Beef consumers continue wanting more beef that grades Choice and higher, and they’re voting with dollars.
“In 2005, we were producing 12 billion pounds of Choice and Prime. This year, we’re going to produce in excess of 18 billion pounds of Choice and Prime,” says Randy Blach, CattleFax CEO. “I believe this is telling you that our industry is making a major change away from being a commodity market to being a product-driven market. We’re not fully branded yet, but we’re making a major structural shift in our industry today and the consumers are responding.”
Blach was speaking at this week’s 16thAnnual Holt Cat®Symposium on Excellence in Ranch Management at the King Ranch Institute for Ranch Management in Kingsville, Texas.
Compared to 2005, he says about 6 million more cattle will grade Choice and Prime this year, and about 6 million head fewer will grade Select or lower. Yet, the price spread between Choice and Select continues to widen; about $13 for average this year. It’s lots wider for Prime, of course.
More narrowly, according to David Anderson, Extension livestock economist at Texas A&M University, the Prime boxed beef cutout averaged $279.55 per cwt during the last month, which is a staggering $64.74 more than a year earlier. During the same period, the Choice cutout was $13.28 more at $215.76.
So, the Prime-Choice spread for that period was $63.80 per cwt compared to $12.33 last year. The average Choice-Select spread was $25.76, compared to about $11 last year and for the five-year average.
In the latest issue of In the Cattle Markets, Anderson explains the price spread is being magnified by less year-over-year fed beef production and a decline in carcasses grading Choice and higher.
“Over the last four weeks, total beef production is more than 0.5% below the same period a year ago,” Anderson says. “Over this period, fed steer and heifer slaughter is down 1.7%, while cow slaughter is up 4.2%.
“Digging a little deeper, fed steer slaughter is down 6.5% while fed heifer slaughter is up 6.7%. Dressed weights continue to be down about 2 pounds per head over the last month for steers, heifers, and cows. Combining weekly slaughter and dressed weights leaves fed beef production about 2.2% lower than a year ago, while cow beef is up 3.8%.”
For the last month, Anderson says Prime is running about 1.6% less than same period a year earlier and Choice is about 2.6% less. Approximately 7.7% more carcasses graded Select.
“Combining the percentage of carcasses by grade and pounds of fed steer and heifer beef produced indicates that over the last month, Prime beef production has been almost 4% below a year ago. Choice beef production is almost 5% lower than a year ago, while Select production is about 5% higher,” Anderson says.