Premiums & Deductions: Dairies Have A ‘Steak’ in Cow Quality

When every dollar of dairy income counts, lost premiums and quality deductions on cull cows add up.

By Dave Natzke

Dairy cows represent 6%-8% of total U.S. beef produced annually – and a source of income for dairy producers when cows can no longer contribute in the milking parlor. As of late October 2009, more than 2.3 million culled U.S. dairy cows were slaughtered under federal inspection this year alone.

Results of the 2007 National Market Cow and Bull Beef Quality Audit indicate there’s still work to be done to improve market cow quality and consistency. Auction barn audits demonstrated dairy cows had the most visible quality defects compared to other cattle types.

A recent beef quality assurance (BQA) program, sponsored by the national beef checkoff program with help from Idaho and California Beef Councils, estimated how quality defects impacted cow sale prices. Information was collected at 10 livestock auction markets with regular weekly sales (four locations in California, five in Idaho and one in Utah) during spring and fall of 2008. A total of 9,177 lots with 12,429 head were analyzed. The majority (86%) of cows sold for $30-$60/cwt. The mean sale price of all cows was $42.23/cwt.

According to USDA, the 2008 average price for cull cows (beef and dairy cows combined) was $50.60/cwt.

Comparing cows

Subjective scores – based on established evaluation scales – were assigned for body condition score (BCS), muscle score and locomotion score (LS). Additionally, cows were evaluated for specific defects: foot abnormalities; mastitis evidence; retained placenta; brand (and major brand) presence; horn presence/length; cancer eye score; prolapsed rectum/uterus; evidence of surgery; abscess/sore presence; whether cows were visibly sick;  or other conditions.

Researchers developed a model for a “par” cow: a healthy, Holstein cow selling as a single lot with the following characteristics: weight – 1,400-1,599 lbs.; BCS – 3.0; muscle score – 3.0 muscle score; lameness score – 1.0; udder size – average; with no horns, brands, knots, sores, cancer eye, foot abnormalities, leg bands, udder or reproductive defects.

Premium and discount ranges

Premiums and discounts listed are compared to “par” cows:

• BCS: Market cow buyers desire moderate to heavy BCS, with no deductions at 3.0, and a premium of  $1.35/cwt. at 4.0. Emaciated and near emaciated cows (BCS 1.0 or 1.5) were strongly discounted (-$20.47 or -$12.19/cwt., respectively).

• Body weight: Lightweight cows (<1,000 lbs) were discounted substantially (-$6.72/cwt.); with cows weighing 1,000 to 1,199 lbs. (-$2.89/cwt.); and 1,200-1,399 lbs. (-$1.14/cwt.). Heavier cows earned premiums, with 1,600 to 1,799 lbs. (+$0.73/cwt.) and 1,800-1,999 lbs. (+$0.97/cwt.). Very heavy cows (2,000 lbs. or more) received the same price as cows weighing 1,400-1,599 lbs.

• Lameness. Discounts for lameness varied substantially, depending on severity. Cows with a LS of 2 or 3 were discounted $1.76 or $2.88/cwt., respectively. Cows with a hunched back while standing and walking and favoring one limb (LS 4) were discounted $4.03/cwt.

• Muscle score. While heavier muscling is not a typical breed characteristic for dairy-type animals, it does impact carcass yield. Cows with a light muscle score of 1 or 2 were discounted at $6.92/cwt. or $1.80/cwt., respectively.

•  Udder size. Udder size influences dressing percentage, carcass weight compared to live weight. Non-carcass items (hide, head, udder, etc.) is commonly referred to as the “drop” or offal value. Buyers will “adjust” the live weight price based on a cow’s anticipated dressing percentage.

Based on research, “small” udders (25-50 lbs.) constitute 3%-5% of total drop weight;  “average” udders (50-75 lbs.) represent 8%-11%; and “extra large” udders (greater than 75 lbs.) likely represent 15%-20%, significantly impacting dressing percent. Cows with extra large udders were discounted $1.18/cwt. In contrast, cows with small udders, including dry or undeveloped mammary glands, received a $0.54/cwt. premium.

Illness: Animals that exhibited a potential antibiotic residue risk based on their appearance were discounted. For example, animals that had reproductive defects, such as a retained placenta or evidence of a recent surgery,  were discounted $5.02/cwt. and $8.64/cwt., respectively. Animals that appeared to be sick were, on average, discounted $15.77/cwt.

Other BQA traits

While other traits were not highly prevalent, they did have the potential to significantly impact sale prices.

• Foot abnormalities. Cows with foot abnormalities (long toes, screw toe, etc.) were  discounted $5.79/cwt.

• Leg bands. The presence of one or more colored leg bands, commonly used to identify a cow for a variety of reasons (e.g. not to be bred, treated with antibiotics, kicks during milking, etc.), did not affect selling price.

• Bottle teats. The incidence of bottle teats, which may indicate mastitis, did not affect selling price. However, cows with visible mastitis sold for $2.35/cwt. less.

• Ocular neoplasia (“cancer eye”): Very few cows exhibited ocular neoplasia, but a small percent were assigned a score of 5, which indicates the eyeball is prolapsed from the orbit. Cows with ocular neoplasia in the pre-cancerous stage (score of 1 or 2) were discounted heavily (-$6.78/cwt.). A severe discount (-$32.04/cwt.) occurred in cows with ocular neoplasia in the cancerous stages (3, 4 or 5 score), due to the possibility these animals will be condemned. Animals identified in early stages of ocular neoplasia should be marketed immediately to avoid severe discounts.

• Retained placenta. A small percentage (0.13%) of market dairy cows had a visible retained placenta, and were discounted $5.02/cwt. Evidence of recent surgery (displaced abomasum, caesarean section, etc.) led to a discount of $8.64/cwt.

• Body sores. “Active” or recently acquired body sores on the hip or knee led to a discount of $4.58/cwt. and $4.85/cwt., respectively.

• Visibly sick. Cows displaying one or more of the following subjective characteristics – severe lethargy, extreme weakness, significant panting, drooping ears or extremely gaunt – often resulted in an animal not selling at any price, or being sold contingent on passing inspection at the packing plant.

• No sales. About 1.5% of the animals offered for sale to auction market buyers were “no saled” or “passed out” due to the presence of one or more major BQA defects, including, but not limited to: severe lameness, visible illness, emaciation, advanced cancer eye, or being extremely light-weight or light-muscled.

Implications

Culling animals in a timely manner is one of the best measures to maintain value and enhance their carcass quality. Recognize potential opportunities to add value by improving carcass quality and yield by improving BCS, body weight and muscling score.

BCS emerged as one of the most important factors in determining potential premiums. Producers should consider adding value via improved BCS to thin cows prior to sale.

The positive correlation between increased body weight and price indicates producers should consider adding pounds to lighter weight market cows (<1,400 lbs.) prior to sale. Benefits include avoiding the lightweight discount, accessing a heavyweight premium, as well as selling more weight at a higher price.

However, producers must determine if such a strategy is cost-effective, comparing the potential added revenue with other costs, such as feed, medicine, time and labor involved with keeping an animal when she has no potential to return to the milking string.

A pricing model developed by researchers indicated the range of discounts was greater than potential premiums. The best strategy is to avoid major discounts through management and timely culling. This will optimize revenue opportunities and decrease the likelihood of cows entering the marketplace in marginal condition.

Avoid selling animals that are severely emaciated, visibly sick, very lame, have open sores or injuries, cancer eye or evidence of surgery. Animals with extreme defects should be humanely euthanized on-farm to address both welfare and consumer perception issues.

FYI

For more information about this research or the Beef Quality Assurance Program, visit www.bqa.org.


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