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Market Opportunities

Bullish cash, bearish futures provided opportunities.

The currentness of fed-cattle supplies (i.e., lighter finished weights and early marketing of fed cattle) in May had some implications for the high-quality cattle market. Earlier suggestions that the share of Choice- and Prime-grading fed cattle would decline less than usual in early May proved wrong, but it all makes sense today. Tight cattle supplies and a historically wide June basis (cash higher than futures) combined to push carcass weights rapidly lower.

Cattle contracted by feeders to packers have to ship in the specified contract month, so even if feeders would like to add days to the feeding period for cattle performing below projections (due to winter feeding conditions, for instance), their hands are tied by the contract in most cases.

Such cattle likely fall short of their optimum backfat thickness and marbling scores, depressing quality grades and Certified Angus Beef® (CAB®) brand acceptance. Additionally, feeders motivated by higher market prices and favorable basis levels may choose to forgo higher marbling scores and grid marketing returns in favor of the attractive cash price (or higher grid base price).

Fig. 1: U.S. percent Choice & Prime grades

steer Carcass Weights

This early May chart of Choice and Prime quality grade shows that grades recently dipped to year-ago levels, more so than the early 2018 pattern suggested they would. Late April CAB acceptance percentages show 34%-35% CAB qualification for eligible cattle, slightly off of the 36% from mid-April but still holding strong ahead of the May data, which was yet to come.

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Editor’s Note: Paul Dykstra is a beef cattle specialist with CAB. Read more of Dykstra’s biweekly comments in the CAB Insider at







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