Cattle Economics: Carrots, Sticks, and Cattle Markets

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Andrew Griffith

Dr. Andrew Griffith
Assistant Professor
Department of Agricultural and Resource Economics
P: 865-974-7480

What provides encouragement to do a job and achieve an objective? The answer depends on who needs the encouragement. Some people respond to the carrot while other people respond to the stick. This brings to mind children. Parents ask/tell their children to do things on a regular basis such as pick up their toys, put their clothes in the laundry, be home by 10:00, don’t wear that outfit, or to simply be good. Sometimes achieving the desired results requires a carrot or a stick. Most people would say a carrot is better than a stick. However, there are somethings in life that a carrot is not deserved, because it was what a person should do anyway. Trophies do not have to be handed out just because someone did what they were supposed to do. At the same time, the stick may have to be used when a child does not do what they were supposed to do.

The truth of this statement is that adults face the same scenarios. Adults enjoy being rewarded with money or acknowledged and praised when they have done a good job. At the same time, adults often need to be disciplined for doing a poor job. From a farming standpoint, this often comes in the form of reduced yields and lower prices for a commodity, but there are also times when another person needs to directly inform the person in the wrong of the error of his or her ways. There are also things that should be done without the expectation of a reward such as helping a neighbor in need or simply being kind instead of hateful.

What does this have to do with cattle markets? In fact, it has a lot to do with cattle markets. I have heard many livestock market operators talk about premiums for cattle that are weaned, vaccinated, and preconditioned for the feedlot. Alternatively, many livestock market operators would now say there are no premiums for those cattle but discounts for the other cattle. In other words, premiums would be the carrot or the reward for increased management while discounts would be the stick or the discipline for not managing the calf crop.

In reality, the price difference between how animals are managed can be looked at as either premiums or discounts. At the end of the day, it does not matter how one looks at it, because the price received will reflect the quality of cattle being marketed and the management provided to those animals. For instance, there was a $12 per hundredweight difference in 525 pound steer and bull prices in Tennessee the week this article was written. Is it a discount or a premium? The answer does not matter, because the difference is $63 per head. That seems like enough of a carrot or a stick to start castrating bull calves at a young age. Similarly, 525 pound value added steers received a price $8 per hundredweight higher than those that were not value added that same week, which is an additional $42 per head.

Are the differences in value enough carrot or stick to change current production to institute certain management practices? Maybe the better question is, should these carrots and sticks be necessary for producers to do what is best for the livestock? There is clear research that demonstrates the reduction in stress, morbidity, and mortality of cattle that have been castrated at a young age, weaned, and vaccinated for clostridial and respiratory diseases. However, some cattle producers will still provide some type of argument or excuse as to why they do not do these things, which is exactly what children do when asked why they did not do something they were asked to do.

People have been the same yesterday, today, and will continue to be the same tomorrow, but excuses bear no fruit. An excuse that is not acceptable for why these practices are not done is that the market is not willing to pay for them. It would seem $105 per head between castration, vaccination, and weaning should be a sufficient carrot or stick. At the same time, there should be some pride value in doing what is best for the animals being produced. Here is to an extra “Benjamin” and “Lincoln” for each steer calf. I could be for hire for that kind of money.