There has been a large increase in the supply of beef carcasses grading Prime over the last five years, and it’s paying off for the industry both in terms of premiums and consumer demand, according to Paul Dykstra, beef cattle specialist with Certified Angus Beef (CAB).
On a volume basis, the number of Prime carcasses -- not just CAB but industry-wide -- has essentially doubled in five years, he noted. Even on a weekly basis during those five years, the U.S. beef industry went from over 22,000 to more than 43,000 carcasses grading Prime from the fed steer and heifer supply.
According to Dykstra, the industry has achieved the increase through better genetics and cattle entering the feedlots at heavier weights as well as “the best feeding regimes at the feedlot level today than we’ve had in a very long time.”
The use of distillers grains and good implant technology have been friendly toward carcass quality grades, he added.
Dykstra said end users have responded to the higher quality, because “folks realize that Prime grade beef is the crème de la crème, so to speak. It’s the preferred marbling, best eating attribute kind of a grade that we have here in the United States.”
Achieving a U.S. average rate of 8.6% Prime grade has also led to an expanded market as it has created quite a bit more availability for consumers.
“Now, we can not only have those foodservice restaurants that have always kind of been the exquisite, white-tablecloth customers, but we’ve got retailers that have been able to come on and make larger purchases of Prime and offer that in volume to their clientele. So, it’s really been a boon to our brand and to our sales volume in the last few years.”
In fact, Dykstra noted that, CAB has increased sales of CAB Prime by an average of about 30% in each of the last four years. In 2019, sales increased by 36%.
Interestingly, as the supply of Prime carcasses has almost doubled over the past five years, the premium for Prime carcasses over Choice carcasses has also, by 5%.
“While supplies have dramatically increased, the actual price premium has also increased at least fractionally in that period,” Dykstra relayed. “The marketplace is giving the signal quite well that everybody wants Prime; the end user is ready and willing to purchase and sell that and offer that product. As such, the premium has not only kept pace but actually slightly outpaced this hand-over-fist increase in supply.”
Also, while translating the benefit back to the producer may not be quite as clear because the carcass premium on a hanging carcass or boxed beef basis is not exactly the same as what packers are willing to pay feeders for Prime carcasses, Dykstra said it’s still very close, because they share a significant portion of that premium back to that feedyard and those grid pricing arrangements.
For example, Dykstra explained that in 2019, a pen of feedlot cattle with a large potion of Prime cattle would average a premium well over $100 per head across the entire pen. Further, once the Prime animals were hung on the rail and graded, they would garner a premium of more than $200 per head above the market.
“It’s a great signal back to the producer that what they’re doing is right; we need to do more of it. This trend towards higher-quality beef is really helping beef demand. Consumers are absolutely preferring that,” he said.