2009, Volume 17, Paper 9
ISSN: 1883-5675

The Cost of Non-Compliance to Beef Market Specifications

Andrew Slack-Smith
Garry Griffith
John Thompson

Abstract

Strategic sourcing of cattle that are more likely to meet market specification is a critical challenge for buyers purchasing animals for feedlot finishing. Missing target specifications has the potential to result in a large discount in carcass value. Costs associated with carcass weight and external fat depth that is out of specification impact on both the ability of suppliers to meet customer requirements and levels of productivity or slaughter rates that are nearer to the processor’s cost-minimising level of production. This analysis used a subset of Australian beef industry feedlot data from two long-fed feedlots to assess both the costs and causes of carcasses out-of-specification. The economic value associated with products that are out-of-specification can be illustrated by the Taguchi Quadratic Loss Function, carcass specifications, and industry grid prices. At the nominated carcass weight specification (300kg – 400kg) in the short-fed export market, there were 28 per cent outside of specification, while in the long-fed export market (380kg – 450kg), 29 per cent were outside specification. A P8 fat depth specification of 10mm-26mm showed 16 per cent outside of specification in the short-fed market. At the nominated marbling score specification (3+) in the long-fed market, 70 per cent were outside of specification. These cattle out-of-specification for marbling incurred a loss of $105/head. These results demonstrate that there is a large amount of variation in cattle in Australian beef production systems that has led to a reduction in opportunities for precision management and value-based marketing. 

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