Quality Pays in 2017
2017 grid premiums & discounts show strong Choice, Prime prices.
As annual reviews are more enjoyable if the evaluation shows improvement, marketers of high-quality beef and cattle like to see a measurable margin for the extra effort. In 2017, packers were willing to pay steady to stronger grid prices for cattle hitting the quality and yield grade marks. On the quality side, the bellwether is the Choice-Select spread, averaging $11.82 per hundredweight (cwt.) for the year in the USDA weighted average, $1.11 per cwt. higher on the year.
The spike came in early June with a $27.07-per-cwt. advantage to Choice carcasses, $5 per cwt. higher than the 2016 high, with a seasonal low in September of $2.72 per cwt. Prime carcasses were paid on average a $15.94-per-cwt. premium over Choice in a narrow range spanning just $5.89 per cwt. from $13.71 per cwt. to $19.60 per cwt.
The CAB premium averaged just a little lower than the year before, down 17¢ at $4.33 per cwt. July through September figures pulled the average down because Certified Angus Beef® (CAB®) brand acceptance rates outpaced packers’ expectations.
The weekly high of the reported CAB premium range came in June with one packer reporting a $14-per-cwt. premium. On the yield grade side, stability was no doubt the case as yield grade (YG) 1 through 5 premiums and discounts were all but unchanged across the board. The leanest YG 1s commanded a $5.71-per-cwt. premium while overfat YG 5s were discounted heavily again in 2017 at -$14.88 per cwt., quite steady on the year prior. Packer demand and fabrication styles have changed as we look back to 2008 to find a $15-per-cwt. discount for YG 4 carcasses, which were discounted at a more lenient -$9.78 per cwt. in 2017.
Editor’s Note: Paul Dykstra is a beef cattle specialist with CAB. Read more of Dykstra’s biweekly comments in the CAB Insider at www.cabpartners.com/news/cabinsider/.