CAB Grid Premiums
CAB grids pay well in face of larger supply.
Record Certified Angus Beef® (CAB®) brand carcass counts are impressive from a quality supply standpoint, but immediately call to mind the potential economic antagonism of lower premiums for qualified carcasses. Carcass weights this year have ridden slightly ahead of 2017, and CAB carcass counts are far and away higher than a year ago.
Even so, the CAB cutout premium to Choice has worked either side of the 2017 trend line thus far in 2018, most recently trading $2 per hundredweight (cwt.) below the 2017 line for most of July and all of August, averaging $9.15 per cwt. for the period.
The market tends to “price in” additional premiums, although somewhat erratically. The fourth quarter’s holiday middle-meat demand differentiates more based on higher quality for those premium CAB middle meats. Despite larger production for the brand, packers have reported larger grid premiums paid to cattle feeders during the past three weeks, averaging an added $1.30 per cwt. above a year ago, with a $4.14-per-cwt. average.
We’d expect a combined Choice-Select spread increase coupled with higher CAB premiums in the fourth quarter to spell continued healthy grid settlement sheets for the groups of cattle hitting a high CAB acceptance percentage on the rail.
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/.