Quality beef is in high demand. One look in the beef section of a grocer’s cooler or a night out with a good steak dinner testifies that quality beef fetches premium prices.

Dairy beef, once considered the second-class cast-off from the dairy industry, has come a long way in proving it can make the cut when it comes to achieving high yield and quality grades.

Jared Jaborek, Michigan State University Extension beef feedlot educator, discusses marketing opportunities for the dairy beef animal in a market hungry for flavorful beef.

“Marbling is not a selection criterion for dairy breeds, but dairy breed cattle are capable of marbling very well,” Jaborek says. “In the past 10 to 20 years, beef breeds have selected for high quality (marbling), and when crossing native breeds on dairy females, it is possible to capture some of the same premiums as the traditional beef breeds. Many feeders are able to capture Prime quality grade on a large portion of the dairy beef herd.”

There are 93 million beef cows and 9 million dairy cows in the U.S., according to Jaborek, indicating a slight drop in total numbers from recent years. The most current National Beef Quality audit from 2016 states that dairy cattle contributed 16.3% of the fed cattle supply of finished steers to the U.S. market during the previous five-year period. However, Brenda Buttell of University of Wisconsin – River Falls estimates dairy’s total is closer to 21.5% including culls, fed steers and heifers.

The report also states that the average yield grade (YG), the estimate of retail cuts for dairy steers is 3.0 and native beef 3.1, statistically small on many cattle scored, noting that there are always extremes within breeds or type. “Dairy cattle traditionally have less backfat, a smaller ribeye area which is flatter shaped, especially when the loin tapers into the strip area,” Jaborek says. “This indicates to the grader that the carcass is a dairy animal, and a dairy discount is applied, referred to as a basis discount.”

Capturing premiums

There are opportunities to capture premiums throughout the dairy beef supply chain, beginning with bull calves receiving the same care and colostrum feeding as heifers, helping them achieve a healthy, efficient start in life.

Crossbreeding strategies need to complement the cow by bringing in the strengths of beef breeds through muscling and growth and performance throughout the life cycle.

The blueprint for genetic selection to capture premiums from calf sales to the slaughterhouse is fourfold. Select for calving ease, growth, ribeye area and marbling. Black-hided animals can also add to value if the other criteria for Certified Angus Beef can be met.

Calf raisers and feedlot operations need good growth traits to justify paying premiums on purchased calves. Look for bulls with high expected progeny differences (EPDs) on weaning and yearling weights.

There is no reason not to select for marbling and ribeye area on the carcass side, considering the demand for high-quality beef. Light muscling is one of the biggest drawbacks for the packer when it comes to buying dairy beef. Market price and contracts historically reflect this discrimination.

Both the Angus and Hereford breeds have indexes for Holstein and Jersey crosses, with EPDs to match best performers for each breed. Another popular cross is Charolais on Jersey, yielding a grayish, smoke-colored calf.

Carcass length in large steers around the 1,600-pound mark can be problematic in the slaughterhouse, requiring a carcass to be quartered to prevent it from dragging on the floor. The problem derives from the conflict between sometimes needing additional days on feed to achieve an adequate finish versus that extreme body size and weight which doesn’t mesh well into standard packing house design and equipment. Jaborek observes that this issue seems to be correcting itself, at least to some degree in the last few years.

Genetic platforms like ABS’s Beef InFocus and Select Sires' ProfitSOURCE are tailoring beef genetics to dairy females by mating the lower-genetic-value females with bulls that complement dairy breeds.

Evelyn Damveld of DeGrinns Oer Dairy says that their Blanchard, Michigan, dairy is continuously analyzing the beef sire program they adopted a few years ago. Initially breeding lower-genetic Holsteins to Angus bulls, they recently began a hybrid system of using Angus on the bottom 15% genetics based on mating and cows on third through fifth service. “This way, we can breed our higher-genetic animals to Holstein bulls to get better replacements while still keeping breeding and replacement costs in mind,” she says. “There is no need to have more replacements than needed. This way, we can keep from overcrowding and provide more optimal conditions for replacements. Instead of putting the cost into raising and selling extra heifers, we can save that cost and sell the crossbred calves for a higher price, which we usually do.”

Successful marketing differs by farm

The "buy local" movement continues to grow, and every market interference drives home the importance of buying direct from farmers. Kelly Raterink of Raterink Dairy in Zeeland, Michigan, opened a family market in an unused house on the farmstead. Not long ago, the area was devoted to dairy, crop and hog farming. Today, the Raterink family farm lies deep within urban sprawl – housing developments are within eyeshot in two directions and just out of sight in two more directions. Opening in late 2019, the timing was accidentally perfect – just prior to the onset of COVID-19 and mainstream meat shortages. A loyal customer base continues to push demand and sales higher each month.

Raterink also uses Angus, Simangus and Wagyu sires on select Holstein females. The first Simangus crosses are scheduled for harvest in March, and so far Raterink is happy with their moderate frame size. The goal is a 760- to 800-pound hanging weight carcass. The Angus/Simangus are on feed 13 to 14 months, while the Wagyu crosses require about 18 months on feed to reach size.

“Just like the genetics in the dairy herd, I’m trying to find the most balanced sire that can provide top carcass and growth variables without compromising calving ease and fertility,” she says. “EPDs I utilize are Terminal Index (TI), Ribeye Area (REA), Marbling (Marb) and Residual Average Daily Gain (RADG), along with calving ease and fertility data.”

Planning for profitability

Michigan State University Beef Team Feedlot Enterprise budget tool was created to track expenses, calculate costs including yardage and run sensitivity analysis to project profitability on beef and dairy beef feeding enterprises. The customizable tool can compare ration costs side by side and help create hard data useful for decision-making. The tool is available online. 

Through buying habits, consumers are signaling to packers that demand is strong for well-marbled, high-quality beef. Packers are relaying that message back to producers through changes in marketing contracts such as JBS’s updated Holstein/Holstein-cross contract. 

“Choice is now the average or basis, and it takes Prime quality grade to get the premiums,” Jaborek says.

The alternative JBS contract rewards feeders who can achieve high marbling scores, even if animals are on feed longer and deposit more backfat. That penalty dropped from $20 to $10 on YG 5’s as long as the marbling criteria are met.

The Choice/Select spread penalties are steeper in the new contract format. Seasonality and quality beef’s high demand during summer grilling season is one factor driving contract changes. Both the updated and older contracts are available to producers who can supply whole contracts, and each option has advantages and disadvantages based on yield and quality grades, and the number of animals within a contract achieving Choice, Prime or Select quality grades.

Jaborek says that the newer contract version favors well-marbled beef entering processing during peak grilling season beginning in June. Discounts for animals not achieving at least Choice will be highest during the seasonal peak demand. The original contract version carries less penalty during the off-grilling season. The answer to which contract provides the greatest return is: both. Peak grilling season will reward new version contract holders who can deliver high percentages of well-marbled beef during the seasonal grilling season. Producers marketing outside of the grill season window may achieve more income by using the older contract version.