The Influential 10% with Paul Dykstra

The cattle cycle is something everyone in the beef business is familiar with, but one incredibly bright spot in the current cycle is the quality of beef U.S. cattlemen are bringing to the table with less cattle overall.
 
On this episode, we are joined by Paul Dykstra, Director of Supply Management & Analysis with Certified Angus Beef. Take a listen as Paul and our very own Miranda Reiman chat about recent data on CAB cattle harvested, the data backing CAB brand standards, improvements in the quality of cattle over the last decade and the incredible job U.S. cattle producers are doing at bringing high quality cattle to market.

We thank Westway Feed Products for their support of this episode.

Find more information to make Angus work for you in the Angus Beef Bulletin and ABB EXTRA. Make sure you're subscribed! Sign up here to the print Angus Beef Bulletin and the digital Angus Beef Bulletin EXTRA. Have questions or comments? We'd love to hear from you! Contact our team at abbeditorial@angus.org.

Transcript

Lynsey McAnally (00:02):

Angus at Work, a podcast for the profit-minded cattleman,. Brought to you by the Angus Beef Bulletin, we have news and information on health, nutrition, marketing, genetics and management. So let's get to work, shall we?

Lynsey McAnally (00:25):

Hello and welcome back to Angus at Work. The cattle cycle is something everyone in the beef business is familiar with, but one incredibly bright spot in the current cycle is the quality of beef US cattlemen are bringing to the table with less cattle overall. I'm Lynsey McAnally, and on today's episode, we are joined by Paul Dykstra, director of supply management and snalysis with Certified Angus Beef. Take a listen as Paul and our very own Miranda Reiman chat about recent data on CAB cattle harvested, the data backing CAB brand standards, improvements in the quality of cattle over the last decade and the incredible job U.S. cattle producers are doing at bringing high quality cattle to market. So, let's dive in!

Lynsey McAnally (01:13):

Today's episode of Angus at Work is brought to you by Westway Feed Products. Westway Feed Products liquid supplements, increase forge utilization when seasons cause forages to decline in value. Our products deliver effective and efficient nutrition to your herd. To learn more about the best way to raise beef, please call 800-800-7517 or visit westwayfeed.com.

Miranda Reiman (01:44):

Welcome to the Angus at Work podcast! I'm your host Miranda Reiman and my guest today is Paul Dykstra with Certified Angus Beef. Hey, Paul.

Paul Dykstra (01:52):

Hey, Miranda. Thanks for having me on the program.

Miranda Reiman (01:54):

Yes, we just finished up the Certified Angus Beef Feeding Quality Forum here in Dodge City, Kan., and had a lot of good information on the program. But you were one of the early speakers with a program talking about the most impactful 10%. I don't know if I got that title exactly right, but the 10% that has the most impact. Can you explain that a little bit?

Paul Dykstra (02:18):

Yeah, that is kind of a hook for a title of my portion of the program. But what it's referring to is the fact that when we evaluated our 2023 CONSIST data. A little over 2 million head of carcasses evaluated together in a big data set that we put together from our many packing partners and that data being specific to Angus-type or eligible animals, black-hided cattle. And evaluating that data. we found that up and down the scope of marbling scores, 10% of those carcasses were within 30 degrees of the lowest marbling score that's eligible for Certified Angus Beef, which is modest zero. So that 10% that's within 30 degrees of that entry point to CAB looks like kind of the low hanging fruit, if you will. And it's a relatively tight concentration of a large number of animals or carcasses in this case.

(03:26):

So the idea simply being that we need to grow our supply in the future, and of course in '24, this is a period of time where that's very challenging with the contraction of the beef cow herd over the last few years and not expanding quickly by any means. We're looking at times like this for ways to improve our supply without actually improving the nation's headcount. And so if we can breed cattle a little bit better from a marbling perspective, obviously that would be the first area that we would look toward to help us in the future push that 10% on up into Premium Choice and consequently Certified Angus Beef. That was a little bit of the journey that we went on in our session here yesterday at the seminar.

Miranda Reiman (04:18):

And when you talk about that 30 points of marbling, maybe put that in perspective for our listeners. I mean, how much is 30 points on what scale?

Paul Dykstra (04:27):

Yeah, good question. So Choice is typically thought of as low, mid, and high Choice. There are three separate areas of the grade and Certified Angus Beef occupies the upper two-thirds. So average Choice and above. And then low Choice is simply what we call commodity Choice. And low Choice is the scale of 400 to 499. That entire span is low Choice. And so 30 degrees would be 470, roughly up to 499. And so that's actually very close. The short answer is it's very close and a tight alignment of a lot of carcasses that are almost into average Choice and consequently CAB.

Miranda Reiman (05:20):

And of course you talked about it from a growing supply standpoint, but from a producer standpoint, anybody who's retaining ownership, it means they're that close to premiums as well?

Paul Dykstra (05:30):

That's true, that's true. And of course the thought that then comes to mind is, well, they're close but no cigar, right? So you've got to figure out what you do differently moving forward, but I guess it's good to have the knowledge at least on a very, very large number of animals. It's no accident. That's big data and that means the data is very, very solid. So it's good to just have the knowledge that, hey, each and every day we have in recent history produced a lot of cattle that we're almost good enough. So what can we do differently? Can we implant them differently in the feed yard, add days on feed? Which it's hard to recommend today that that's the solution to anything because we are feeding cattle as long as we ever have in history and carcass weights are becoming very, very heavy and potentially somewhat problematic.

(06:18):

So I wouldn't necessarily jump to that end or that conclusion today, but anywhere in that animal's life from birth all the way to harvest after we've already made our genetic inputs (which arguably I think there's plenty of room to improve that as well in our selection of Angus bulls in our case to what best feeds our supply chain) we can certainly improve on some of that pressure on marbling. But there are lots of management opportunities at the farm or ranch and through the feedyard if folks choose to give those cattle or help their chances a little bit and give the nudge to that 10% to get them across the line.

Miranda Reiman (06:57):

So you mentioned genetics would be the first place to start. You talked about a program that Certified Angus Beef has had in place for a number of years - for I guess half a decade or something like that. Talk a little bit about the Targeting the Brand program and how that might help producers as they head into some of these fall bull sales or even next spring as they're looking at their sire selection.

Paul Dykstra (07:18):

Yeah, I really like the Targeting the Brand program and what it does is, and you said it's been many years that we've had that, and it came from commercial producers calling our office with some frequency wanting to know, 'Hey, we'd like to get more cattle into Certified Angus beef', or 'We'd like to become a reputation cow herd for producing a high percentage of CAB-type carcasses. What do we do? What do you recommend we do to do that?' And of my bias has always been, well, genetics is the easiest path and the most obvious. And of course my colleagues at CAB similarly thought that we should put forth some recommendations. And there are lots of things to do from a management perspective that we could add into this discussion, but specific to genetics selection for marbling is the obvious choice because something like 82% of all carcasses that fail to make Certified Angus Beef miss due to marbling.

(08:17):

So that's why we emphasize marbling selection and pressure and not to the detriment of any other trait of course. And I must always qualify the statement by saying balanced trait selection is the way to go, but do so with marbling in mind and make marbling a criteria at least at the very least. And so we designed targeting the brand to be a logo used in association with bulls, primarily bulls that meet plus 0.65 marbling EPD as well as plus $55G index combined. And that is affiliated with a probability of 50% of the offspring of those sires making it into Certified Angus Beef. So that 50% compares to currently we're at 36% or 37% on a very current basis of CAB acceptance. So 50% is well above that and it's a good goal to reach an even higher percentage of Certified Angus Beef. Clearly, we have lots of examples of cattlemen that are shooting for marbling EPDs well above what I've just described with Targeting the Brand. But we feel like it's a good mid-range number that first of all is very inclusive of a lot of bulls, a lot of number of sires meet that, and a lot of seedstock breeders can successfully create a lot of bulls that do that. But of course the sky's the limit and we know lots of folks are shooting for marbling EPDs well above that, and that's great. And you can make faster and larger leaps toward higher marbling achievement with doing so.

Miranda Reiman (10:04):

You just look for that logo when you're looking through the bull sale catalogs?

Paul Dykstra (10:08):

Yeah, that's the part that's handy about it with the number of EPDs and indices that are available on Angus cattle today. It's a lot and it's kind of handy to be able to page through the bull sale catalog and just see the logo right there. And that's just a quick visual that the bull you're looking at at least meets that criterion from a marbling in a carcass perspective. And you can go on and look at the rest of the numbers affiliated with that bull and you can kind of use it as a preliminary sort if you will. And a lot of folks do actually use that. And it also shows up electronically on the pedigrees on angus.org as well. So that's kind of handy is another visual trigger.

Miranda Reiman (10:52):

And so once producers have focused in on that or have maybe thought about trying to move that 10%, it's one way obviously, and you mentioned some management things, but you put some dollar figures to that in your presentation. What kind of impact can just moving that small chunk of cattle have on maybe a per head across the whole pen basis?

Paul Dykstra (11:14):

Yeah, we included in that discussion in the seminar the comparison of the average of all of those Angus eligible carcasses in terms of their carcass data outcome. Compare that against what would happen if we moved all of those marbling scores up 30 degrees, which accomplishes the goal of getting 10% more of those low choice carcasses up into CAB, both the affiliated move of all of those carcasses being 30 points better for marbling. I think we looked at about a $25 per head premium improvement in doing that. And some of the punchline though was that that's fine, but that's not really changing anyone's life too much and it's not as attractive as we would like it to be if we're thinking about selling fed cattle and trying to add value to 'em. Now granted, historically a $25 profit itself would've been very acceptable in the cattle feeding sector, but today when we're thinking about an asset in a fed steer or heifer that's worth in the range of $3,000 depending on grade, a $25 change in the value of that animal is a smaller proportion of the total than what maybe we would like it to be.

(12:37):

So we moved on into some more discussion about, well, what if we make the goal 20% Prime because Prime premiums are well larger than CAB premiums of course. So that's a good goal to concentrate on Prime. And in doing so, we pull in a lot of improvement in just premium Choice CAB carcasses too. So we drag everything higher when we shoot for the top. And when I showed the math for that, we're closer to a $65 premium above just the total industry average carcass data for 2023. Again, 20% Prime, that's pretty darn good. When we compare to industry average today is just under 10% across the board. So we're doubling the industry average today. But again, we can show several examples and talk to several cattlemen that are disappointed if they're producing less than 50% Prime. So we could talk and talk about the coffee shop comparisons on data, and obviously there are always really extreme, good examples, but 20% Primes are very doable without a monumental change within a cow herd, if you will. We still get $65 premium with that. It's a great start. You can see that we can just go up and up from there and a hundred dollars ahead across the entire pen is really kind of a benchmark of, 'Hey, now we're really doing something'. So you'd need to do better than 20% Prime and a large percentage of CAB carcasses to do that.

Miranda Reiman (14:18):

For sure. So we've been talking about marbling just primarily here, but you mentioned this CONSIST data and you're not just measuring the marbling on these cattle, you're also looking at ribeye area, carcass weight and some of those kinds of things. But you mentioned earlier marbling is the number one reason. Is that as true today as it was when you started that CONSIST study maybe a decade ago or whenever we had the first ones?

Paul Dykstra (14:43):

No, it's not the same as it used to be. I believe 92% or 94% used to be the number, the percentage of fallouts due to marbling years ago. And it was like that for a long time. It was almost the conversation only should be about marbling because the other, we've got 10 carcass standards, all of them important. But when nine out of 10 of the failures are due to marbling, it's really easy to see where the problem lies. But as carcass weights have continued to increase and they have rapidly done so since Covid. The Covid year of 2020 was the first real uptick and some unseasonal wild behavior in terms of carcass weights due to the backlog of fed cattle. But we have had to increase our brand carcass weight since 2015. And 2015 was a period not unlike 2024, where the supply of cattle had dwindled enough to where carcass weights were rapidly increasing due to management in a feed yard.

(15:50):

And profitability of fed cattle was so good, and the cost of gain related to the sales price of the fed animal was so vastly lower that we could just add weight and every pound was money right in the bank. And so that was our first adventure into super heavier carcass weights in one single season. And in 2015, we made the first adjustment from 1000 pound (lb.) maximum to 1,050 lb., and weights continued to increase as they have done historically 5 lb. a year. But we had some bigger advances periodically. And in 2022, in October, actually on Halloween, we also, we had to increase again to stay relevant with the industry to 1,050 lb. Excuse me, that was up to 1,100 lb. And that's where we are today. And so the reason I'm describing that history is that carcass weight and ribeye size have become more of a factor in carcasses being unsuccessful.

(16:54):

Now, as we've increased our carcass weight maximum, we've alleviated some of the problem because we've adjusted to manage that problem and the loss of those really high quality excellent carcasses. We've recaptured them through our adjustments, but ribeye size now. So we haven't changed ribeye size, and the max is still 16 in. under our standard scenario. And so we're losing more due to ribeyes exceeding 16 sq. in. today. So that's becoming more of an issue, and it's just a sign of the times that cattle are getting bigger and management in the feed yard has changed. Our packer partners attitudes about big carcasses have also evolved to be more favorable on those heavier ones.

Miranda Reiman (17:44):

Has heavier weights become more acceptable? Some producers might say, "Well, then why penalize us for above a 16 ribeye?" Explain why that spec is in place.

Paul Dykstra (17:57):

Yeah, it's a good argument to ask the question. And often I have to go through a mental exercise as well to feel good about the fact that we haven't changed that because I can see that we would readily capture another good portion of carcasses if we were to increase that. But it is the standard, the sizing standard for our brand that immediately impacts the customer from a standpoint of your steak plate size and ribeye area is immediately impacting your plated product size on these middle meat steak cuts. And folks don't want them any bigger. They're plenty big enough at 16 in. on your plate and cut to an 1.5 in. thick or something. I think we've had this discussion in our industry for decades now, but we could change it and increase it. Folks would have to learn then how to reimagine how to cut that product. And I'm not saying that the issues off the table, but we are sure slow to change on that one. And obviously still today we haven't chosen to do so.

Miranda Reiman (19:10):

As we've seen that marbling has improved and quality grades have improved. It's exciting to look at those trends and say that producers have done a good job at listening to the economic signals that have been put in front of them.

Paul Dykstra (19:23):

That's true by and large, and a lot of it is unconscious in terms of not every producer in the supply chain is making that conscious decision. But collectively, the seedstock sector is, of course, driving that change. They have put more concentration on carcass traits and marbling specifically in our case, and done a tremendous job in the last 15 or 20 years. And as well, I think that the commercial sector, we do have more participants there that are conscientious of these traits, and it doesn't necessarily mean that there are more people who may be retaining ownership or feeding cattle in the commercial cow-calf sector, but just being cognizant that the value of their feeder calves is affected by whether or not those cattle go on to achieve high status in the marbling measurements in the cooler. So it's been a lot of fun to watch because the consumer acceptance of beef in total from the U.S. has, it's been revolutionized since that low point in 2006 where quality grades and Certified Angus Beef brand acceptance hit a bottom in modern history. Ever since then, it's been sky's the limit and impressive dramatic change in our country's product in total. And then when we get into, now, that's just the entire U.S. average, but if we get into pockets of, now, let's talk about some of the special cattle, the ones that are really well bred that are the top of that average. And boy, it'll make you emotional to see how good they are because they're exceptional animals.

Miranda Reiman (21:14):

Well, that feels like really a good place to end or good news to end on. Is there anything I haven't asked you about that you wanted to add?

Paul Dykstra (21:21):

No, I think we covered it.

Miranda Reiman (21:23):

Excellent. Well, you've been a guest on this podcast before. So my last question is always that there's enough bad news in the business. Give me something good! Whether it's personal or professional, share something good with us.

Paul Dykstra (21:35):

Well, I think it's both personal and professional.I have had the chance to do a little bit of traveling lately in the center part of our country and see the improvement in the moisture conditions across the large area. It's always really frustrating to see drought. And we've had our share of it in the last couple of years. 2022 was the last really bad year in a lot of country. It's nice to see some improvements for some folks, and especially notable in western Kansas, which is a part of the country where two years out of 10 would be good years. So they're having some good ones here in the last couple of years in this part of the world.

Miranda Reiman (22:13):

Yeah, they've been due. And it was definitely fun to drive down and see green grass, black cattle! That's good news for sure.

Paul Dykstra (22:20):

Absolutely.

Miranda Reiman (22:21):

Well, thank you so much for joining us on the podcast today.

Paul Dykstra (22:24):

My pleasure. Thanks again. Miranda

Lynsey McAnally (22:32):

Listeners, for more information on making Angus work for you, check out the Angus Beef Bulletin and the Angus Beef Bulletin EXTRA. You can subscribe to both publications in the show notes. If you have questions or comments, let us know at ABB editorial@angus.org, and we would appreciate it if you would leave us a review on Apple Podcast and share this episode with any other profit minded cattlemen. Thanks for listening. This has Ben Angus at Work.