Fewer cattle equals more Prime beef.
It doesn’t take a mathematician to think, “Wait, something doesn’t add up.” Yet, that’s the reality in today’s marketplace. Fed steer and heifer harvest was down 6.2% for the first 32 weeks of the year, but it wasn’t an even distribution across all quality grades
“In pounds of Prime, we’re up 2.5% to 3% [from 2013], and adding in Premium Choice, it’s still pretty much a wash,” says Mark McCully, vice president of supply for the Certified Angus Beef ® (CAB®) brand.
Looking at lower quality grades, Select and No-Roll production had decreased 12% to 15%.
“We’ve taken all that supply away from Select. You’d think that would be supportive to a narrow Choice-Select spread,” he says.
Although the Select discount has declined compared to last year, the long-term trend (See Chart 2) points to a widening valuation gap in beef quality grades, McCully says. Four years ago, an 850-pound Prime carcass would fetch $190 more than Select. In 2011, that gap suddenly widened and it trends to a figure 65% higher in the early fall, a $314 premium.
“Prime graded beef has enjoyed a small increase in quantity and about a 13% increase in premium relative to Choice year-to-date, compared to last year,” says ag economist Ted Schroeder, Kansas State University. “All indications I have are that Choice demand has so far been stronger this year than last, suggesting Prime demand is up even a bit more.”
Even as the U.S. beef industry is producing more highly-marbled product, it still holds a strong price-value relationship for consumers.
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