1998/99 Ontario Beef Research Update
University of Guelph Publication

C. Wade¹ and J.W. Wilton^2
1School of Veterinary Science and Animal Production, University of Queensland, QLD 4072, Australia
²Department of Animal & Poultry Science, University of Guelph

Summary

Beef cattle breeders face a challenge in anticipating market demands for the future. For example, there may be a specialized market for premium beef with higher marbling and lower carcass weights than has been the case. The satisfaction of buyers of the bulls produced by breeders was measured for a mixture of price grids and percentage of buyers trying to sell cattle under these grids. It is clear that breeders must anticipate market signals to maintain the satisfaction level of their clients.

Introduction

Breeders of superior beef cattle have always known that breeding quality stock is not a simple business and it would seem that things are not getting any simpler. Researchers at the Centre for the Genetic Improvement of Livestock have been talking to purchasers of Ontario beef and what they have discovered may cause concern for breeders. Market signals indicate that the current pricing system may be heading for change. It appears that there are two very different kinds of buyers for the beef that is being produced. While the current pricing system pays on the basis of carcass weight and yield grade, there is a growing proportion of buyers of carcasses needing something that meets their special needs. These buyers are purchasing for the premium restaurant trade and indicating that they require a smaller carcass with a higher marbling grade.

The requirements of this selective group of purchasers are somewhat different from the higher carcass weight requirements of the traditional market place. The premium market may represent big business as seen from the success of the Certified Angus Beef marketing campaign. The breeder now must decide whether or not to try and compete in this emerging marketplace. The decision is not one to be taken lightly since it may entail a total shift in the breeding program design. There is a danger that if this move is not successful, then the traditional clients of the breeder will become dissatisfied with the new type of stock available and may change bull suppliers.

Clients were regarded as satisfied if the basic needs of their marketplace were met. In the traditional marketplace, this meant that carcasses were over 300 kg (or 660 lb) with A marbling, while to meet the requirements of the premium market, carcasses had to be between 250 and 340 kg (or 550-750 lb) and have AA marbling or better. Clients were assumed to choose their bulls on the basis of expected progeny dollar values on the premium grid or on the traditional grid.

Results and Discussion

For a mixture of clients between the two markets, a different strategy may be better. The breeder should have a mean carcass weight of between 300-309 kg and AAA marbling if 80% or greater of clients are interested in selling in the premium market, which is the same strategy if 100% of their clients are interested in the premium market. For the situation where 60% of clients are interested in the premium marketplace, it is better to have AAA marbling but a slightly higher carcass weight (310-329 kg). The most difficult client mixes to satisfy are those where 20-40% of clients are interested in the premium market; only 81-82% satisfaction is registered. In the case where 20% of clients are interested in the premium market, the maximum satisfaction is shown at AA or AAA marbling and a carcass weight greater than 310 kg. When 40% of clients wish to deal on the premium grid, the optimum client satisfaction occurs at 310-329 kg and AA or AAA marbling.

If the premium market is shown by time to accept larger carcasses than 340 kg, then we would expect the optimum carcass weights for client satisfaction to be increased. What is clear is that those working with the premium market need to be concerned with marbling, and must try to produce animals with AA marbling grade or better. If the breeder thinks that the premium market is not worth the trouble, then a selection program focusing on carcass weight and feed efficiency will be much more valuable to clients on the traditional grid.

Significance to the Industry

This study highlights the dangers of trying to sell into two different markets. Breeders cannot expect to ignore market signals and maintain the satisfaction levels of their clients. Instead, a planned breeding strategy is required to meet and satisfy market demands.

Acknowledgments

The authors wish to thank the Natural Sciences and Engineering Research Council of Canada (NSERC) for their support.