CAB Insider: Grid Values Improve, Grade Runs High


Paul Dykstra, Certified Angus Beef

via Drovers - May 20, 2020


Last week’s federally inspected cattle harvest brought a much brighter outlook to the supply chain, as it marked a two-week continuance of increased head counts in the country’s packing facilities. A one-week increase of 47K head brought the weekly total to 499K head. That’s just over 1,300 semi-loads of cattle, and a great jump in the right direction.


Of course, packers have a long road ahead to get throughput within a reasonable proportion of normal capacity. Regardless, we’ve already moved from 60% to 75% of the volume seen a year ago in the latest report.


This Monday brought on an overall 9% increase in the cattle harvest and 14% larger steer/heifer counts compared to the prior Monday.


Carcass cutout values reached all-time highs last week, with the weekly average CAB cutout value touching $451/cwt.


Last Wednesday appears to have been the peak as the Choice cutout value hit $478/cwt. in that morning’s report. The descent began quickly as that metric had fallen to $434/cwt. by Friday afternoon.


Questions about beef pricing abound, as consumers join retail and restaurant protein buyers navigating these daunting prices. With record prices hitting right in the middle of Beef Month it’s definitely not a healthy environment for beef demand.


Ground beef may be the most obvious pain point for consumers as retail meat case prices in the range of $6 to $7/lb. are abundant. While it’s difficult to identify the extreme topside of the price range, examples have shown some grinds up to $10/lb. That pricing does not even describe the grass-fed or other niche label product.


Boxed beef cutout prices have fallen 14% since last Wednesday, with this Tuesday afternoon’s Choice quote down to $397/cwt. for product shipping within 10 days. This is a needed trend and a further reduction in cutout values is to be expected as long as harvest levels continue to ramp up.


Grid Values Improve, Grade Runs High


The slowdown in the packing sector is having a notable impact on beef carcass outcomes. The latest USDA confirmed data pegged steer carcass weights at 893 lb, 41 lb. heavier than a year ago. The added carcass weight and days on feed are generating the expected increase in end-product marbling scores and resulting quality grades.


The 82.8% combined Choice and Prime quality grades easily set an all-time grading record for the week of May 4th. This specific period in May normally sees marbling in beef cattle reach annual lows as the youngest of the spring-born calf-feds are harvested. We’re currently seeing a dramatic departure from this seasonal norm as the backlog of finished cattle are held on feed longer than normal.


From a beef demand perspective, nothing is normal as we are just a week removed now from all-time cutout highs. However, end-users are still buying what beef they can and consumers are generally clearing meat case inventories. Possibly the millions of Americans stuck at home under the orders of their respective states are more motivated to get outside and grill a steak for Memorial Day than ever before.


Pricing on the boxed beef and retail side has been unprecedented, but the quality grade spreads and CAB product price differentiation remain mostly intact. This is a reasonable market reaction when all beef products are in short supply and consumers still prefer quality...


Restaurant Reluctance ...


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