by Jerad Jaborek, Michigan State University

JBS is one of the major beef packing companies in the United States and has a facility located in Plainwell, Mich., with the capacity to process approximately 1,800 to 2,100 cattle per day. The JBS Plainwell facility has been known to primarily process fed Holstein cattle. However, the declining beef cattle population has caused a shortage of fed-cattle available for processing across the United States, leading beef packing facilities to search for cattle to process. Beef packing facilities have had to pivot to purchase different types of cattle to fill rail space and keep up with consumer demand.

The net revenue received for cattle sold on each contract is compared to determine which contract optimizes the income received for a particular load of cattle.

The composition of U.S. cattle continues to change due to economic pressures and the desire to meet consumer demands for a high-quality protein. As a result, we have seen USDA beef quality grades improve, shifting from fewer cattle grading USDA Select and more cattle grading USDA Prime and Choice (see Fig. 1). Carcass weights continue to increase (see Fig. 2), thereby increasing efficiency by creating more pounds of beef per animal. Additionally, genetics have changed, with the U.S. beef industry seeing an influx of beef × dairy crossbred cattle replacing the fed-cattle (i.e., primarily Holstein steers) being produced from the dairy herd (see Fig. 3).

Consequently, as the standard or average desired beef carcass composition changes, the premiums and discounts assigned to beef carcasses must also change. JBS has offered new contracts to cattle feeders to reflect these changes.

In 2021, the High Energy Holstein/Holstein Cross contract was created due to the growing supply of beef × dairy crossbred cattle entering the beef supply chain. Fast-forward, the selection of beef genetics being used to create beef × dairy crossbred cattle started to improve, and JBS created two contracts for ABS InFocus and Select Sires ProfitSource fed-beef × dairy crossbred cattle.

In 2024, JBS created two new contracts, an 80% Native contract and an 80% Holstein contract. The intent is for the 80% Holstein contract to replace the original High-Energy Holstein contract beginning in 2026.

The JBS Holstein Contract Comparison Tool was created in 2021 in response to the High Energy Holstein/Holstein Cross contract being provided as another option for cattle feeders to market Holstein steers. Now, as a result of the other new contract options JBS has available, the JBS Contract Comparison Tool from Michigan State University (MSU) Extension has been updated to include all six contract options. The JBS Contract Comparison Tool allows users to input payout report data from a particular load of cattle or create hypothetical loads of cattle and see how the prices would compare for those cattle on the various contracts.

Once the data for a particular load of cattle is entered into the JBS Contract Comparison Tool, summary statistics will be calculated for the weight of the cattle, quality grade and yield grade. Each contract displays a live and carcass contract price based on the CME futures price and the contract basis. It is important to note that depending on the month of the year, the 80% Native contract basis changes from $0 per hundredweight (cwt.) to $2 per cwt. (June through September) to $4 per cwt. (May). Premiums and discounts are applied based on hot carcass weight, quality grade, yield grade and other potential factors (e.g., animal age).

Net revenue is a summation of the gross revenue for the carcass weight of the marketed cattle at the carcass contract price and cattle sold at the cash price; carcass weight discounts; load size adjustments to total contract weight; grid premiums and discounts for quality and yield grade; freight/trucking, if applicable; and a beef council fee. The net revenue received for cattle sold on each contract is compared to determine which contract optimizes the income received for a particular load of cattle.