Record Prime Beef Production Drives Price Decline

USDA's latest steer and heifer grading report shows Prime carcasses totaled 9.6%, the highest level on record, with Choice accounting for 71%. ( . )

American cattlemen are producing more Prime beef than ever. USDA’s latest steer and heifer grading report shows that carcasses grading Prime accounted for 9.6% of all cattle graded, with another 71% grading Choice.

“Thus, in mid-November 2018, over 80% of all cattle in the U.S. were grading Choice or better,” says Len Steiner, Steiner Consulting Group. “That’s a stunning shift from even 10 years ago when fewer than 60% of cattle graded Choice or higher.”

As Steiner notes in the Daily Livestock Report published by Steiner Consulting Group, there are a number of factors at work to help explain this shift toward higher quality.

“First, there is the long run trend in upgrading cattle genetics, a trend that accelerated after the liquidation that took place in 2011-2012,” Steiner says. “The herd rebuilding that started in 2014 appears to have brought with it much better performing cattle and a sharp increase in the supply of high marbled beef. It is stunning to think that almost 13% of cattle in Nebraska graded prime and another 73% graded choice.”

Steiner says the processing industry has also upgraded processes used to grade cattle.

“While human graders still are employed, a larger share of grading is now done by computers, with human graders overseeing the process. This has made for more consistent grading but also more cattle grading choice or higher.”

The more cattle grading Choice and Prime has also reduce the number of Select carcasses in the slaughter mix. That fact has tended to narrow the spread between Choice and Select, “especially for those product where marbling does not bring any special benefits,” Steiner says.

“For some beef processors a higher marbled product may be a disadvantage since it presents lower yields and does not add much to the flavor profile of the final product.

The shift to more prime grading cattle has helped bolster cutout values but not as much as one would think.”

Steiner says the increase in supply of Prime has been accompanied by a decline in price.

“The premium last year averaged $31 per cwt, not far from the $30 per cwt average premium of the last five years. This year, however, the Prime beef cutout has averaged just $14 per cwt higher than the Choice cutout. With more Prime cattle in the mix, packers have had trouble realizing the normal premiums on Prime ribeyes or loins, which are about half of what they were a year ago.”

Related articles on Drovers:

CAB Insider: Prime Ahead of Demand - For Now

CAB Insider: Marbling Bred In More Than Fed In