Grid locks in rewards

Cattle grid locks in rewards for producers

Markets
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Brendan Wade continues his in-depth look at the history of the livestock cattle grid and its impact on producers and processors.

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From pounds, shillings and pence to flat rates to “just send ’em they’ll be right”,  the current livestock purchasing grids objectively reward producers for a premium product that is demanded by consumers.

This education gave cattle producers the confidence to trade on a ‘weight and grade’ basis.

From here we work towards the present, where producers know what they have to do to secure better prices for their livestock.

Elements of the original payment grid at AMH included the following, and all data was collected prior to, or at the hot weight scale:

Carcase weight – measured in kilograms per side.

Dentition – being the number of permanent incisor teeth, which at the time was a reflection of age, a proxy for ossification, and a proxy for tenderness.

Fat depth – measured at the P8 site, when correlated with butt shape, had a large influence on yield and revenue.

Bruising – was scored which reflected the loss of a cut/s from a side, and the loss of yield/ revenue caused by this downgrade. This had a major influence on raising the awareness of all in the supply chain as to how much revenue loss bruising was causing the industry.

Fat/meat colour – were recorded, and carcases downgraded for ‘yellow fat’ and ‘dark colour’ on the basis that both elements were perceived by the consumer to equate with a poor eating experience.

As these ‘cut out’ tests continued, the production staff could accurately predict the yield of red meat from a particular ‘grade’ of animal, and the sales people could establish a potential market for each grade.

While the yield remained relatively constant, the market destination and revenue changed daily as the sales value fluctuated.

Given this information, it was established that animals with the same characteristics processed at different AMH plants should have a very similar boning room yield, and therefore achieve similar revenue returns.

During this same period, we saw the development of AUS-MEAT, without whose presence and assistance grid trading of cattle may not have evolved into how we operate and know today.

Significant changes have occurred, driven by more accurate feedback and producers’ willingness to meet market signals.

Significant changes have occurred, driven by more accurate feedback and producers’ willingness to meet market signals.

In the early 1980s, the red meat industry endured the meat substitution scandal, or “roo in the stew" to some. This led to the Australian Meat and Livestock Corporation (AMLC), the forerunner of today's MLA, establishing AUS-MEAT, then a Section 16 committee of the AMLC to assist the industry through this crisis.

The original AUS-MEAT Board consisted of prominent producer and processor representatives, which included the late Maurice Binstead, chairman of the Cattlemen's Union.

AUS-MEAT at that time became responsible for the licensing of meat export plants, and accreditation of domestic plants, the introduction of the export meat trading language, and critically, the establishment of what is now referred to as over the hooks (OTH) trading via the current livestock trading language.

The first accredited export plant gained full AUS-MEAT accreditation in July 1987, and others quickly followed.

With the AUS-MEAT language now a critical part of each processing company’s quality system, regular third party audits started to ensure compliance to the language. During this period AUS-MEAT conducted producer training days at most major export processor sites, and this education gave cattle producers the confidence to trade on a ‘weight and grade’ basis.

Producers were encouraged to better understand the AUS-MEAT language, understand the benefits of ‘feedback sheets’, and visit the plants when their animals were being processed.

This they did very quickly and in large numbers.

Over the years, as some markets matured, and new markets emerged, the grid specifications changed slightly, and new criteria incorporating Chiller Assessment and Meat Standards Australia (MSA) where introduced to company specific grids.

However, the major change occurred in 1987/1988, when AMH introduced a standard company-based grid across all its operating sites, with language and specifications common to all sites, supported by the AUS-MEAT audit process.

Interestingly, in the 12 years from 1988 to 2000, AMH was processing about 1.3 million cattle a year, of which between 80 and 90 per cent were purchased on a weight and company grade basis.

In that same time frame, the percentage of bullocks in the kill mix with 8 teeth fell from just over 80pc to just less than 20pc, testament to the significant changes which occurred during the period, all driven by more accurate feedback and producers’ willingness to meet market signals.

Most producers strove to get a higher percentage of their turn-off into the top cells within the grid and reaped the monetary rewards that these actions provided.

Special thanks to John Keir and Ross Keane for the details contained in this column last week and today. While John has retired, Ross is still active in the red meat industry.

Over coming months we will look to speak to other industry identities to understand what the meat business is all about and to fully appreciate that improvements in the red meat industry “don’t just happen”.

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