Popular Choice: CAB sees success in FY2011Written by Christy Martinez
Immediately following the close of fiscal year 2011, a flurry of press releases from the American Angus Association and Certified Angus Beef (CAB) announced record sales and cattle registrations.
Bull sale averages increased nearly 26.6 percent above last year, and overall sale averages increased 20.8 percent. Angus members registered 294,975 animals in FY 2011, which ended Sept. 30. Embryo transfers accounted for 10.3 percent of registrations, and more than 51 percent of calves were a result of artificial insemination (AI). Of total registrations, more than 96,000, or 32.7 percent, were stored electronically in 2011.
CAB Feedlot Specialist Paul Dykstra, who oversees the western U.S. for the brand, says those numbers are a direct result of genetics that heavily influence higher quality carcass outcomes.
“A complex of things have contributed to the better grading and the higher CAB acceptance,” says Dykstra. “It’s a perfect storm, in terms of more Angus influence in the industry nationwide than we’ve had in past years.”
CAB, for the fifth consecutive year, reported record sales for its brand of beef, with nine out of 12 months in fiscal 2011 hitting new heights. Sales totaled 807 million pounds, an increase of almost four percent over 2010’s record of 777 million pounds.
“The brand’s growth represents a wave of momentum that took more than 30 years to build,” says CAB President John Stika, adding that it’s a function of both demand and supply of high-quality Angus beef.
“One of the new statistics indicates that 63 percent of finished cattle were identified, meaning black-hided cattle,” says Dykstra. “That was a 10 percent increase in as many years, and we can extrapolate that to mean those are Angus genetics, for the most part, and that has had an increase in carcass quality in the nation’s cattle population.”
Dykstra says the implementation of camera-assisted grading at the packing plant level has also meant a standardization of grading, beyond the eyeball of USDA graders, which is favorable to grade, overall.
“There are a few cows on the line that were in the low Choice grade that are now slipping up into the upper two-thirds of Choice and CAB,” says Dykstra.
Increased demand is not only proven by sales success, but also documented by new research from Kansas State University that shows that, since 2002, demand for the CAB brand has risen 56 percent, while demand for commodity Choice beef rose 20 percent.
Dykstra says that, in addition to carcass quality, carcass weights have also increased.
“We’ve got a few more days on feed, and certainly heavier carcasses represent cattle grading a little better, due to extra days on feed or extra age on cattle in a yearling program,” he comments. “Those both tend to benefit quality grade.”
Dykstra describes the final factor in the “perfect storm” – the inclusion of distillers byproducts from the ethanol industry, which he says have led to an improvement in grade.
“That product is very friendly to quality grade,” he notes.
Looking forward, Dykstra sees an interesting 12-month period for CAB, and cattle markets in general.
“Historically we’ve seen feed increases in terms of price, and many would have said that would cause feeders to feed cattle for a shorter period and get them off feed a little earlier,” he states. “We suspected that would be the case, but that has not happened in most of the times when corn prices have spiked.”
He says the rise in ration costs may have played out over the last few months, where quality grade slipped in concurrence with the timeframe when corn prices were in the seven-dollar-per-bushel range.
“I want to see how it plays out in terms of what the increased corn price actually does,” he says. “The bigger factor is that the tight supply of cattle will probably cause feeders and packers to favor heavier weights again this year, because there aren’t the numbers to replace cattle shipped from feedyards to the packing plant, so I don’t think we’ll see carcass weights decline as much as the price of corn might suggest.”
Dykstra says it’s been interesting to watch the continued demand for beef, including international sales and value-added products.
“Many of us would have thought the economy would cause people to back away from higher-priced meat products, and CAB does demand a bit of a premium over Choice and Select, but it’s an indication of consumer acceptance, underpinned by the trade balance we have as a country, where exports are a boon to our industry,” he explains.
“Looking ahead into the next 12-month period, I’m very optimistic, because supplies are not expanding this year,” continues Dykstra. “I would suggest that prices will be higher, and with the better-grading cattle in our brand we’ll have a supply that, at times, may be touch and go, but it will be a decent supply of CAB product.”
Dykstra says he sees the success of the CAB brand trickle down to cow/calf producers.
“Correctly managed, high quality Angus calves have sold for prices none of us would have dreamt about,” he says. “The futures on fed cattle are really strong today, and they suggest these calves are worth a lot. The April contract in 2013 is $1.30 per hundredweight for fed cattle. The strength is there on the futures
“Although I’m always cautious, I’m very optimistic that producers at the ranch level will see some very sunny days in the years ahead,” he adds.
To best capitalize on the positive beef markets, Dykstra says producers should, first of all, run their businesses the best way they see fit.
“Most ranchers and cattlemen understand they have priorities at the home ranch that should never be overlooked, but in terms of building a premium product that will demand the top of the market, continue to tune into those factors that are important to customers, who are, first of all, the feedlot and, in some cases, the yearling operator,” he says. “When they’re spending the kind of dollars they are today, when a 600-pound calf costs almost $1,000, they don’t want risk. They need them to be healthy, to efficiently convert feed to pounds of beef and to be able to sell those cattle on the grid to capitalize on premiums for quality, yield grade and CAB brand acceptance.”
“The most progressive rancher is building a resume for his calves with all these attributes, and going out to market the cattle. Get in contact with progressive cattle feeders, let them know what you’ve got and prove to them what you’ve done to set your calves up for success,” he adds.
Of CAB’s success, Dykstra says, “Fortunately the premiums are available to cattlemen. They trickle down, and that’s the best reward for the success we’ve seen with the branded product.”