For over 15 years, the scientists at Kansas State (K-State) University’s Department of Animal Sciences have been analyzing data from the world’s largest feeder cattle marketing company, Superior Livestock Auction, to give the industry a more complete understanding of value signals in the market.
In their most recently released peer-reviewed research, K-State scientists Esther McCabe, Michael King, Karol Fike and Ken Odde studied the “Effects of Holstein and beef-dairy cross breed description on the sale price of feeder and weaned calf lots sold through video auctions,” which was published in the journal Applied Animal Science.
Similar to previously released research from K-State scientists, the study found straight dairy calves continue to be significantly discounted. However, beef-dairy crosses sold for significantly more than straight dairy calves but still market for less than all breed descriptions of straight beef calves.
Among the beef breed type descriptions, they included English, English crosses, English-Continental and Brahman influence, which were priced significantly differently in descending order, respectively.
Beef harvested from dairy cattle, whether that is represented in the harvest of cull cows or from fed cattle from steers and excess heifers, has long been a significant contributor to the domestic beef supply. However, it has generally been highly discounted by feeders and packers. This is because of their high maintenance cost and relatively poor feed conversion, which have made them expensive to feed relative to traditional major beef breeds.
At the packing plant, relative to beef carcasses, dairy have low dressing percentages and are light muscled in relationship to carcass size, which affects cutout value. Holsteins, which are the dominant dairy breed, have also become very large in stature, which makes them more prone to producing an unacceptable number of carcasses too long for conventional rail height. The only major plus for beef from fed dairy cattle is its desirability by the food service industry because of its consistency in terms of ribeye size, shape and grade.
Therefore, the rapidly progressing trend of producing feeder cattle from beef sires out of dairy cows is not necessarily adding any more competition from additional new tonnage to the domestic beef complex, as many beef producers fear. Rather, through genetics, it is striving to reshape the conformation of the cattle, change the hide color, moderate the length of the carcasses and make them more efficient to feed.
Turning the cattle black and improving carcass conformation not only helps the cattle avoid the “dairy” conformation discount levied by packers, but also potentially puts them in the window to receive premiums for branded beef programs, including many of the Angus product lines.
The whole beef-on-dairy phenomenon came about when genomic and sexed semen became a practical alternative for the dairies. Genomics allow them to sort out the best heifers and cows in their herd for producing potential replacement heifers and then breed them to sexed semen to produce heifer calves. That leaves the majority of the herd available to be bred with beef bulls to produce value-added feeder cattle.
The beef semen market into dairies is one with a narrow margin due to dairy managers’ resistance to go beyond a certain price point, which in the beef industry would be considered at the low end of the price spectrum, similar to the commercial export market to South America.
Still, the National Association of Animal Breeders reported “a 23 percent increase in domestic beef semen unit sales from 2019 to 2020 and 44 percent increase from 2018 to 2019, indicating increased beef semen use in dairy and beef programs alike.”
In terms of value of the relative breed types, Table 1 demonstrates significantly different prices for weaned steers sold in lots through video sales, whose breed description fell in the category of English-English cross, English-Continental cross, Brahman influence, beef-dairy cross and Holstein.
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However, the biggest numerical jump occurred between Holsteins and the beef-dairy cross weaned steers at $34.58/cwt. This indicates that breeding dairy females that are not destined to produce replacement females to beef bulls is a viable way to improve their offspring’s marketability.
It is also informative to explore how the current trend in breed types compares to previous years, which is represented in Table 2. Although this data did not contain a beef-dairy comparison, the relationship between the other breed types, including Holsteins, ranked the same. However, there was an important difference between the two summaries, with larger numerical differences observed in 2020-21 between breed types compared to the summarized data from 2010-18.
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Overall, the data in Tables 1 and 2 indicates that buyers have increased the spread paid for premium calves compared to the penalty levied on discounted feeder cattle, which is the category into which Holsteins fall.
Other significant fixed effects beyond breed description that significantly affected sale price included auction date, sex, health protocol administered, flesh score, whether the lot qualified for one or both of the Non-Hormone Treated Cattle and the Verified Natural programs, lot size, base weight, and number of days between auction and planned delivery.
Fixed effects that did not significantly affect sale price included implant status (P = 0.78), oversized truck loads (P = 0.63), Source and Age Verified (P = 0.59), region of origin (P = 0.50), Superior Progressive Genetics status (P = 0.51), BeefCARE program (P = 0.29) and frame score (P = 0.23).
Weight variation within lot (P = 0.09), Beef Quality Assurance program (P = 0.05) and slide and weight stop combination (P = 0.05) tended to be associated with sale price, although they were not shown to be statistically significant.
Right now, the beef-on-dairy semen market is one of the most dynamic aspects of the beef complex. All indications suggest that it pays when done right and by an ever-increasing magnitude. Other fixed effects influencing the price of calves, including health, protocol, base weight, etc., were predictable, while others did not significantly affect price, which provides new insight on areas where less emphasis could be placed. — Dr. Bob Hough, WLJ correspondent
