The fed cattle trade showed increasing signs of bullishness last week. Values in the northern region, although quite variable, saw the top of the range in western Nebraska touch $227/cwt. Similarly, the Iowa/Minnesota report showed a range from $220 to $225/cwt., with the 5-area weekly average at $224/cwt. live and $352/cwt. dressed.
Carcass weights are creeping higher as the expected fall pattern continues to develop. USDA’s latest confirmed weights from two weeks ago peg average steer weights at 983 lb., just 6 lb. lighter than last March’s record-high. Given this early October data, it’s clear that new highs are ripe to be made in November. The stronger cash trend is even more compelling given that weights continue to rise, undoubtedly led by the North, where prices were simultaneously led higher last week.
Carcass cutout values were held to a lower trading range last week. A robust 553,000-head federally inspected harvest count filled packer supplies with heavier average weights. Steady rib and chuck values held cutout values to small declines while the loin primal faces weaker price trends across tenderloins and strip loins. Buying emphasis should be placed on top sirloins as they remain at their lowest prices seen in the past 12 months.
Recent carcass quality price spreads have been quite wide, with at least $20/cwt. separating CAB, Choice and Select. The Prime premium over Choice last week was $39/cwt., while the Prime grade share has improved from the summer low of 12.8% to the latest 14.8% of fed cattle carcasses.
Strong Sales Amid Fewer Carcasses
Increasingly smaller annual fed cattle supplies have been a constraint since peak harvest levels for the current cycle topped harvest volume in 2022. Subsequent years have meant historic profitability to the cattle sector, yet growth in Certified Angus Beef sales has largely been achieved through the diligent work of downstream brand partners. The brand closed the fiscal year in September with strong demand outshining tighter supplies.
In a trend very near that of the total fed steer/heifer supply, CAB-licensed packers harvested 6.5% fewer Angus-type, brand-eligible carcasses in the past 12 months, a total of 14.3 million head. The combination of heavier carcasses (+28 lb.) plus greater sales utilization of each certified carcass (+5.6%) pulled annual sales volume to within 1 percentage point of the prior year’s total. This marked the brand’s 11th consecutive year to sell more than 1 billion lb., ending the fiscal year at more than 1.224 billion lb. sold.
Heavier carcass weights have cut the 7.5% decline in fed cattle numbers by nearly half this calendar year. This benefitted average pounds boxed per head for CAB carcasses as well. However, excessive weight, ribeye size and backfat thickness hindered the share of eligible carcasses qualifying for the brand’s 10 specifications, as upper limits for each of these traits increasingly disqualified carcasses. This was most obvious last March when record-large steer/heifer weights were documented at 955 lb. Although record-high premium quality grades followed closely on the heels of peak weights last spring, CAB carcass acceptance rates fell several points below implied marbling trendline expectations due to growing disqualifications. Against these odds, the annual CAB acceptance rate came in two-tenths of a point higher than the prior year at 37.8% as the richer marbling trend overcame size and fat constraints.
On the sales side of the ledger, domestic restaurant sales grew 1.7% while retail sales were 1.2% smaller as grocery store ad features were less prevalent for the year. Unsurprisingly, export sales were held lower by 6.4% as the international tariff environment and increased U.S. beef prices proved to be headwinds overseas. As well, domestic consumption and demand for CAB product proved stout enough to keep an increased share of product within the U.S. consumer market.
A highlight spanning both the supply and sales discussions came in the form of a 10.1% increase in Certified Angus Beef Prime product sales volume. This speaks to both the brimming supply of qualified Prime carcasses, as well as greater sales penetration in the retail sector for the brand’s Prime products. As well, a notable 4.2% increase in value-added products sales serves as an indicator of consumer demand for convenient, high-quality beef with a highlight on strength in the brand’s Prime deli meats.
The new fiscal year begins with seasonally larger fourth-quarter fed cattle harvest totals, but those are unlikely to average higher than a year ago for the October-December period. Carcass weights are already within 6 lb. of last spring’s record-heaviest, promising to top last fall’s seasonal highs in November, if not sooner. Lower supply pressure consequently continues as a threat to growth in sales in the coming months. Yet further increases in marbling performance, currently outpacing that of a year ago, may underpin supplies to a degree again in the upcoming year. Discovering new sales opportunities and strengthening existing partner relationships will be the focus for the team to continue to keep the Certified Angus Beef brand in a leadership position for the coming year.
