CAB Market Insider

by Paul Dykstra

During the last full week of February, cattle harvest was notably smaller with the President’s Day holiday which shortened Monday’s fed cattle harvest by 20 percent compared to the following weekdays. 

Regardless of the holiday, packers continue reducing hours to regain leverage given the sector’s estimated recent losses.

Also during the week, fed cattle prices increased again on strong February Live Cattle contract prices and increasing boxed beef values.

Carcass weights posted a correction to the upside in the week of Feb. 12 as steer carcasses added three pounds to average 912 pounds each. Steer weights landed at 10 pounds heavier than the same week last year, even as they’ve shed a net 30 pounds since their December highs. 

The 912-pound average is still nearly seven pounds lighter than the records for the period, marked in 2021-22.

Last Friday’s Cattle on Feed report indicated a slightly larger January placement number than analysts’ pre-report estimates had guessed. However, the January number was just 92.6 percent compared to last January and the smallest in decades. 

The month’s severely inclement weather was a factor in feedyards opting to place fewer cattle.

Beef market sees

strong increases

The boxed beef market saw strong increases in prices with restricted supply yet again a driver. Discussion about softening demand or customer pushback at recent price levels is nullified by the evidence of boxed beef values marching higher. 

The current price rally is reminiscent of a year ago, even though late February beef demand is typically quiet.

Chuck and round prices are quite firm as consumers move toward value-priced items.

In the week beginning Feb. 26, the cutout report showed very strong support for multiple beef cuts from each of the subprimals, adding credibility to further upward price moves to follow the previous week’s generous increases.

There is a bit of a juxtaposition in the price position of several cuts versus this period a year ago. Ribeyes, tenderloins and 0x1 strip loins are cheaper than a year ago, whereas many of the lower priced cuts from the chuck, round and skirts are higher.

2023 carcass primal

premiums review

In the brand’s continued effort to track carcass premiums, there is logically a tendency to focus on total carcass cutout values. In other words, the weighted average price of each subprimal cut from the carcass summarized into a singular price for the entire carcass.

Comparing cutout values across U.S. Department of Agriculture (USDA) quality grades and Certified Angus Beef (CAB) brand carcasses provides the quality pricing component of fed cattle values for grid and many formula sales.

Last November, CAB focused on chuck and round primal price differences between the CAB brand, USDA Choice and USDA Select carcasses. 

This study revealed a trend where CAB chuck primals increased 285 percent over Choice since 2018. Slightly less dramatically, CAB round primal premiums 170 percent compared to Choice. 

The combined chuck and round CAB premiums increased by 223 percent over five years, while the CAB cutout total increased 39 percent for the period. The per-head value addition changed from $20.66 in 2018 to $48.99 in 2023. 

This compares to the $17.84 premium for USDA Choice chuck and round primals over Select in 2023.

Looking at the other major primals, it’s easy to see the largest value gains in the middle meat rib and loin primals are achieved moving from USDA Select to Choice. 

More moderate gains are achieved upgrading from Choice to CAB, as the Choice middle meats already command a significant premium. Even so, moving to the higher-quality CAB rib and loin primals generates another $84 per carcass.

Historically, the widest Choice/Select cutout spread of $204.51 per head – basis an 880-pound hot carcass weight – achieved in 2023, set the general tone for increasing demand for higher quality grade and premium branded carcasses. 

Yet, the CAB premium added $147.05 per head, on top of Choice, for brand-qualified carcasses.

Carcass cutout values are not equivalent to grid payment prices for fed cattle, with packers keeping a share of the premium and passing a portion back to the feeder. 

As well, we tend to see premiums tighten when cattle supplies shrink, as they are currently. This is likely to create a pricing scenario where all cattle are priced at or near record-high levels, yet the premium outcome may pause or retreat some as was the case in 2014-15.     

However, the message from our customers and consumers has strengthened the votes for higher-quality carcasses in the 2023 cutout data. 

Preference for highly-marbled beef with added specifications under a brand with a reputation for quality will not fade even if the magnitude of premiums does.

Paul Dykstra is the assistant director of supply management and analysis at CAB. He can be reached at pdykstra@certifiedangusbeef.com.