CAB Acceptance Factors
How are high corn prices affecting CAB acceptance rates?
There is no doubt that this summer has been a tough one. More than 70% of the country this year has been in a drought. Drought conditions have made already high corn prices even higher. Pastures are in rough shape, too, as low moisture has reduced forage quantity. What do these changes imply for the beef industry? More specifically, what does it mean to the Certified Angus Beef® (CAB®) brand?
Historically, corn price fluctuations have not significantly affected CAB acceptance rates, says Mark McCully, assistant vice president and director of supply development at Certified Angus Beef LLC (CAB). However, fall 2011 might have been the exception.
Due to high feed costs, more beta-agonist and growth promotants have been used. The aggressive growth technologies decrease marbling, which certainly affects CAB acceptance rates. To alleviate the quality grade issue, though, many cattle feeders increased the days on feed, McCully says.
This and last year's drought have made it necessary to place lighter cattle in feedlots, which means that more days on feed are required. Low feeder-calf placements, he explains, have also supported longer days on feed.
With some projecting corn prices at $10 per bushel (bu.) this year, the impact on days on feed and resulting quality grade are unknown. $10-per-bu. corn means cost of gain could elevate to $145 per hundredweight (cwt.). McCully cites Cattle-Fax analyses that reported cost of gain has remained relatively steady at around $115 per cwt. in late 2011 and early 2012, while corn was about $6 per bu. However, the recent spike to $8 per bu., with the impending threat of higher corn prices, has sparked an uptick nearing the $120-per-cwt. level in cost of gain.
Are we going to short-feed cattle?
"As long as the value of that pound of gain exceeds the cost of that pound of gain, we're going to keep feeding cattle," McCully answers. "We're going to keep feeding heavier because it just makes sense to do that. We all know cattle get less efficient, but there is incentive to feed cattle a little bit longer, especially for feedlots selling on a carcass basis. The market has been able to sell cattle and beef high enough to offset these increased cost of gains, for the most part, over a five-year period."
He concludes, "The absolute positive message for Angus genetics in this is the need for cattle to grade with possibly fewer days on feed — come in and grow and grade."
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