Crunching the Numbers for Retail Meat Sales and Live Animal Sales - - PowerPoint PPT Presentation

Crunching the Numbers for Retail Meat Sales and Live Animal Sales

Andrew P. Griffith Assistant Professor Extension Livestock Economist

What can I market?

• Live animals

– Stocker/feeder cattle

• Traditional methods (auction market, value added, etc.)

– Finished/Fed cattle

• Traditional avenues (Cargill, Tyson, JBS, etc.)
• Local consumers for local harvest (live animals: wholes,

halves, quarters, etc.)

• Meat

– Steaks, roasts, other muscle cuts, ground product

Demand and Market Size

• Stocker/feeder cattle

– Easiest, multiple sales and multiple buyers every week

• Finished/fed cattle

– A long way from large commercial facilities – Must have sufficient demand by local consumers to meet

• bjectives for sales, profits, etc. for live cattle sales
• Meat

– Some cuts will sale better than others – Determining the correct mix of steaks, roasts, other muscle cuts and ground product can be a challenge

Focus for Today

• Marketing and pricing live animals for custom‐

exempt processing

• Pricing and direct marketing meat
• Pricing to cover costs/Break‐even pricing
• Pricing a profit objective

But First

• Regulations: Live animal vs. Meat

– What do I have to do to market a live animal?

• Sell a live animal!
• Custom‐exempt processing can only be done for the
• wner of the animal and cannot legally be sold.

– What do I have to do to market meat?

• Harvested under USDA inspection
• Retail Meat Sales Permit from TDA.

Live Animal Sale Suggestions

• 1. Clear communication in all transactions
• 2. Avoid terminology associated with “meat”
• 3. Set sale price for the live animal
• 4. Provide and retain detailed bill of sale
• 5. Document transfer of funds for live animal
• 6. Customer should pay processing fees
• 7. Transportation of animal to processing facility

Livestock Bill of Sale

• Date of transaction
• Names and addresses of buyer and seller
• Description of animal
• Dollar value received by seller/ paid by buyer
• Payment method (cash, check, etc.)
• Delivery services agreed on
• Buyer and seller signatures

Ways of Calculating Costs

• Calculate actual cost of production: breeding
• f cow through sale of live animal or meat
• Value of weaned calf plus cost of production

from weaning to sale of live animal or meat

Value of Weaned Calf

• Using the value of a weaned calf captures
• pportunity cost
• 500 lb steer calf at $196 cwt

– $980/head

Decision Time

• Are we going to provide a grain based diet or

strictly a forage based diet?

– Grass fed, Grass fed and grain finished, Organic, Natural, other alternatives? – Have to know the market

Grain Based Diet with Pasture

• Cost of backgrounding the calf

– Carrying the calf from 500 lbs to 800 lbs

• Cost of finishing the animal

– Carrying the animal from 800 lbs to 1300 lbs

Backgrounding Cost

• 500 lbs to 800 lbs

– ADG = 2.0 lbs (150 days = 300 lbs) – Feeding 2.5% of bodyweight

• 1.0% hay/pasture (974 lbs)
• 1.5% grain supplement (1,460 lbs)

Item Price Cost Hay/Pasture $85/ton $41.37 Grain $225/ton $164.28 Salt/Mineral $0.18/lb $4.86 Vet/Med $15.00 Death Loss 2% $19.60 Interest charge 4% $20.14 Total Backgrounding Cost $265.25

Finishing Cost

• 800 lbs to 1,300 lbs

– ADG = 3.5 lbs (143 days = 500 lbs) – Feeding 2.5% of bodyweight

• 0.3% hay/pasture (450 lbs)
• 2.2% grain supplement (3,299 lbs)

Item Price Cost Hay/Pasture $85/ton $19.12 Grain $225/ton $371.09 Salt/Mineral $0.18/lb $5.40 Vet/Med $8.00 Death Loss 1% $12.45 Interest charge 4% $26.03 Total Finishing Cost $442.10

Total Cost of Production

Item Cost Value of Weaned Calf $980.00 Total Backgrounding Cost $265.25 Total Finishing Cost $442.10 Labor Cost $20.00 Fixed Cost (taxes, ins., depr., main.) $37.50 Total Cost $1,744.85

Break‐Even Pricing

• Live Weight

– $1,744.85/hd ÷ 1300 lbs

• $1.34/lb
• Dressed Weight (Illustration Purposes Only)

– 60% dressing percentage – $1,744.85/hd ÷ (1300 lbs × 0.6)

• $2.24/lb

Profit Objective Pricing

Profit Objective Revenue Live Price $100/hd $1,844.85 $1.42/lb $200/hd $1,944.85 $1.50/lb $300/hd $2,044.85 $1.58/lb $1.42/lb

$,.$ ,

Marketing Meat?

• Additional cost when marketing meat as

individual cuts and as ground product

– Transportation (live animal to processing facility) – Processing ($0.35 ‐ $0.45/lb) – Transaction (time, transportation, time, promotion/advertising, time)

Processing Cost

• 1,300 lb animal dressing 60% (780 lbs)

– $0.35/lb ‐ ($273/hd) – $0.40/lb ‐ ($312/hd) – $0.45/lb ‐ ($351/hd)

Break‐Even Pricing Meat

Item $0.35 $0.40 $0.45 Production Cost $1,744.85 $1,744.85 $1,744.85 Processing $273.00 $312.00 $351.00 Transportation $20.00 $20.00 $20.00 Transaction $100.00 $100.00 $100.00 Total Cost $2,137.85 $2,176.85 $2,215.85 Break‐Even Price $2.74/lb $2.79/lb $2.84/lb

Transaction cost are extremely variable and can account for a large portion of total cost

Break‐Even Prices Too Low

• Some cuts may not be easily marketed

– Liver, stew meat, etc.

• Availability of certain cuts

– Not enough steaks, too many roasts! – Ground beef?

• If I can’t market it as a muscle cut, should I

grind it?

– Depends if the ground beef is easily marketed

Other Considerations

• How long am I willing to keep meat in the

freezer before it should be discarded?

– Consumers may have a preference

• Determine the mix of cuts

– Cannot have your cake and eat it too – T‐bone or New York Strip and Filet Mignon

Other Considerations

• Pricing of different cuts to achieve price
• bjective

– Steaks, roasts, and ground beef priced differently

• Pricing can be effected by time and place of

marketing

– Spring vs Winter – Metropolitan vs. Rural

Thank You