When trying to select for several traits that influence profitability at once, many cattlemen turn to the American Angus Association’s dollar value ($Value) indexes. Each spring, to keep those relevant to current market conditions, a new year of data — such as ration cost, calf price and grid premiums — are added to the calculations and the oldest data drops off.
That can cause some shifts in numbers and re-ranking of animals.
Kelli Retallick-Riley, president of Angus Genetics Inc., gives a preview of what will change, what won’t and what that means to you.
Listen to full interview or read the transcript.
MIRANDA REIMAN:
When trying to select for several traits that influence profitability at once, many cattlemen turn to the American Angus Association's $Value indexes each spring to keep those relevant to current market conditions. A new year of data such as ration costs, calf price, and grid premiums are added to the calculations and the oldest data drops off. That can cause some shifts in numbers and re-ranking of animals. I'm Miranda Reiman with the Angus Journal team, and I visited with Kelli Retallick-Riley, president of Angus Genetics, Inc. To give us a preview of what will change, what won't and what that means to you. To start off, I asked her to recap what will happen on Friday.
KELLI RETALLICK-RILEY:
Yeah. So June 2nd is going to be the date of our annual update to our economic assumptions as well as our genomic scores. And so we do an annual update to our economic assumptions just to make sure that we fine-tune those indexes as new calf prices and new ration costs come on board and we're able to utilize kind of the latest average prices inside of those indexes to stay up to date with what's currently going on in the industry.
MIRANDA REIMAN:
Excellent. And when you say you update those to stay current, what years are you using or, or what span of data are you using?
KELLI RETALLICK-RILEY:
Yeah, that's a really good question because our definition of current might be different than some other people's out there, but as you're really delivering an economic index, right, either this breeding value index out into an industry, we really look to the past to tell us what's going to happen in the future and how should we predict those genetic, uh, differences based on profitability. And so we actually use a seven-year rolling average, right? A seven-year time horizon. And so our current update happening on Friday is basically going to range from 2016 to 2022. That's the last seven years worth of data that we collect from folks like CattleFax in order to basically keep those things current and updated. So even though we're updating those economic assumptions yearly, we're using a seven-year time horizon. And the reason for that is it really mimics the cattle cycle, Miranda. And so when we think about, uh, economic index, what we're really trying to do is get the relative cost and revenues correct inside of that profitability function. And so using that time horizon really allows us to kind of encapsulate all the ebbs and flows that we experience in a cattle cycle over time.
MIRANDA REIMAN:
And probably gives you a, a long time range for an average when you've got some anomalies in there, such as the 2020.
KELLI RETALLICK-RILEY:
Yeah, exactly. So when we think about what happened with COVID or when you hit a severe drought, things like that, obviously that can take a heavy toll on what happens in the marketplace. And so if we only focused on one year, for instance last year, if we only focused on the year prior with that big COVID year when cattle were getting held over, it can really kind of throw a linchpin right into kind of what you're trying to do when you think about really predicting the relative costs and and profit differences inside of these breeding indexes.
MIRANDA REIMAN:
So for those of us who, who probably can't remember back to what 2015 markets looked like compared to 2016 markets, give us a little bit of a sneak peek of what will change or where we'll see those changes.
KELLI RETALLICK-RILEY:
Yeah, so when you think about what was happening in 2015, obviously we had record-high calf prices. And that's the one thing that I think if you ask anybody who's been in the business for a while, they're going to remember those days. And I think when we look back to what's happened in the current year in 2023, right, we've really started to see some of those calf prices increase and those sorts of things. But that really, that upward tick really didn't start until we got into kind of the first part of 2023. So when we look over 2022, even though we did rebound some on calf price, Miranda, we don't see that 2022 year coming off and actually increasing the average calf price over the last seven years. And so because we are replacing right in exchanging 2015 with 2022 we're on average in 2022, we had a lower calf price than what we experienced in 2015. On average, we're going to see that seven-year time horizon actually fall from what it was last year at 172 for steer calves and 158 per hundredweight for heifer calves to basically 167 per hundredweight for steer calves and 152 for heifer calves. And so just a slight decrease across the board when you kind of think about that, but it's really just because we didn't have a big enough year in 2022 to replace that all time high, right, that we experience when we, when we think back and we think about 2015.
MIRANDA REIMAN:
Right? So when you think about that in terms of an index, then what impact will that have on say, a $B or some of these value indexes?
KELLI RETALLICK-RILEY:
So the biggest differences that we're going to see on the indexes themselves, obviously with that weaned calf price kind of falling a little bit, we're going to see some differences in maternal weaned calf value in our $W where we're going to see a little bit of a decrease on current sires. I think we go down by about a dollar on average in $M and $W, when we start to input some of those lower calf prices with that. Another big increase in change that we had in that seven year rolling average is going to be around ration costs. While we didn't rebound enough on calf prices in 2022, we sure did rebound enough on ration costs and that showed up in that seven-year rolling average, moving that seven-year rolling average to $178 per ton to, to 199 per ton. And so when we think about that change that's really going to affect our feedlot profitability, so obviously high-intake cattle, right, that maybe don't gain as much as the their contemporaries. Those are going to be the ones that are going to see a little bit of a downward change in overall maternal weaned calf value across the population. I think in current sires we lose about a buck, $B we stay fairly constant because we had a little bit of a downward shift in in $F because of the fact that they're just not as profitable anymore because their gain is more expensive to put on them. And then on the contrary, while we saw kind of a slight decrease in profitability in some of those types of cattle in the feedyard stage, we actually saw quality premiums increase again, right? So when you think about that grid value index or $G, which is really targeting how many premiums we're going to garner, you know, with those CAB and Prime type premiums, we actually, we saw them on average go up by about $3 across the board. And so very minimal changes in beef value overall because $B is the combination of F and G, right? Or feedlot and the grid, right? Anything after weaning time. So we saw very minimal changes in beef value as a whole, because of the fact that we did add a little bit of a, a slight increase in quality premiums, but it was kind of offset by that increase in ration costs.
MIRANDA REIMAN:
So I know I've heard you say that we won't see big shifts, but any shift of course sometimes makes me a little bit nervous, especially when it applies to our cattle. So tell me what you can expect with some modeling as you look forward on maybe the amount of change that that will be there
KELLI RETALLICK-RILEY:
Overall, Miranda, we had talked about this and different updates within internal staff. We have a 0.99 correlation across the board when we look at those individual indexes across the board. And so 0.99, we all know that a one correlation would mean that the changes result resulted in no change, right? Because everything is ranking exactly the same at a correlation of one. So we're at a 0.99. And so while that's a super high correlation, there are some animals that are going to see a decrease in one category or another just based on, you know, what their individual genetic makeup is of those individual traits and how they're getting to their current level of profitability, right? Because as a selection index, the one thing that we have to realize is a selection index is targeting profitability, right? And when we think about whether it's M, B or C, it's profitability for a certain objective, and you can actually get there with multiple combinations of traits. And so when we start to look at, you know, how you get therefrom that standpoint, whether it's because I have a high level or weaning weight from that standpoint, but I also have, you know, a super high mature cow size or something like that, that's where feed cost is going to start to take a little bit of a toll on some of those things from a profitability standpoint. And so it'll be a, it'll be different based on the individual genetic merit of those individual animals, but overall, we see fairly high correlations across the board even though they make change, are going to rank very similarly. So it's definitely not going to be a huge shakeup when these economic assumptions go, go into place on Friday.
MIRANDA REIMAN:
If anybody has any questions on the updates, on their specific rankings or just the update as a whole, where can they get more information?
KELLI RETALLICK-RILEY:
Yeah, we'll have communications up on our website at angus.org. We'll have lots of communications around, you know, how our economic assumptions change, what changes took place. And then also anytime that anybody has a specific question about a specific animal, things like that, be sure to reach out to the American Angus Association or AGI staff and personnel and we'd be happy to walk through those individual things for us. We know when we dump these things in, right, there's going to be someone that changes a little bit more than others. And, and if you have questions, we're sure happy to answer them and walk through it with you. Because with every change, there's always an explanation, right? And we hope that we can be of service in that way.
For more links and information, see “Angus Genetics Inc. Announces Updates Coming June 2” on Angus.org.