Last week’s federally inspected cattle harvest brought on another solid packer performance with 622,000 head harvested. This was steady with the prior week’s total after USDA adjusted the head count in the post-report numbers for the week of May 6. Once again, harvest head count gains are all in fed steers and heifers as cow slaughter is declining sharply. Most recent cow harvest totals are 15% smaller than the same week a year ago with last week’s total at just 118,000 head, the third smallest year to date. Fed cattle prices held steady last week at $185.28/cwt. on average. Northern feedyards held a $1 to $2/cwt. premium over the south.
Carcass weights were mixed last week with steers 1 lb. heavier and heifers 4 lb. lighter than the week prior. A broader look at weights reveals that little has changed in the past month, as steer weights have declined just 2 lb. in that timeframe while heifers are the same as a month ago. This brings the latest data to a 24 lb. advance in weights over this period a year ago. The weekly average cutout values show slight declines last week with price spreads between CAB and Choice narrowing to $11.29/cwt., within the expected seasonal range. The Choice-Select price spread is roughly half of its value a year ago, near the narrowest margin so far this year. Reviewing the carcass on a cut-by-cut basis shows the loin primal continuing to capture buying interest. In the previous Insider, we described how strip loins have been in high demand with a steeply increasing price trend versus a year ago. This is due to their lower price point relative to ribs and tenderloins. The strip loin and top sirloin have both been a spotlight in the most recent market as buyers continue to find value in these cuts versus ribs and tenderloins. The total cutout picture does, however, show some recovery of interest in ribeyes and tenderloins last week. This makes sense as seasonal grilling and holiday demand is still very relevant for steaks. Price weakness is notable in the lastest report for all round cuts as well as chuck rolls.
Carcass Quality Surge, South to North?
It’s Beef Month! During the middle of May, spring grilling and holiday demand typically conspire with seasonally depressed carcass grading trends to widen carcass quality price spreads, especially the Choice/Select spread. Yet the supply side of this two-sided scenario isn’t behaving within normal constraints. Carcass marbling has recently benefitted from the extra days on feed and heavier carcass weights resulting from current market conditions. Thus, the mix of boxed beef from fed cattle is historically quality-rich for this time of the year. The focus is on the USDA Prime trend since it has shifted sharply higher in the past month. For perspective, the national average Prime grade has run slightly higher than a year ago since last July. Even so, that uptick was overshadowed by the record periods of backlog in 2020 and 2021. Latest data shows Prime is now just fractions of a percentage lower than the spring 2021 highs. The breakout movement in Prime this year began in March, holding above 11% of fed cattle carcasses since April 1 in an unseasonal spring rally.
The Prime uptick is relatively even across the regions with cattle graded at Texas packing plants showing the most upswing lately. Texas has exceeded 6% Prime for the past two weeks, a feat achieved only by one other period in history. You may have guessed correctly; that was during the worst of the backlog period in July 2020. Cattle management and days on feed are playing a role in this scenario. Yet one has to think that genetics are a factor too as the region’s strong beef on dairy supply is pulling high-quality terminal sires into the equation. The trend for total USDA Choice grading is currently second only to last year’s record spring highs. Granted, a percentage point or two difference in Choice carcasses, normally comprising 71 to 75% of all production, admittedly seems trivial. But it matters to the market, especially when slaughter volume is down. Traditional Certified Angus Beef ® brand product is performing at the top of the historic range with recent values in record territory. Brand-eligible carcasses, meeting the live cattle specification of a predominantly black hide, are roughly 72% of the cattle harvested in licensed plants. Of those, 40.7% have qualified for the brand in the past four weeks, setting records in the latest two weeks. This is more impressive when considering that unseasonally record-large carcass weights are likely pushing some steers past the brand’s 16 inch ribeye area maximum even if they are safely below the 1,100 pound upper limit. Slower processing speeds have assisted carcass quality this spring, partially masking the effects of a dwindling cattle supply, now promised by smaller recent placements. There is potential for the cattle supply to become much more current later in the year, especially if tighter head counts shift the basis strongly positive. That would likely pull grading trends well off of their current high-flying trend lines. There is a lot of carcass weight to shed in the interim period.
