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Reflecting on Canada’s Old Three-Class Yield Grade System
By Michael Campbell, BFO Policy & Research Analyst
As we all know by now, on January 15, 2019, Canada moved away from its three-class yield grade system and embraced a five-class system in line with what is currently employed in the U.S. The intention behind this move is to better facilitate international trade; with aligned grading systems, U.S. importers should have a clearer picture of how Canadian beef compares to domestic U.S. product. The crux of this change lies in the criteria used for grading; where we previously focused on “lean meat yield”, or the percentage of red meat in the carcass, we will now look at “retail yield” – the extent that cuts from the carcass end up on store shelves, including some trim. As someone who doesn’t cut the fat off his steak, this change makes sense to me. Its intention is to align packer and retailer buying decisions, and provide guidance for producers to adjust their production practices.
Our grading system produces a lot of data; every week, we receive figures on the number of cattle graded in Ontario, their average weight, and the number of cattle given each yield and quality grade. In addition to what was the three yield grades (YG1, YG2, & YG3), the vast majority of graded carcasses have typically fallen into two quality grade categories; AAA plus prime and AA. This means that, under the old system, almost all graded cattle could be classified one of six ways: AAA+P1, AAA+P2, AAA+P3, AA1, AA2, & AA3. One implication of the change to our yield grade system is that this flow of data has come to an end, and will be started from scratch with the five new yield grade classes.
As it will take time to build new carcass grading data, now is a good time to look back on the data from our old system and see what information we can glean from it about carcass traits. Such data can give us insights into the interactions between carcass weight, the yield carcasses produce, and the quality grade the meat receives. What implications might data from our old system have for navigating production practices under the new one?
In the August, 2017edition of Ontario Beef, I graphed some of this data when writing about how carcass yield is impacted by carcass weight (Fig. 1). It’s not news that heavier cattle produce lower-yielding carcasses, but as carcass weights get into the 900s the number of cattle graded YG1 begins to drop off exponentially, with YG2 and especially YG3 rising to fill the gap. Similarly, as depicted in Fig. 2, AAA+P increases with carcass weight but experiences diminishing returns; each additional pound brings with it a smaller and smaller gain in quality grading, especially once weights exceed 900 pounds. However, when we look at the combined yield and quality grades mentioned above, that’s when we get some interesting results.
A scatter plot of every week of data for the past 10 years (Fig. 3) demonstrates just how the grades cattle receive are influenced by carcass weight. The solid lines represent the three yield grades of AAA+P, and the dotted lines the three yield grades of AA. What’s noteworthy is that, at around 875 pounds, there is a clear peak for AAA+P1 – any heavier than this and the number of cattle receiving this grade began to go down, replaced by AAA+P at lower yield grades. Between 900 and 950 pounds, not only do lower-yielding AAA+P carcasses overtake the top yield, but we see the lower yielding AA carcasses beginning to increase as well. According to our old grading system, between 850 and 900 pounds appears to be the sweet spot where we maximize the value of cattle produced in the province.
In a system that prioritizes quality grades, using more feed and making serious yield sacrifices for marginally more AAA+P carcasses may make economic sense for individual producers which is why for the past three years Ontario has consistently seen cattle in the 900-950-pound range. However, for a system where yield grade is better integrated into the supply chain and becomes a trait better reflected in the price offered by packers, it may make sense to take a closer look at how to best balance the yield/quality grade trade-off.
As part of the research that was performed leading up to this change, Agriculture and Agri-Food Canada did an assessment of how cattle produced in Canada may be distributed across the new grade classes. In the sample used, 19.6% graded YG1, 41.9% YG2, 30.1% YG3, 7.5% YG4, and 0.8% graded YG5. If this is reflective of what we will see in Ontario, most cattle will still fall into three yield classes, but the highest yield class will be much more selective, being applied to fewer cattle than has been the case to date. We can almost certainly expect the highest value grading class, AAA+P1, to peak similarly to how we have seen, but may drop off more quickly at higher weights.
Until now, yield grade has been overshadowed by quality grade when it comes to valuing carcasses, hence our sacrificing of Y1 gradings to achieve more AAA+P with heavier weights. If yield becomes a more important factor in fed cattle pricing, this could add pressure to send cattle to slaughter lighter, with better value gained by cattle producers.