Marbled Beef

Value Based Marketing

Value Based Marketing (VBM) is a concept that has been around for decades, but only now just starting to materialise. The basic premise of VBM is that animals that are of higher value are worth more to all participants in the supply chain (aka ‘value’ chain), and so all participants are appropriately rewarded. That includes the producer who bred and/or finished them. In VBM, the value of an animal is simply the product of yield and eating quality.

The value to the wider industry of VBM is the transparent price signals that incentivise breeders to pursue the objectives that drive profit for all participants in the value chain. VBM also allow for far greater consumer focus as the consumer at the end of the chain can more clearly indicate their preferences with their product choices.

After decades of little progress, the advent of brands in the marketing of beef has finally got the industry making meaningful steps towards to VBM. Brands have allowed the processing sector to capitalise on the better eating carcasses that they find on their hooks. For a couple of years now they’ve enjoyed this windfall without passing on the spoils to their producers. To their credit, processors have talked about implementing VBM to their suppliers for some time, however, their appears to have been some reluctance to take the big step. This changed significantly on the 19th November with JBS announcing a $0.20/kg premium for carcasses that graded 4+ for Ausmeat marbling.

As Australia’s biggest processor, I’m sure JBS will not be alone in taking this step. Hopefully with some healthy competition we’ll see better than $0.20/kg (only $0.10 in live weight terms). I’ve previously written about the IMF premium available at certain feedlots that pay more for cattle with a track record for better than average marbling. The premium was $0.34 LWT this year. And that’s paid for every animal on the truck – not just the good marblers!

If you haven’t already, now is the time to include IMF genetics in your breeding objective.

The best time to implement your breeding strategy was 20 years ago. The second best time is now. If you haven’t already, now is the time to include IMF genetics in your breeding objective.

A load of steers departing for the feedlot

Monetising high IMF cattle

"The variation between the average value of progeny of the best and worst performing sires in Cohort four was $619.  On an individual carcase basis, the difference between the highest and lowest valued carcase was $2076."
Beef Central

One of the commenters (David Murray Kilburnie Angus) makes the point that producers don’t receive any of that premium. I used to feel that way, however this year, while marketing our feeder steers I did see a clear premium of 25c/kg offered to us based of our high IMF breeding objective and the performance of previously inducted steers. That equated to an extra $105 per steer or $8.3k for the load.

David’s point is still valid – there is a distinct lack of transparent price signals available to the wider market to encourage more breeders to pursue carcass traits in their breeding objective.

Genomics tools for commercial producers are on the cusp of making a big impact. Commercial angus breeders can now utilise genomics to make more informed selection decisions about their replacement heifers. Depending on their heifer retention rate, a producer would only have to do this for 3 or 4 years to have strong evidence at hand about the genetic performance of their whole herd with relation to 8 different traits (that are otherwise mostly invisible). This would include a fairly accurate indicator of their herds IMF.

In the US there is already a equivalent genomic test for steers.  I’ve had one senior spokesmen for a large processor and feedlotter indicate that these tests would one day be used at induction as a basis for a value based payment to the producer and to determine which feeding program each animal is best suited.

Perhaps when genomics for commercial producers is proven to make commercial sense, feedlotters/processors will feel more confident about bidding harder for the better cattle.