Understanding the Value In The Beef Carcass

Across all sectors of the beef supply chain, prices vary.  Certified Angus Beef brand vice president Mark McCully explains examples at three key market points.

“The live cattle price, that’s simply the price per pound cattle feeders would sell to the packer. The cutout is really the wholesale value of the beef. So, boxed beef, sales from the packer out to the next level of the distributor and the retailer. Then of course that retail price is at what the retailer or grocer prices it at – that the consumer is paying at the grocery store.”

Cutout spread values are incredibly important to fed-cattle marketing grids today because they establish value differences between commodity and premium beef.

“That cutout value really originates through mandatory price reporting when USDA collects all the date of the packers’ sales of boxed beef, on to the next tier of distribution, and the price is paid for all those distribution pieces and parts – the sub-primals and the cuts. Then all that, those prices, are taken and rolled up into a primal price and ultimately calculated up into a total carcass cutout value.

McCully noted that USDA does that for Select and Choice and Prime and no-roll and the differences between those cutouts is what’s so important and we pay a lot of attention to, as it relates to demand for premium.  As important as the overall cutout value is, specific sub-primals and cuts from the carcass drive the price higher for better beef.

“Yeah, I think in the Choice-Select spread we’ve historically seen the middle meats is really where the premiums are being paid on the rib and the loin cuts, and therefore we see that Choice-Select spread being largely driven off those cuts. That’s changed here recently. In particular with the Certified Angus Beef ® brand where we also have a premium above the Choice price in the marketplace, but we see our partners also paying premiums for round meat, chuck meat, ground meat, ground beef in particular. And so, it’s driving a premium across the entire carcass.”

But in the current expansion phase, record beef supplies and herd inventory are affecting these prices.

“We have produced a tremendous amount of quality beef today, between the tremendous grade of what cattlemen have produced along with increased cattle inventory. So, those two combined have produced some really large high-quality beef inventories in the marketplace. And we’ve seen those spreads compress just a little bit, but when we look at the Certified Angus Beef spread, it’s actually maintained really well considering we have increased sales at a tremendous amount. We think going forward as cattle supplies get tighter, the demand for high-quality is not going away – we see those spreads, we think, will continue to get larger in the future.”

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