The percentage of choice and prime beef carcasses coming out of packing plants is way above average even though the number of cattle being slaughtered and processed is way down, USDA data showed.
The USDA said that 10.2% of the cattle slaughtered in April yielded a prime-grade carcass, which was higher than the entire first quarter’s 9.76%. And this was while the seasonalities show that more younger cattle should be working their way into the slaughter mix, said Nevil Speer, director of industry relations for Where Food Comes From Inc, in an email. (Younger cattle won’t have the muscle marbling that brings the prime grade.)
Speer pointed out that the next-best showing of prime cattle in April over the first quarter came in 2015 when April’s prime-grade percentage output was 5.14% of the total kill versus the January-March average of 4.89%.
Usually, the percentage of April prime to first quarter is negative with the most notable recent year coming in 2017 when the first quarter exceeded the April rate by 0.70%.
And prime isn’t the only area of growth, the USDA’s Agricultural Marketing Service reported that 71.9% of graded beef carcasses last week were listed as choice. This followed a seasonal downward slope but was up 1.5 percentage points from 70.4$ in the same week a year ago and up 3.3 percentage points from the previous five-year average for the week of 68.6%.
WHY THE CHOICE/PRIME BOOST?
Speer said a combination of reasons might be given for the boost in prime and choice beef production over select and ungraded carcasses. Some is related directly to fallout from the COVID-19 pandemic, and some is only magnified by the virus-caused problems.
It’s true that the genetics of the US herd have improved to provide more high-quality choice and prime carcasses, he said.
Another analyst said this situation is more than just improved genetics. The current situation is focusing the spotlight on these genetic improvements as the market swings to favor these cattle and shuns the more “commodity” cattle.
“What’s really amazing,” Speer said, is that “all of this happened on the backend of a pretty current feed yard inventory,” although this is changing rapidly now.
What has happened is that “COVID has changed the marketing pattern,” Speer said. “Only the best cattle (program and high-quality) are getting marketed. If you have a limited number of slots – why waste time with commodity cattle?” They get left in the pens.
That could provide a dilemma for feedlots with those “commodity” cattle, Speer said. What to do with the growing number of “fat, big” leftover cattle that will want to come to market.
“Carryover is going to get ugly,” Speer said. “This isn’t your run-of-the-mill carryover.”
There likely will be some wide disparity between who does and doesn’t get to market their cattle in the middle of this, Speer said. The carryover may not be uniformly dispersed, and those with only commodity cattle could get pinched really hard.
CATTLE, BEEF RECAP
Cattle traded last week at $94 to $105 per cwt on a live basis, steady to down $1 from the previous week. Dressed-basis trade took place at $150 per cwt, versus $148 to $160.
The USDA choice cutout Monday was up $32.60 per cwt at $410.05, while select was up $19.53 at $376.66. The choice/select spread widened to $33.39 from $20.32 with 87 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Friday was $118.91 per cwt, down $0.48. This compares with Monday’s May contract settlement of $119.07, up $1.25.