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Higher volumes of cattle grading Prime in 2020

Cattle feeders clearly pushing to achieve higher Prime grading.

The percentage of cattle grading Prime appears to be continuing to grow in 2020, according the Livestock Marketing Information Center (LMIC). U.S. Department of Agriculture data showed that the first two weeks of the year were nationally a quarter- to a half-percent higher than the same period in 2019. That’s saying, something since USDA data showed that Prime-graded beef was also considered high, ranging from 6.86% to 10.47% weekly. LMIC relayed that the five-year average range was from 4.35% to 6.80%, with the highest values in the fourth quarter.

“Genetic improvement has been on a steady march forward, but in 2018 it seemed supplies outpaced the market, as the Prime/Choice spread dropped when nationally the supply of Prime-graded beef jumped from 6% in 2017 to 7.95% in 2018,” LMIC reported, adding that it continued to move upward in 2019, averaging 8.6%.

According to LMIC, regions 1-5 in the USDA report typically produce the highest percentage of Prime beef, ranging from 10.88% to 13.80% in the five-year average. In 2019, however, this region saw 17.03% of carcasses grade Prime on a weekly average, compared to 3.72% in Region 6, 8.68% in regions 7-8 and 9.20% in regions 9-10. 

“Region 1-5 also had the largest jump in 2017 to 2018, gaining over 3% in that single year, and 2% in region 7-8, while the other two region combinations reported increases less than 2%. Last year, the increase in all regions was less than 1%,” LMIC said.

Conversely, LMIC said the percentage grading Select has dropped significantly. Last year, U.S. Select was 9.13% of carcasses, compared to the five-year average of 12.23%. Choice-graded beef has also increased in volume, but LMIC said the 2019 levels were similar to the five-year average of 69.36%.

As for this year, LMIC said the first two weeks of 2020 show that even more cattle presented for grading are Prime.

“Region 1-5 showed the second week of the year approaching 20%. These gains in percent grading Prime do not appear to be the case for all regions, though,” the center said.

Figures for regions 6, 9 and 10 are lower than last year in comparative weeks, while regions 7-8 are showing smaller gains, LMIC relayed.

“Heavier cattle weights could be a contributing factor, but within the last three years, there seems to be a clear push from cattle feeders to achieve the higher Prime grading,” it said.

Spreads between Prime and Choice have not been as low as they were in 2018, but LMIC said they also have not been maintaining historical premiums, either.

“Interest from retailers, such as Costco and now Walmart, to offer Prime cuts may be short-lived. A U.S. recession and/or contraction in the cattle industry could put pressure on future demand for Prime-graded beef moving forward, if it no longer is price competitive or consumers are watching their wallets,” LMIC explained.

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