as optimum days-on-feed. The study evaluated 10,209 cattle fed in six Midwestern feed yards from 2007 to 2008. First baseline scenarios, marketing all groups of cattle as live weight, dressed weight, or grid basis, were used. Then genetic information was added into the scenarios and cattle were sorted by this additional information. A third scenario was used that estimated a marketing scenario with “perfect information”.
The value of using genetic information characterizing yield grade and marbling to sort cattle into marketing groups in the study ranged from $1 to $13 per head, with the greatest improvement in net return and the greatest reduction in variability occurring in cattle optimally marketed using grid pricing. One conclusion of the study was that having additional genetic information reduced the risk for value-based marketing which may be particularly important for risk-averse producers. Interestingly, the scenarios using “perfect information” only had slightly improved net return compared to the genetic information currently available, indicating relatively little additional economic return for improved genetic tests. The study concluded that using genetic information to optimize fed cattle marketing decision has the potential to improve transmission of market signals for carcass quality traits through the beef cattle supply chain, and that this information has the potential for increased net returns of 1$-13$/head.
Thompson, Nathanael M., Eric A. DeVuyst, B. Wade Brorsen, Jayson L. Lusk (2016). “Using Genetic Testing to Improve Fed Cattle Marketing Decisions.” Journal of Agricultural and Resource Economics 41(2):286-306. Link
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