Video: Watch K-State's Ted Schroeder Talk About the Beef Value SystemWed, 04 May 2016 17:40:44 CDT
Fed cattle premiums don’t just drop out of thin air. They are earned at every point in beef production, says Ted Schroeder, Kansas State University agricultural economist. And while selling beef by quality grades and brands allows consumers to choose and value them individually, it also creates more work and cost to get the beef to them.
“In producing, processing, marketing, positioning and putting that product in the consumers’ hands, all of those activities take investment, take scrutiny to make sure that there is integrity throughout that value chain,” Schroeder says. “Everyone involved in that has an additional cost incurred. If you are the retailer, you have different shelf space that you have to allocate to this product. If you are the processer, you have a sorting mechanism that you have to incur in order to ensure that you have product flowing into that right retail channel.”
Schroeder says the added expense at each level means wholesale premiums for higher quality will not match the Choice-Select spread.
“So you will never have the consumers’ premium equal to the producers’ premium, but you would sure expect a percentage of that consumer premium to be reflected down at the producer level and that is indeed what we see,” he says. “As the consumer premium increases, so does the producer premium and again those aren’t going to be 100 percent transmissions, but they are going to be a very high correlation and causation with each other.”
Click on the video below to watch Schroeder talk more about how premiums filter back from beef consumer to beef producer.
Source: Certified Angus Beef, LLC
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