7 - Meeting market specifications

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Key actions

• Know the specifications and customer requirements of your target markets.
• Know how to assess and monitor the progress of live animals towards target markets.
• Manage the natural pastures and grazing system to achieve growth targets and successful market outcomes.
• Seek feedback and implement practices to improve the management of your production system.
• Regularly evaluate new marketing options and implement those more profitable to the beef enterprise.

Why is meeting market specifications important?

A successful pastoral grazing business makes a sustained profit by growing and converting native pasture into beef products that consistently meet market specifications. Every producer should strive to:

• gain a reputation as a reliable supplier of quality cattle and/or beef
• maintain market access to as many markets as possible
• be financially rewarded when a high proportion of cattle and/or beef consistently meets customers’ requirements.

There is a range of potential markets available to beef producers in the arid pastoral zone of Australia. These include: 

• backgrounding cattle for feedlots
• culled breeding animals
• pregnancy-tested in-calf heifers and cows
• unjoined/maiden heifers
• animals for live export and niche markets like organically certified. 

Each market has defined specifications for animals to return the highest price.

Many pastoral properties in the arid zone of Australia have land types and climate suited to breeding herds, which turn off lighter feeder steers for live export markets. 

The absence of large scale processing works in close proximity means pastoral enterprises may face logistical challenges and high transport costs for slaughter cattle, such as bullocks and cull cows that they produce. However, properties in areas with more productive arid zone land types, such as floodplains, and with easier access to markets may have the opportunity to produce finished cattle for slaughter markets.

The biggest hurdle for pastoral beef producers is meeting the market requirements for a consistent animal or beef product, both in terms of quality and quantity, because of the natural of highly variable seasons.

Production averages are significantly affected by drought. Similarly, rate of sales are also affected by drought, although some of this is masked by the averaging process. Sales generally increase significantly towards the end of a drought with an accelerated reduction in stocking rates but then decline again after the drought and restocking occurs.

There is also a growing trend for pastoral producers to market the ‘natural’ and, in some cases, organic attributes of their cattle and/or beef. However this may require modification of their existing animal husbandry and land management practices, as well as certification, which may take considerable investment in terms of effort and resources.

Like all beef producers, those in the arid zone are constantly faced with decisions about the:

• type of cattle to produce or acquire
• best management system to optimise production while maintaining the vegetation and feedbase
• relevant market.

These decisions are based on their experience and knowledge of their cattle’s performance, seasonal conditions and their effect on the potential to grow cattle, and the specifications of the various markets available to them.

This module concentrates on the short term management decisions needed to meet product specifications and is designed to help identify the best market you can target and ensure you deliver a quality product to its requirements. The longer term options of changing your cattle genetics to better meet market specifications is addressed in Module 4: Cattle genetics.

While genetics is important, you need to maintain the flexibility to diversify and realign your target markets and options depending on opportunities and changing production circumstances. There will be times when the condition and nutritional status of your native pastures will not enable your stock to meet certain target market specifications. When these circumstances arise, maximum profitability may be achieved by selling animals in other markets.

Clearly, there is a balance between maintaining long-term relationships with regular customers and exploring new market opportunities. As specifications can vary between buyers and change over time, it is important that you review the specifications of targeted markets with your regular buyers as a matter of routine. This personal approach to supply chain management may also involve entering into forward contracts or similar undertakings to ensure your cattle are marketed to achieve a profit, while enabling maintenance and long term sustainability of your feedbase.

How does this module assist you?

This module covers the period from the time calves are weaned to the point-of-sale, and includes the management of trading stock and culled breeding animals. It aims to help you increase financial returns by better meeting target market specifications, exploiting market opportunities and managing the risks.

A key aim is to apply recommended best practice to the nutrition, health and welfare of sale stock to meet the target market specifications. Regular evaluation of new market opportunities and alternative selling options (see Tool 7.04) also assist in sustaining the profitability of your beef enterprise. Managing the marketing system needs careful implementation based on previous experience, the anticipated rainfall pattern and seasonal outlook and the ongoing monitoring of land and vegetation (ie. your feedbase) condition.

Achieving the highest price is not necessarily the best business option. The most profitable strategy is usually a combination of the best margin per kilogram with the maximum kilograms of beef produced/ha. Price and cost of production need to be considered along with the stocking rate (DSE/ha).

The value of meeting market specifications

Beef producers are continually making management decisions that influence how well their cattle meet market specifications. Achieving consistently high compliance rates in high value markets is an important profit driver for beef businesses. The number of animals failing to meet market specifications in Australia can be high, which results in lower dollar returns.

Information collected from the live cattle marketplace by the National Livestock Reporting Service (NLRS) contains detail of price differences payable due to the variation and degree of muscle and fat. Meat processors and livestock buyers pay according to the degree of muscularity of a beast and, therefore, the potential yield in all cattle market categories.

Table 1 illustrates the price variations observed for different muscle and fat scores within the yearling steer 330-400kg category. This category typically represents domestic trade steers. The table demonstrates the price advantage achieved for finished animals meeting preferred market specifications.

In this example the optimum grade is clearly the B3 (muscle score B and fat score 3), which averaged 8c/kg above the B2. However, these animals only represented 1% of total numbers. D-muscled cattle received the greatest discounts, averaging up to 29c/kg ($0.29) lower than the C-muscled cattle. 85% of medium weight yearling steers were C-muscled, while 74% had a fat score of 3. More importantly, when the market shows a negative trend the variation between the C- and D-muscled cattle widens as buyers apply larger discounts on the plainer muscled cattle.

Table 1: Price variation (cents/kg liveweight) with muscle and fat score (yearling steer, 330-400kg).

Linkages to other modules

Module 1: Setting directions discusses identifying the most profitable target markets and times of sale in relation to native pasture growth and condition and other resources available to the beef enterprise, an essential step in planning and setting the direction of your beef enterprise. 

Managing the grazing system to meet market specifications is about fitting together the livestock requirements (see Module 4: Cattle genetics, and Module 2: Managing your feedbase) and livestock responses (see Module 3: Managing your natural resources, and Module 6: Herd health and welfare) to satisfy market needs. Maximising the number of weaners available and appropriate for growing to meet target market/s is the focus of Module 5: Maximising weaner throughput.

Principles of meeting market specifications

• Know the specifications and customer requirements of your target markets.
• Know your production system.
• Implement a plan to market cattle to specification on time (as opposed to producing cattle for sale and then finding a buyer who wants those specifications).
• Manage the grazing system and your natural resources and feedbase to achieve livestock performance targets and successful market outcomes.

Procedures for meeting market specifications

• Procedure 1 - Know your market specifications
• Procedure 2 - Manage the nutrition, health and welfare of sale animals to meet target market specifications on time
• Procedure 3 - Manage cattle before sale and during mustering and transport to achieve best carcass dressing percentage and avoid downgraded meat and carcases 
• Procedure 4 - Regularly evaluate market opportunities as feed supply, financial situation or market prices change and select markets to maximise enterprise profit