CAB Insider: Runaway Prime Percentage Dominates 2018


Paul Dykstra, Certified Angus Beef (CAB)

via Drovers - November 28, 2018


The evolution of beef quality over the past dozen years has been largely a story of the Choice grade increasing on an unbelievable trajectory, up 20 percentage points (ppt) from just 51% of all federally graded steers and heifers in 2006 to 72% in 2017. That amazing story has stalled in 2018 with the Choice share down 0.8 ppt, yet still record large tonnage this year on a 1.5% increase in the total fed-cattle harvest. That progress now gives way to astounding increases in the Prime grade and to a smaller degree, the Certified Angus Beef  brand and the best combination of the two, Certified Angus Beef brand Prime. Data from the week of November 5th marks a new record national average: 9.8% of steer and heifer carcasses qualified for the Prime grade.


Some readers may recall USDA adjustments made to quality grade lines as determined by instrument grading technology a year ago in early November. Those adjustments, however, should have posed a greater challenge for carcasses at the precipice of the Choice-Prime grade line in 2018 compared to past years, however, rather than lowering the bar. We’ve recently covered the fact that last December’s carcass maturity rule changes—away from the less accurate bone ossification, in favor of dentition—has captured a few more richly marbled carcasses into the CAB brand, and the Prime grade in particular.


Market Update


Federally inspected cattle harvest during last week’s holiday-shortened business was put at 570,000 head, roughly 5k fewer than a year ago. Thanksgiving and Christmas weeks often feature an increase in fed cattle prices, and last week saw such action. However, feedyards held finished cattle in determined hands after a bullish Cattle on Feed Report on Wednesday that featured surprisingly lower feedlot placements for the month of October at 93.9% of a year ago. That’s much lower than analyst expectations and 3% under the 5-year average. Cattle on Feed as of November were fairly numerous at 103% of a year ago, while cattle marketed during October were 104% of a year ago. All of this led to packer willingness to acquiesce on price, paying between $115/cwt. and $117/cwt. in Texas, Kansas, Colorado and western Nebraska. Eastern Nebraska and Iowa apparently had larger supplies of finished cattle to work through as successful bids in those areas were around $114/cwt...


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