Prime and Choice beef dominating production

Over the past 15 years, Choice and Prime beef have grown to a bigger share of overall production.

Nevil Speer

June 22, 2016

3 Min Read
Prime and Choice beef dominating production

Last week, we highlighted the importance of the recent spike in the Choice / Select spread. The focus included implications of a concurrent price surge for middle meats (rib and loin) versus the end meats (chuck and round). That is, the rib and loin now account for over 52% of the overall cutout value – a jump of nearly 10% since the start of the year. In combination, it appears that consumers are opting for the top end of the market – in terms of both selected cuts and quality grade.

Meanwhile, this week’s illustration depicts the importance of the Choice-Select spread from a different perspective. The graph depicts the influence of the grading trend during the past 15 years on beef production. Last year, the beef industry produced record tonnage of Prime and Choice beef. That occurred despite the beef industry producing only 23.8 billion pounds in 2015, including production from non-fed cows and bulls – the lowest total since 1993. 

Given those considerations around overall production trends, the beef industry has been successful in shifting the supply curve of Prime and Choice product over time, versus simply increasing quantity produced. The biggest driver of that shift falls under the category of “conditions of production” or sometimes referred to as “technology.” In this instance, that would include better genetic tools and selection, feeding management, and a whole host of other factors.

annual fed cattle carcass production

As explained last week, though, given other things staying constant, the expectation would be for the spread to narrow as more Prime and Choice product becomes available. In other words, less scarcity of Choice product would typically force it to garner a lower relative price to clear the market. But that’s not been the case. Rather, it appears the market is working within the framework of a new, and more favorable, demand for Choice product: tastes and preferences have shifted in a favorable manner.

This all bodes well for the beef industry’s position in the marketplace. What’s your general assessment of beef and the consumer? Are these favorable signs the consumer made a long-term shift to high-quality beef that won’t be reversed any time soon? Leave your thoughts in the comments section below.

Nevil Speer is based in Bowling Green, Ky., and serves as vice president of U.S. operations for AgriClear, Inc. – a wholly-owned subsidiary of TMX Group Limited. The views and opinions of the author expressed herein do not necessarily state or reflect those of the TMX Group Limited and Natural Gas Exchange Inc.

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About the Author(s)

Nevil Speer

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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