ANGUS – YOUR MARKET OPTIONS

Feeder Steer Prices
Each Tuesday, we will post MLA's latest Feeder cattle pricing report from MLA's National Livestock Reporting Service. [Report...]

2. SELECTING TARGET MARKETS . . . . . . . . . . . . . . . . . .Top

One of the most important steps in beef production is deciding which markets to target. This involves evaluating which markets are likely to be the most profitable, the specifications of these markets and their stability. In addition, it is necessary to evaluate the production potential of your country and the options you have if the season or market changes.

These decisions are difficult, especially in an industry characterized by shifting goal posts and extreme variations in seasonal conditions.

However, without a target to aim at, you are a seller not a marketer. If you have a clear target, it is easier to organize your production and breeding programs to make sure you hit the necessary market requirements.

Evaluating Your Environment

The environment and productivity of your property may limit the choices available to you. More favourable environments allow greater flexibility. Where you can finish animals, it is possible to produce to a wider range of market end points. In environments where the pastures do not allow finishing, you have less flexibility.

What is required?

To evaluate your environment, list what you can do on your property. For example:

• Can you fatten vealers, yearling steers, bullocks?

• What weights can your stock reach at different ages?

• Can you grow heifers out to joining weights by 12 to 14 months?

• What can be done with supplementary feeding, pasture improvement or fodder cropping?

• What are your neighbours able to do?

Evaluate the possible market opportunities. . . . . . . . . . . Top

• Can you sell vealers, store weaners, yearlings, steers, or bullocks through your normal outlets?

• Are there special sales worth targeting in your district?

• What other outlets do you have?

• How far will you have to truck cattle to meet the other options?

Whatever your answers to these questions, you need to develop a cow herd that can perform well in your environment. For example, the environment will dictate the optimum size and milk production level for your cows. With females designed to produce under your conditions, the bulls can be selected to match market requirements.

Choosing target markets.

To focus accurately on producing for a market, the specifications of that market are central to success. You must know what the specifications are and what penalties you will receive if cattle fall outside specifications.

To make valid decisions between different market options, you need to calculate the costs and returns from each. Gross margin budgets are the best way of comparing the potential profitability of alternative enterprises.

The budgets should be compared on a return to the total area devoted to cattle, on a gross margin per hectare basis. They should not be compared on a return per cow basis.

Example gross margins are available from your local agriculture office, accountant or consultant. Find one to use as a sample and add your own figures.

Maintaining Flexibility . . . . . . . . . . Top

While you target particular markets, it is also important to maintain some flexibility in your program. You can’t afford to lock yourself exclusively into one system. Markets may change and seasonal variation will influence what you can do in any one year. When you decide your main target, make sure your program and your cattle have the versatility to meet alternate options if necessary.

Flexibility in your production system is also important. In some enterprises, there is little scope to vary things if seasons change. It is desirable to have some stock that can be marketed earlier than planned if seasons require. For example, a store weaner enterprise is based on carrying large numbers of cows and selling calves and cull cows before the hardest time of year.

A property fully stocked with pregnant cows or cows and new calves has little chance to cope with bad seasons. In contrast, running less cows to grow steers out to yearlings allows you to cash in the steers if conditions dictate. You can cut up to 30% of stock numbers before it is necessary to sell breeders if conditions dictate.

Being Different

The markets that you have targeted in the past and that your neighbours produce for now are often not the only markets available. Seeking alternative markets may be more important than locking in to what others do. What other options do you have? Can you supply a local butcher with cattle every week?

Instead of selling store weaners, can you retain ownership and have the calves backgrounded for slaughter at your cost or on shares?

What marketing alliances are available to you? Can you work together with other producers to sell bigger lines? Can you sell at times of the year when others can not?

Are you locked into selling at the one time of the year with no flexibility (eg annual weaner sales)? Can you sell surplus females at special sales?

Participating in Industry Alliances . . . . . . . . . . Top

More and more producer groups are being formed to establish marketing alliances. Some of these are horizontal alliances formed by groups of producers to increase the number of cattle they are able to offer and the consistency of the group supply. These alliances can often arrange special deals based on the numbers provided.

Other alliances are vertical arrangements involving all or part of the supply chain. Under vertical alliances, producers supply stock at pre scheduled times for slaughter or for feeding on.

In some cases ownership of the cattle is retained through to slaughter with payment based on pre determined quality and weight arrangements. The advantages of these alliances are that as the owner of the cattle during feeding and slaughter, you are guaranteed feedback. You are paid on the results and receive the information as part of the payment process.

3. MARKETS AND THEIR SPECIFICATIONS . . . . . . . . . . . Top

Australian beef producers supply a variety of domestic and export markets:

3.1 Domestic Markets: The domestic market is the most important market for Australian beef. Around one third of the beef produced in Australia is consumed domestically and is sold through butcher shops, supermarkets and the food service industry.

The domestic retail market uses young, lightweight carcasses finished either off grass or following short term grain feeding. Of the retail sales, traditional butcher shops sell just over half of the beef sold while the value of sales is about equal between butchers and supermarkets.

3.1.1 Retail butchers: Traditionally the retail butchers have handled lightweight grass-fed calves or vealers. They are generally finished on the cow and sold direct for slaughter with live weights of 250 to 350 kg. They produce 140 to 200 kg carcasses with required P8 fat depths of 4 to 10 mm. Both heifers and steers are used. Some butcher shops are now increasing their carcase weight requirements to stay competitive with the supermarkets.

3.1.2 Supermarkets: These handle mainly boxed beef from heavier animals with more use of grain feeding to improve consistency of supply and quality. About 80% of the current supermarket supply is grain fed.

Some supermarkets buy direct from wholesalers who buy or feed the cattle, others contract feedlots to supply grainfed carcasses and offer forward contracts. A price grid is normally used with discounts for carcass weight, fatness and meat colour. Marbling is not a requirement for this market.

Suitable feeder steers and heifers must be able to grow quickly and not become overfat by the time they reach the required carcass weight. Cattle are fed for 60 to 90 days gaining 1.3 to 1.7 kg / day. Large numbers of heifers are fed for this market as they are generally cheaper to buy. Heifers perform nearly as well as steers on feed and can be fed for shorter times because they finish faster. Heavier weaners can go directly to the feedlots. Lighter calves are grown out to required feedlot entry weights.

Specifications for feeders and carcasses vary between states and supermarkets but there are generally two sets of specifications used:

3.1.2 a) Light Supermarket. This market covers the smaller supermarkets that use lighter carcass weights of 160 to 220kg HSCW, with 5 to 12 mm P8 fat, with bright red meat colour and white fat preferred. Stock enter feedlots at weights of 240 to 300 kg liveweight with milk teeth.

3.1.2 b) Heavy Supermarket. The larger supermarkets are moving towards heavier carcass weights and cutting the carcasses in new ways to give reduced costs per kg processed. Feedlot entry weights of 280 to 350 kg,with no more than 2 teeth produce carcasses weighing 200 to 280 kg HSCW, with 4 to 17 mm P8 fat.

3.1.2 c) Food Service. This sector uses a wide variety of product from manufacturing beef for hamburger patties to high quality steaks for white tablecloth type restaurants. Most of the beef is supplied in boxed form and comes from heavier carcasses. Certified Australian Angus Beef™ is an example of a high quality product used in this sector. Large numbers of grassfed heavy steers or “Breaking Ox” are used in this area. They are 0-2 teeth with carcase weights of 260 to 350 kg and 6-15 mm of P8 fat.

3.2 Export Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Top

3.2.1 Japanese B3. This is the long fed, higher quality part of the Japanese market targeted by the Australian feedlots. Steers of breeds known to marble, like Angus, are fed for 240 to 300 days or more to hit a minimum of marble score 3. Carcass weights of 350 to 450 kg with 12 to 25 mm P8 fat are preferred. Carcasses are boned out to primals and sold in the upper end of the Japanese middle market through supermarkets or food service outlets.

Steers start on feed at 360 to 480 kg with fat scores of 2 to 3 and milk or two teeth. They should be medium to later maturing types.

Gains on feed are around 1.0 to 1.5 kg / day decreasing with time on feed. The minimum marble score of 3 is critical and animals are slaughtered at 24 to 30 months to maximize marbling. Carcasses that fail to meet this specification are downgraded to B2 resulting in substantial economic penalties.

Selection for growth and marbling are important in herds supplying this market. Sires with higher IMF% EBVs produce progeny with higher proportions meeting minimum marbling standards.

Details of the B3 production system:

3.2.2 Japanese B2. This product targets the central segment of the Japanese middle market, with a minimum of marble score 2 required. Steers are normally fed for 150 to 180 days to achieve carcass weights of 350 to 420 kg HSCW. Angus have been widely used in northern herds in crossbreeding programs to increase the proportion of steers suitable for this market.

Steers go on feed at 400 to 500 kg, up to 4 teeth and condition score 2 to 3. Mid to later maturity types are required. Gains on feed are around 1.2 to 1.6 kg / day. Carcasses failing to meet marble score 2 are downgraded to B1. Meat colour and fat colour are important for this medium quality segment and carcasses can carry 12 to 25 mm of P8 fat.

3.2.3 Japanese B1. This market uses short feeding times of 100 to 120 days to produce carcasses weighing from 300 to 400 kg HSCW with 10 to 22 mm of P8 fat.

The carcasses are boned out to suit the lower end of the Japanese middle market where marbling is not required. Steers of all breeds are used and the main emphasis is on feedlot growth, carcass yield and minimum quality requirements of meat and fat colour.

Steers start on feed weighing 400 to 500 kg with up to 4 teeth. They should be no more than 2 to 3 fat score on entry and normally gain 1.3 to 1.7 kg / day on feed. Steers with higher Bos indicus or European breed content have suited this market and Angus crossbreds are ideal.

3.2.4 Grassfed Export Markets. A range of grassfed markets also exists. The EU uses cattle with carcase weights of 260 to 327 kg and 7 to 17 mm of P8 fat. Only herds that individually identify their herd using the electronic NLIS identification and certify no use of HGPs are eligible for EU sale.

Large numbers of grassfed bullocks with carcase weights over 300kg are exported to Japan.

Older animals like cows and cull bulls are used in manufacturing purposes. This includes large quantities of trim and low fat meat used to grind hamburgers in the USA. . . . . . . . . . . Top

3.2.5 Other Export Markets. Australian beef is also exported to a wide range of other export markets. The specifications differ and individual abattoirs tend to specialize in supplying different markets. For example, some works conduct special slaughter procedures to meet religious needs of export customers.

The Korean market has become an increasingly important market for Australia since its liberalization. Imports of chilled grainfed beef similar to Japan are increasing and Korean consumers have a strong history of preferring high quality, grain fed, marbled beef.

4. HOW WELL SUITED ARE ANGUS CATTLE? . . . . . . . . Top

Research and trial results show that modern Angus cattle can meet the specifications of all the markets described above. They have the versatility to suit light supermarket weights and to be grown out for feeding on to heavy export weights.

The ability to marble make Angus the preferred cattle for the high quality, long fed Japanese market. The current Meat Standards of Australia (MSA) grading system emphasizes the value of Angus cattle and their crosses. They have produced high grading carcasses with tender palatable beef to meet consumer needs.

5. WHAT THE FEEDLOTS WANT FROM ANGUS . . . . . . . . .Top

The feedlot industry has become a major force in the Australian beef industry over the last decade. Feedlot buyers have a strong influence on cattle prices, especially for Angus cattle. The superior performance of Angus in a wide range of grainfed markets has generated a healthy premium for both straightbred and crossbred Angus cattle.

The following comments on the requirements and performance of Angus in feedlots were made by feedlotters aiming at a range of markets.

Ross Keane, Livestock General Manager, AMH, Toowoomba
“AMH feed cattle for all overseas and domestic markets, including short, medium and long term feeding for Japanese and Domestic customers. To meet these markets we have a wide range of purchase weight specifications.

Our buyers are looking to purchase Angus and some other British breed steers from 350 to 500 kg depending on the availability of orders. Premiums are paid to breeders that have steers with a proven all round feedlot and carcass performance.

Average daily gain, dressing percentage, P8 fat and marbling are all taken into account when evaluating the performance.
The challenge for breeders is to supply feedlotters and processors with the steers they want and to maintain a profitable herd in the process.”

Richard Eldershaw, Livestock Manager, Rangers Valley Feedlot, Glen Innes, NSW
“Rangers Valley is the only specialist Angus and Murray Grey feedlot in Australia. We concentrate solely on feeding for the high quality B3 Japanese market. We feed to maximize marbling and that characteristic is the dominant factor in the explosion of Angus cattle over recent years.

Our research shows wide variation in the profitability of cattle fed for this market. We cannot afford to feed cattle that don’t perform, no matter what breed. We know there are good lines of Angus cattle that grow rapidly, yield well and produce top quality carcasses. We like to buy large lines of these cattle in store condition.”

Gina Lincoln, ICM, Peechelba, VIC
“Peechelba Beef is a custom feed yard feeding cattle for various markets. Our main programs are Angus cattle suited to end markets such as the B3 and CAAB. We've observed that the Angus Cattle bred specifically for quality markets such as these are the ones that succeed. Buyers from feedlots and processors keep coming back. Just having a black hide isn't enough.”

6. HOW TO SELL ANGUS CATTLE TO THE FEEDLOTS . . Top

If you produce Angus cattle and want to sell feeder steers or heifers, you can contact the feedlots directly or work through your agent.

You will need to know how much your cattle weigh, their condition score, what bloodlines are involved, and understand different delivery arrangements. Most feedlots will have a buyer inspect the cattle on property before purchase. Unsuitable cattle will be drafted off and the remainder may be weighed individually to make sure they fit specifications. Prices are normally decided on full weights less 5%, or on empty weights on arrival at the feedlot.

When you sell to any feedlot, make sure that you discuss getting feedback on the animals after feeding and slaughter. Feedlots have the capacity to record your animal identification details and match this with feedlot identification. This feedback is essential to you in evaluating the suitability of your cattle to that market. You need the information to improve your breeding program. Be diligent to ensure that this information is collected and returned to you.

The following feedlots buy Angus:

The following feedlots have been identified as operations that buy Angus cattle and contribute to the ANGUS PREMIUM. If you have Angus or Angus cross cattle for sale, contact these buyers to ascertain their requirements and pricing.

This is not intended to be a complete list. Please contact Angus Australia on 02 6772 3011 if you want further information. Would like your feedlot listed or if you have any corrections or amendments.

For more information about the Australian feedlot industry contact: Australian Lot Feeders Association (ALFA) on 02 9290 3700 or www.feedlots.com.au

Feedlot	Address	Contact	Phone
Cargill Beef Aust. CAAB	PO Box 166, Wagga Wagga NSW 2650	Tony Burke	0429 383 002
		Grant Garey	02 6938 3002
		Shane Bullock	02 6973 8846
Kerwee Feedlot CAAB	PO Box 29, Jondarayan QLD 4403	Jim Cudmore	07 4692 2277	0417 735 507
Ox Hill Pastoral Co CAAB (Westmeats Exports)	7-9 Cahill Street, Dandenong VIC 3174	Andrew Doljanin	0427 775 790
Charlton Feedlot	Seven Mile Road, Charlton VIC 3525	Stephen Rennie	0418 266 691
		Jim Guilfoyle	0429 447 016
Rangers Valley Feedlot	Glen Innes NSW 2370	Richard Eldershaw	02 6734 4977	0428 263 955
Whyalla Feedlot	PO Box 10, Texas QLD 4385	Russell Handley	07 4650 9177
AMH Beef City	Toowoomba QLD
AMH Prime City	Griffith NSW	Brett Campbell	0428 719 024
AMH Caroona	Quirindi NSW
Tasmania Feedlot	PO Box 58, Perth TAS 7300	Anthony Barnes	03 6398 6244
		Andrew Thompson	03 6398 6244
Rockdale Feedlot	PO Box 42, Yanco NSW 2703	Peter Steer	02 6951 1180	0427 343 094
Peechelba Feedlot	RMB 4610, Wangaratta VIC 3678	Gina Lincoln	03 5726 8388	0418 364 133
Yarranbrook Feedlot (John Dee)	Inglewood QLD	Graham Bond	07 4652 1688	0427 636 861
Teys Feedlot (Condamine)	PO Box 15, Beenleigh QLD 4207	Glenn Poole	07 3287 2188	0408 078 723
Nebru Plains Feed lot	PO Box 94, Three Springs WA 6519	Alexandra Pugh	08 9955 2032
		John Pugh	08 9955 2032
Killara Feedlot	Pine Ridge Road, Quirindi NSW 2343	Peter Kearney	02 6746 1700	0427 558 778
Ladysmith Feedlot	“Yallambee”, Ladysmith NSW 2652	Lex Crosby	0427 277 398
Sandalwood Feedlot	MS 501, Dalby QLD 4405	Warren Salter	07 4663 7739	0429 902 117
Smithfield Feedlot	Okeden Road, Proston QLD 4613	David Harris	07 4168 9104	0429 689 100
Tallawanta Feedlot	Garah NSW	Bruce Picone	02 6754 3442
Wilga Feedlot	Wilga, Bellata NSW 2397	Ian McCue	02 6793 7466	0428 937 466
Elders	WA	Bruce McCosh	08 9422 2333	0418 913 080
Narrogin Beef Producers	Narrogin WA	Matt Thompson	08 9881 5595	0427 815 595
Daniels Well Feedlot	Borden WA	Paul O’Meehan	08 9827 9237	0427 279 237
Vern Mouritz	“Hydillowah”, Hyden WA	Vern Mouritz	08 9880 7016
Wanderribby Feedlot	Box 55, Meningie SA 5264	Ron Nankivell	08 8575 1960	0428 751 372

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