WVM Blog #2: Value-Added Management Programs
Ranchers marketing their cattle through Western Video Market (WVM) are often at the forefront of the industry, enrolling in and differentiating their cattle on sale day with the newest value-added management and marketing programs available. Using data from WVM's 2017 satellite video auctions allows us to estimate the average premium/discount associated with marketing under each of these programs individually.
This is the second post in the blog series developed from the article in California Cattlemen Magazine (May, pages 24 - 26) where we discuss the estimated premiums associated with value-added management and marketing programs in 2017.
In order to generate reliable estimates, a sufficient number of lots of cattle must be marketed under each program. In 2017, the available programs for analysis included:
- Age and Source Verified - allows cattle to be sold in export markets (USDA Process Verified Program or Quality System Assessment Program).
- Non-Hormone Treated - third-party certified program that ensures animals are not given hormonal growth promotants at any time during their life. Qualifies beef derived from these cattle for export markets (e.g., Europe).
- Organic - Cattle must be raised in a manner that compiles with USDA Organic Standards.
- Non-GMO - Cattle are not fed GMO feeds; indicates compliance with the voluntary GMO labeling system.
- Natural - cattle have never been fed or injected with antibiotics, fed any ionophores, implanted with synthetic hormones, or given any feed or supplements containing animal by-products.
- Verified Natural - third-party certification that cattle were raised in accordance with the natural standard.
- WVM Natural - WVM provides an alternative to the third-party verified natural program wherein ranchers can sign an affidavit confirming that cattle were raised naturally.
- PI Negative - Cattle have been tested and are negative for persistent infection (PI) of bovine viral diarrhea (BVD) .
- Implanted - Cattle have received an anabolic implant (e.g., Ralgro, Synovex, etc.).
- Global Animal Partnership (GAP) - Cattle are raised in accordance with the third-party certified animal welfare protection program.
Prices for calves and yearlings were analyzed separately given that they are often marketed to different buyers (see blog #1 in the WVM series for details). The results from the calf and yearling models for the value-added management and marketing programs available in the 2017 data are provided below.
Estimates for calves are shown in navy blue and estimates for yearlings are shown in red. All estimates are provided in per hundredweight (cwt.) terms. In the figure below, the dots represent the estimated premium/discount for that particular value-added program and the lines that extend away from the dots show the 95% confidence interval. This is the range in which we are 95% certain that the true value of the premium/discount falls. If the confidence interval includes zero (vertical red line), we cannot be certain (in statistical terms) that the premium/discount is not zero.
The largest premiums earned for value-added management programs in 2017 were associated with lots that were marketed organic ($7.92/cwt for calves and $6.60/cwt for yearlings) or non-GMO ($6.94/cwt for calves and $3.03/cwt for yearlings). Both of these programs were included in lot descriptions for the first time in 2017. Also note that these programs have large confidence intervals surrounding the point estimates. This is because relatively few lots participated in these programs and, as such, statistical precision is limited. This is similar to what we saw a few years ago when lots were first marketed with the Global Animal Partnership certification: initially estimated premiums were large with large confidence intervals, then as more producers opted into these programs and increased supply, premiums decreased and confidence intervals got tighter. By 2017, on average there is no longer a premium associated with GAP certified lots.
Yearlings that were implanted ($0.93/cwt) or were marketed as either WVM Natural ($1.93/cwt) or Verified Natural ($3.25/cwt) earned statistically significant premiums in 2017. Calves that were Age and Source Verified sold for a premium of $3.23/cwt in 2017.
Year-to-year variability in premiums/discounts can be caused by many factors. These estimates represent averages across all calves and yearlings marketed in 2017 through WVM. These are not meant to be taken as forecasts for premiums/discounts in the future.
If you would like to be notified via email when additional blog posts become available, please email Tina Saitone (email@example.com).