Branded Beef Trends Upward
Branded prices gain on Prime in 2020.
Supply factors took center stage for cattlemen in the past year as COVID-19 ravaged the marketplace. The backlog of finished cattle, carcass weights and price discovery have been such burning issues for months now, it’s been hard to free up mental space for anything else.
The CAB cutout premium was $17.78 per cwt. over Choice, according to Urner Barry’s spot market values, 85% higher in the second and third quarters of 2020 than a year earlier.
Yet as we look back, there appears at least one boxed-beef trend left largely unnoticed by many. That trend is the fact that prices for the “branded” product category, defined by USDA as both the upper two-thirds and low-Choice brands, gained mightily on Prime in the wholesale beef market.
Understanding this first requires a look at what happened with supply and demand for Prime grade product. From the supply side, it’s easy to realize that record-large seasonal carcass weights created a spike in marbling-rich carcasses. During the most extreme three weeks in May, the fed-cattle average touched a 48-pound (lb.) year-on-year increase.
That mark would quickly fall to a 28-lb. average increase through year’s end. The unintended consequence of additional days on feed boosted Prime production an average of 20% above the prior year for May through December. Nothing was predictable in 2020. Anyone could have assumed that the Prime premium over Choice would decline with the combination of an unforeseen influx of product and the extreme reduction in fine-dining business. This came to fruition as the Prime cutout premium above Choice declined by 53% during those months, posting a recovery in the high demand period late in the fourth quarter.
What happened regarding the demand side of the “branded” category follows a less-obvious narrative. This generalized category isn’t easily dissected by brand name or quality level, but since the Certified Angus Beef® (CAB®) brand comprises most of this segment, we can speak to it from our brand perspective.
The supply side of the equation follows in line with that of the Prime tonnage increases outlined above. At the conclusion of the extreme packing-sector interruptions, CAB product supplies grew quickly as marbling levels increased with carcass weights. Weekly CAB carcass counts began to surpass prior-year numbers by early June, continuing through year’s end at the pace of +38%, year on year.
The less predictable piece is that branded-product prices narrowed the gap on the Prime grade from May through October. The Prime premium to branded products narrowed from $36 per hundredweight (cwt.) for that period in 2019 to just $13 per cwt. in 2020. Yet the branded-product category held a constant premium to Choice with a $5.87-per-cwt. premium in 2020 vs. a $5.83-per-cwt. premium the year prior.
CAB brand pricing, specifically, outperformed projections throughout the same period. The CAB cutout premium was $17.78 per cwt. over Choice, according to Urner Barry’s spot market values, 85% higher in the second and third quarters of 2020 than a year earlier.
Editor’s note: Paul Dykstra is the assistant director of supply management and analysis with Certified Angus Beef LLC. Read more of Dykstra’s biweekly comments in the CAB Insider at http://bit.ly/Insider0106.
