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Since 2000, Choice and Prime tonnage has increased by nearly 2 billion pounds.
March 19, 2015
Last week’s Industry At A Glance chart focused on the beef industry’s long-standing trend in which a great percentage of the slaughter mix is grading Choice and Prime. The focus occurred because, in combination, the total percentage of Choice and Prime carcasses recently surpassed 75% - a new record.
As part of that discussion, I noted that, “The beef industry has been highly committed during the past 20 years to improving the quality and consistency of beef products. The business has become increasingly effective at incentivizing producers along the way to become more consumer-centric. Producers have responded accordingly. All resulting in widespread strategic changes with respect to breeding systems, genetics and management systems to achieve the grading trend outlined in the graph.”
The outcome of that commitment and response to economic signals is even more telling when looking at what’s occurred from a tonnage perspective. Since 2000, Choice and Prime tonnage has increased by nearly 2 billion pounds, while “other” tonnage (Select and No-Rolls) has declined by 3 billion pounds. That occurrence is perhaps even more significant when considering that fed cattle marketings have declined by nearly 3.7 million head (15%) during the same time frame.
So while marketings have declined, the industry has compensated by making cattle bigger. Slaughter weights have increased by nearly 110 pounds since 2000. But meanwhile, cattle are grading better, resulting in the tonnage divergence seen in the illustration.
Also noted last week, “Improved quality and consistency keeps consumers coming back – they’re more likely to make repeat purchases with little or no hesitation. And most important, when that occurs, it allows for improved pricing power – as the beef industry has witnessed during the past 15 months or so.”
This is an important trend. The question going forward is whether this type of divergence will continue. What’s your perspective on the relative tonnage divergence? Will the beef complex remain on the current path with the resultant production being increasingly comprised of Prime and Choice carcasses? Or will the quality grade mix plateau? How do you see this trend playing out? Are there broader implications to consider surrounding the current grading mix?
Leave your thoughts in the comments section below.
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Nevil Speer serves as an industry consultant and is based in Bowling Green, KY.
Nevil Speer has extensive experience and involvement with the livestock and food industry including various service and consultation projects spanning such issues as market competition, business and economic implications of agroterrorism, animal identification, assessment of price risk and market volatility on the producer segment, and usage of antibiotics in animal agriculture.
Dr. Speer writes about many aspects regarding agriculture and the food industry with regular contribution to BEEF and Feedstuffs. He’s also written several influential industry white papers dealing with issues such as changing business dynamics in the beef complex, producer decision-making, and country-of-origin labeling.
He serves as a member of the Board of Directors for the National Institute for Animal Agriculture.
Dr. Speer holds both a PhD in Animal Science and a Master’s degree in Business Administration.
Contact him at [email protected].
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