By Paul Dykstra, Certified Angus Beef
Fed cattle prices have stabilized and improved over the past three weeks with a $2.47 per hundredweight (cwt). Total increase for fed steers in the five-area weighted average. The cattle feeding sector is moving along in small strides at this time, so this news fits the bill.
The counterpoint is that last week’s $97.24 per cwt. steer price average is 14.5 percent lower than the same week a year ago.
The slightly higher trend is a bit more heartening given boxed beef cutout values continued to work lower again last week. The historical trend for cutout prices is to put in the summer low in mid to late July.
This week will provide some answers as to whether or not we’re seeing a short-term low for cutout prices. Most cuts from the Choice and Certified Angus Beef (CAB) reports showed fractionally lower prices last week, with a couple of cuts from the round slightly higher.
The only notable downward price on any single item remained solely with the 0x1 strip loins, which declined another $0.30 per pound with the CAB strips averaging $6.60 per pound at wholesale. A case could be made for lower values on strips, but ribeyes have ceased their rapid free-fall in the latest data, removing one important middle meat from the downward pull.
Analysts have pointed to current packer margins well over $200 per head so there is limited fundamental pressure on fed cattle prices due to marginally lower cutout values.
Still, the backlog remains a factor, particularly so in the South. Feeders in the North appear to be more emboldened with a more current showlist last week, allowing them to top the trading range at $100 per cwt.
Greater Eligibility Assits CAB Supply
Fed cattle and beef supply rank right at the top of the watch list this year and will remain there for quite some time. While the beef business has proven sensitive to supply chain disruptions, the CAB brand is similarly driven.
A unique aspect of the brand is only black-hided cattle are eligible for consideration for further USDA grading service review under the brand’s 10 carcass specifications. Consequently, the proportion of the fed cattle population that is black-hided is a key driver in long-term sales growth. More eligible animals equates to potentially more qualifiers.
The percentage eligible abruptly fell to 63 percent in unison with the harvest drop. Since this measure is not tied to total volume of animals harvested, it gives one pause. Understanding that Colorado packers were the hardest hit is the key, as one temporarily closed and the other curtailed production.
These two plants capture a larger share of black-hided cattle than those further south and they were not bolstering the average at that time.
In the prevailing weeks, however, a complete recovery of black-hided cattle is featured in the most recent data through July. As a matter of fact, the last 11 weeks show a 69 percent eligibility trend. Four of those weeks surpassed 70 percent eligible, a proportion touched only a dozen previous weeks in the past 20 years.
The move to record black-hided proportions may be more difficult to explain than the dip. Some feeders noted the very small spot market trade occurring in many recent weeks saw fed cattle buyers focusing on CAB-eligible cattle since product supply was scarce and the margin for CAB boxed beef was high.
Possibly more non-black cattle were held out of alternative pricing methods, intentionally directed toward the summer spot market. This would have seen those cattle left standing in the feedlot as the backlog progressed.
In any case, greater eligibility is joining up with higher quality grades to increase July certified head counts above those seen a year ago.
Adjusted sights, targeting the brand
Bull buying decisions are possibly the least germane topic for many cattlemen in July, yet the Angus bull sale calendar heats up in California and other fall calving regions of the country in just over a month.
Genetic selection is one of the primary factors impacting CAB carcass certification rates. Inherent breed characteristics favor Angus sires for adding marbling and overall carcass acceptability.
Yet, research trials and stacks of carcass data summaries show intentional selection toward carcass traits makes a significant impact.
CAB’s supply development team first set out genetic recommendations to assist cattlemen in buying bulls targeting CAB carcass outcomes beginning in 2007.
The Targeting the Brand program evolved from those guidelines, using a logo to highlight bulls that meet recommended baselines for carcass traits. The two most relevant genetic predictors among the many numbers available are the Marbling EPD and $Grid index.
Earlier this summer CAB incorporated detailed carcass data on 8,600 sired-identified Angus animals through the American Angus Association to update the benchmarks. They reflect the genetic profile of the sires of those harvested animals, which indicates bulls with a Marbling and $Grid number at or above these thresholds are more likely to produce calves meeting CAB carcass standards at the rate of 50 percent.
The 50 percent goal is only significant in that it’s well above the industry average of 35 percent CAB acceptance achieved last year. Cattlemen more dedicated to carcass traits have far outpaced this achievement using a much higher standard than CAB’s recommendation.
The Targeting the Brand recommendations are a tool to chart a course toward the goal rather than a treasure map marking the gold.
Paul Dykstra is the beef cattle specialist at CAB. He can be reached at email@example.com.