CAB Supplies Up Amidst Lower Fed Cattle Totals

The CAB Insider Quarterly shares the big things affecting the high-quality beef and cattle markets. Here’s a look back from July 2023.

As we look back at the second quarter of the year, one of the overriding themes was that smaller weekly fed cattle slaughter was down about 3.5 percentage points versus a year ago. That’s about 18,000 head per week fewer harvested in that period at these fed cattle packing plants. That had some impact on supplies, of course, and kept box beef values running higher than anticipated simply due to that restricted supply. But at the same time, demand is quite strong as well as consumers continue to seek out beef.

From a quality perspective, as we look at grade. The second quarter saw impressive performance with regard to your premium end of the carcass grading percentages with Prime at about 9.4% of fed cattle in the second quarter versus about 9.0% a year ago. So slightly stronger from a Choice grade out perspective, right around 72.5% of fed cattle grading Choice in the second quarter, just a couple of percentage point tenths lower than a year ago. So, let’s call it even with a year ago.

Those combined for an 80% Choice and Prime grade out in the second quarter of the year. And when we consider that carcass weights ran 15 to 20 lb. lower than a year ago in the first quarter and started out similarly in the second quarter, it’s impressive that these quality grade trends have held up under the pressure of those feeding conditions and those lighter carcass weights.

Speaking of carcass weights, they did align more closely with 2022 in May of this year and have since remained aligned through the low carcass weight period of early July, where we believe the annual low will have been posted. And that compares to typically a mid-May to early-June annual carcass weight low timeframe that we’ve seen in years past. We’re hitting that low at a later period on the calendar here in early July.

Moving forward, of course, we’ll add weight to fed cattle all the way out through October or November, as we typically do. Now, the exciting part of the fed cattle and beef market, of course, is the price. And seeing those most recent records, certainly getting everyone’s attention. We’ve come back down off of the record high fed cattle values, but in the middle $180s to low $180s. Still prices that are very, very rare and unique to 2023. We’ve got about an $8 price spread from north to south, with Nebraska and Iowa commanding the higher values and Texas and Kansas feedyards receiving about $8 back of that.

Now, given some disparity in those carcasses from a quality grade perspective, speaking of quality grade and price, the Prime premium over Choice from a cutout perspective remains in that $29/cwt. area. This is very competitive with a year ago and again held up even under a strong grade out percentage and under lower total fed cattle supplies harvested.

The Choice quality grade at about 72.5% is essentially even with a year ago. The Choice/Select spread was recently at $30/cwt. over Select. But in the last week’s report, Choice was $28 over Select from a box beef cutout perspective. That’s historically very, very strong.

With regard to the Certified Angus Beef ® brand, we’ve been capturing near record high volumes of carcasses into our branded program in the last number of months. And of course, it varies weekly, but at the top end of that range, we’ve seen 120,000 carcasses certified under all 10 of our carcass standards, and that’s about 38% of those Angus-eligible cattle qualifying at our licensed packing plants. Supplies are quite good relative to history and relative to the smaller total weekly fed cattle harvest.

Moving forward, we anticipate strong demand to close out the year, and that’s primarily based on both the smaller fed cattle placements against that time period. And of course, fourth quarter demand starts to heat up even in mid-August ahead of Labor Day. As well as some end users putting away product in that almost frozen state to bring out for end users in that fourth quarter.

From a cattlemen’s perspective and fed cattle management standpoint, I would look for continued wide quality grade premiums as well as Certified Angus Beef ® brand premiums on those packer grids. I would manage cattle and price cattle for our placements moving forward accordingly.

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