xt7b2r3nx98z https://exploreuk.uky.edu/dips/xt7b2r3nx98z/data/mets.xml   Kentucky Agricultural Experiment Station.  journals kaes_circulars_004_574 English Lexington : The Service, 1913-1958. Contact the Special Collections Research Center for information regarding rights and use of this collection. Kentucky Agricultural Experiment Station Circular (Kentucky Agricultural Experiment Station) n. 574 text Circular (Kentucky Agricultural Experiment Station) n. 574  2014 true xt7b2r3nx98z section xt7b2r3nx98z In _ , J   Q
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{ O FOR YOU THE FARMER?
O FOR YOU THE CONSUMER?
  By Zuck C. Sczufley
 A CIRCULAR 574
in  (Filing Code 7)
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-60 E  UNIVERSITY OF KENTUCKY
T  COOPERATIVE EXTENSION SERVICE
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OHOI

 What Makes The Price of Beef —
0 FOR YOU THE FARMER?
• FOR YOU THE CONSUMER?
By Zack C. Sautley*
Like most commodities, the price of beef is determined by supply
and demand conditions. Supply is the number of beef cattle raised
and sent to market. Demand is the number of dollars consumers
are able and willing to spend for beef.
These definitions tend to oversimplify the question of what makes
g up beef prices. Other complex factors exert some influence; how-
‘ ever, the main conditions of supply and demand will explain most
.  changes in beef prices.
l Let’s look first at supply. Beef cattle are produced on about three
V mfllion farms and ranches. Each farmer has his own idea of what
p  type of beef cattle to raise and when and where to market. \¢Vhen
_ these individual production decisions are totaled, they give rise to
the up-and-down shifts in cattle numbers, commonly known as the beef
cattle cycle. Numbers not only change from year to year, but there are
  also extreme variations in the number of cattle offered for market
within a year. These fluctuations of supplies cause many problems in
L  
2 nsrs BEEF
` ABIT _
Q i RELTGIOUSSBELIEFS  
·  I s¤P¤"$$·ETS$a ’“‘°-°°
p  ron aezi=_ 38-00
, 36.00
j 34.00
_  BUYING , gg·00
. .00
L POWER _) _·) Zum
· r  °°
.  ,l
` ,
._ 20.00
j  r 0.00
Y  i 6.00
I  I 4,00
L  *2.00
.  Fig. l.—— A change in beef supplies or a change in the demand for meat and
.  by-products causes the price of beef to vary.
TlT—TE;e·nsi0n Specialist in Livestock Marketing, Department of Agricultural Ec-
` onomics
F 3

 V the marketing system. Beef, being a perishable product, must be
moved quickly through the marketing channel to the consumer.
When a large volume of beef is offered, the price must be lowered
in order to move all the beef through the marketing system.
This brings us to demand as it affects the price of beef. The
consumer has the final say. Her decision on the quantity and quality
of beef she wants makes up the demand for beef. Factors which
influence demand are amount of consumer’s disposable income,
tastes and religious beliefs, and the prices of substitutes for beef such
as pork, veal, and chicken. To have an increase or decrease in de-
mand, one or more of these factors must change. 4
Most consumers are not aware of the many costs that must be L
included in the retail price of beef. This retail price must cover the
following marketing costs: transportation, slaughtering, processing,
labor, equipment costs, rent, taxes, and other costs, as well as pay-
ment to farmers for the live cattle.
This publication describes the various steps in the production
and marketing process in order for both the farmer and consumer HI
to understand better the marketing system through which their beef chi
passes.
FEEDING AND MARKETING OF LIVE CATTLE
Marketing begins when an animal is sold for the first time. This
i transaction usually involves the sale of feeder livestock. Farmers .611
sell feeder stock as calves, yearlings, or heavy steers. Range and » au
feed conditions and producer’s price expectations are important fac- ug
tors in deciding at what age to market. The largest marketing of . ne
feeders takes place at the end of the summer grazing season.
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 , _  Q7   ·¤_ # . i.  T l
.\'é,/ yl']  `   I ML"  i ll L l
  " I   les".  ‘  it     if in n .....
Fig. 2.- Beef "0n the h0of" must be inspected to determine its price in relation   Fi!
to grade, probable yield and quality. I pre
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gr I   girl ;
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fh   `, ~4.'.I$>`.:`   I 7`3  
._ A · Q. (-;_ x __ Y:
(, ` / ` \ > $$ \ ll`} ;._.}‘.·-2.-t  
?\ \ if _—/ ;\ \ ; f. -l-: . .». .,   ..5.
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y`  $1 j l   -’ '»1\%,) 2
»n M \` \‘ ». ( —  
Br Fig. 3.- The auction method is often used as a first step in the marketing
gf channel.
SALE OF FEEDER CATTLE
is A common practice in marketing feeder cattle is to sell at the farm,
FS —either to dealers or cattle feeders. Farmers also use terminal and
d auction markets in selling their feeder cattle. The type of market
?· used depends upon expected prices, expenses of marketing, and
if nearness of the market.
SALE OF FED CATTLE
A Feeding and marketing of fat cattle is the next step in this pro-
·duction and marketing process. The feeding period may range from
120 days for short feeding of heavy calves (800-900 pounds) to as
. [ I 9+  + UPPLE + E F3'; .'= s
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0 Fig. 4.- A combination of a feeder calf plus feed plus labor equals the finished
I product-a steer ready for market.
Q 5

 long as 12 months for long feeding of calves (350-500 pounds). When
the animals are ready for slaughter, they can be sold through public
terminal markets, directly to packers or dealers, or through auction
markets.
STOCKYARDS TRANsI>0RTATI0N  
_jj  E PACKING
~ \‘   i mma- HOUSE
Iii?   —·   ··>
p\;>;c,._’  \»».—;_     .<* p      —. I .
I    >~ "  V
Fig. 5.- Transporting the fed steer from an assembly point to the packing ’
plant is another marketing cost.
SLAUGHTERING — WHOLESALING {
Slaughtering the beef animal and wholesaling the carcass compose
the next step in marketing. About 59 pounds of carcass beef is ob-
tained from l()0 pounds of live animal grading U.S. choice. The
value of the wholesale carcass plus the by-products determines the ` 
approximate price the meatpacker may be willing to pay for the
· live animal.
{F100 lbs;   V   Q 0 0 
, · '* . . 3*
  _,·<>r -  in .  59 I s.
I ws ***5*6***.  — - I<>F \ = 47 Ibs-
’  .     4 ~ CARCASS AT RETAIL -
_ . (Q O
. = < ,` }   1
Fig. 6.- A little less than half of a live beef animal can be sold as retail cuts  
` of meat. Fig
. the
RETAILING ‘
Retailing is the final step in marketing beef from farm or ranch V  ab
to C()TlSlllTl€I`. R(:‘t3.ll€I`S l)lly C2Il'C2lSS€S illlll (1ll2II`tCI`S l:I`()Il`l p21Cl(€I`S ZIl](l  
wholesalers. They process these wholesale cuts into small cuts suit- ‘ of
0

 I1
IC RETAIL BEEF CUTS
n
°/. ol Carcaxx
I" — ‘ ‘I Q"
I Shqnk I   Round Steak I0
I ~ ·
I
I I
I Heel I   Rump Roast
I °I R°”"‘d I I/I (Partially Bcnedl 5
I (Ruaxt,Stew) I ll
I I
I I  Sirl0in Steak 8
I Flank l
I (mak SIN I Porterhouse,
G   I rg T·B0ne, 6
S I '°““ I ‘ Club seaak
I
_ I I.
» I Plqee I I ‘ Rib Roast 8
’ I (Short Ribx, I  
‘  I Braising Beal. I
G dBe ll I .
I6 _  | mlm E I ;;}I_ Chuck Roast 19
_ Bflikél · (Blade, Arm)
I l(Corned Beet. I  
6 = I Braising Beet) :
€ I I
e · I I ·  
I I\ wig
I Shank I I \ 4 Hamburger,
  l ` `—`'' " " "I \ Stew Meat, 24
`  I Neck \   & Misc. Cuts
\ /
lx
mms V
i E mn! Total Salable Retail Cuts 80
  W   Waste, (Fat, Banes,Shrinkagel 20
  Hm'   Total TOO
I " WASTE
I  AMS NI:<;,Zs04:s-56 I2)
IS  I.
·  Fig. 7.- This chart of retail beef cuts shows the location from which come
; the various cuts and the approximate proportion of each cut.
li =  able for the retail trade. Processing involves trimming off excess
Ll I  fat, boning 801116 cuts for roast and stew meats, and grinding parts
t- I_‘  Of the carcass into fround beef. About 80 >0unds of salable retail
  &» l
I 7

 cuts of beef are obtained from every 100 pounds of U. S. choice carcass cht
beef. Very low prices are received from the sale of bone, fat, and Fr<
waste. in
EXAMPLE OF BEEF MOVEMENT FROM FARM TO CONSUMER 70
This example assumes that in October 1959, a U. S. good grade mt;
555-pound yearling steer raised on a central Kentucky farm was
shipped by truck to a local auction market. A cattle feeder from mh
Indiana bought the steer to go in his feedlot. The steer arrived a tm
few days later at the feedlot weighing 530 pounds. The cattle
feeder put the steer on a typical Indiana Corn Belt fall feeding alu
program. After 200 days of full feed the fat steer was shipped to ° lug
the Indianapolis market in ]une 1960. At this terminal market it
weighed 950 pounds and was graded U. S. choice. An Indianapolis tot:
packer purchased it for immediate slaughter. The 561-pound U. S. L ab(
pot
ma
 
NOT ALL STEER IS STEAK , .....  _ __  uae
$0F CARCASS ‘   >’_ ’‘‘‘’   {
'.Z`fL"` I ZZ   $f’»"['.$~-'2ZZ   Or
CHUCK—IS% 4 " PORT£m•bus¢  _ 
· —. z;::~= l=·j_ ~ the
. 1   iddi JHJN wh
32% 24%   ou
\ .
·' GX3.
@ @ é=»==5¤$ "'\ I  
__  4 V   \ il pI`€
§  *· ;"""   I  ..~, Z"?   age
`, ·   · ‘i‘  _‘  {gg I me;
  V t- " ‘  v _ ·  A N  I gra
        I less
 VII  ifi .;""‘:§ all   ‘ Pm
- l L.   54* · —#¤ · i  .... -* f‘-{ . .
U;   V 20% V qui
. ` . 11lCl
. f A I I I if      if pw
` '   "    Q_ thu
A , ~ ' {lt  
Fig. 8.- Not all of the steer is steak. Such popular cuts constitute only about .
24 percent of the dressed beef carcass.
8

 iss choice beef carcass was sold to a retail food store in New York City-
id From this carcass 449 pounds of retail cuts were sold to consumers.
in New York City during the last week in ]une.
Together, the farmer and the feeder would have received about;
l 70 percent of the amount consumers spent for the 449 pounds of
ie retail cuts, the remaining 30 percent going to marketing agencies.
as Although the cattle feeder would have received the largest share
m of the consumer’s dollar for beef (about 38 percent), his gross re-
3 turns would have barely covered the cost of feeding.
,18 Many different retail cuts of beef are obtained from the carcass,
lg and they sell at widely different prices. The more desirable and
to higher cuts represent only a small proportion of the total carcass.
it Since the carcass averages 59 percent of the live weight, and
HS total salable retail cuts of beef represent 80 percent of the carcass,
S. about 46 or 47 pounds of salable retail cuts are obtained from 100
pounds live weight of U.S. choice grade steer. Thus, before any
marketing costs are added to the net return received by the farmer:
or rancher, the retail price per pound must be more than double
the live weight price per pound to equal the price paid the producer
for the live animal.
On the basis of carcass price (the price paid by the retailer to
the packer), some of the cuts of beef sell at prices per retail pound
which are less than half of the prices paid per pound of beef carcass.
Other cuts sell at prices that are more than twice the carcass price-
; Choice live cattle and choice dressed beef were used in the
Q  example because retailers sell almost as much fresh beef grading
4 choice as any other three grades. Even a greater price spread is
p present in the case of lower beef grades, since the dressing percent-
V ages are much lower than top quality cattle; there is less eating
. meat, more bone, but less fat. (This is especially important: lower
  grades of beef often sell to the best advantage when made into bone-
, less beef.) Cutting and boning must be done by highly skilled labor.
  Processing boneless beef into attractive, appetizing products re-
_ quires more time, labor, equipment, and supplies. These extra costs
i increase the spread in prices between the live animal and the finished
  product.
if Why do we have $1.10 steak from 29-cent cattle? There are
. Q three main reasons;
j 1. Only 59 percent of a choice steer is carcass beef.
. 2. Only a small portion of the carcass is steak.
;  3. Buying, slaughtering, processing, selling, and delivering costs
" T make the difference in price between beef on the hoof and
QV meat on the table.
(  9

 About 15 percent of the consumers dollar, or half of the total R°I`
farm-to-retail marketing margin, would have gone for retailing. The $316*
packer-who1esaler’s share was 11 percent, including 5 percent for  
transportation of the beef carcass. The remaining 4 percent was for Less
l1V€SI[OCI( 1`1'l9.I`I(Gt11]g COSIS SHCI] 8.5 t1`llCI(1Hg, COl]TI`1'l1SS1OI`1S, 3.HCI yElI`(18.gC. at
E tl
ESTIMATED MARKETING AND FEEDING COSTS Su
AND NET RETURNS Beta
Return to Farmer —— Whc
Sale value of 545 lb (shrink deducted) U. S. Good Grade steer
at Lexington, October 1959, at $29 per 100 lb ........................................ $152.60 ·
Less marketing expenses;   MM]
Trucking expenses from farm to market .............i.......... $0.12 cwt y
Expense at auction market, including yardage, etc. ...... 2.16 I
Total marketing expense to farmer ............................................ 2.28
Gross return to farmer ............................................................ $150.32 · l{€tu
_ Retu
Return to Feeder- _
Sales value of 950 lb (shrink deducted) U. S. Choice Grade fed
steer at Indianapolis, ]unc 1960, at $28 per 100 lb ................................ $266.00
Less marketing expense: ‘
Trucking expense from Indiana feedlot to Indianapolis $ 1.82
Expense at Indianapolis livestock terminal market
including commission, yardage, etc. ................................ 2.45
· Total marketing expense to feeder ............................................ 4.27
Received by feeder from sale of fed steer ................................ $261.73
Cost of 545 lb U. S. Choice Grade fed steer at Lexington,
October 1959, at $29 per 100 lb ..... . ...................................... $152.60 V
Expense of shipping feeder steer by truck from Lex- 3
ington to Indiana feedlot ............................................ 2.98 ,
Total Cost ..................................................................... . .............. $155.58 i
Gross return to feeder ................................................................ $106.15  
Estimated Net Return to Feeder: A 
Gross return to feeder .................................................................................... $106.15
Less feeding cost ............................................................   86.20
Miscellaneous (medicine, sprays, veterinarian) ............ 2.00 ‘
_ Labor ................................................................................ 2.40
Total Feeding Costs .................................................................... $ 90.60 ·
Net return to feeder above feed, labor, mise. costs ........................ 5.55
Return to Pucker-Wholesaler — A
A Sales value of 561 lb U. S. Choice Grade beef carcass (950 lb 1
live weight), New York City, june 1960, at $43.20 per 100 lb .............. $242.35
Less expenses of shipping beef carcass from Indianapolis to I
New York City ............................................................................................ 14.05 Q
Net received from sale of beef carcass ............................................ 228.30 _ 
Cost o1` 950 lb U.  Choice Grade fed steer at Indianapolis, .
1960, at $29.10 per 100 lh ............ . ......................................... $266.00  
Value of by—products .................................................................. S 29.16 _ 
Value of live steer less by—products .................................................. $236.84 —.
Gross return to paekcr—w1io1esa1er ............................................ -8.54
10 ·‘

 I Return to Retailer
, Sales value of 443 lb of retail cuts of beef including allow-
A ance for the sale of bones, fat, and waste (]une 1960)
` from 561 lb beef carcass ............................................................................ $272.60
T Less cost of 561 lb U. S. Choice Grade beef carcass delivered
at New York City .........,.............................................................................. 242.35
' V $ 30.25
Estimated Distribution of Consumer’s Dollar Spent for Beef
Percent
Retailing ..........................................................................................................,... 14.9
\Vholesaling and meatpacking Percent
Transportation .... . ............................................................................. 5.4
Other .................................................................................................. 5.6
) 11.0
Marketing Livestock
Expenses at markets .............................................,.......... . .......,....... 1.6
Transportation .. ...,..... . ...........,........................................................... 2.3
* 2.9
2 Returns to cattle feeder ................................................... . .................................. 38.0
Returns to farmer ............................................................... . ................................ 32.2
l 100.0
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gngricglgmglg c0i1i>n§§ti§1gi4Fr::ks ]. Welch, Director? Issued in furtherance of the Acts of _.
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