Heifers might be the unsung heroes of the U.S. beef industry. Not only are they the foundation of all cow-calf herds, those that go instead to a feedlot and then to harvest have pushed the percentage of cattle grading USDA Prime to record levels.
That record came in the first week of November when cattle graded a record 9.81 percent Prime. This beat the prior record of 8.96 percent set the week before. The industry has slowly increased the percentage of cattle that grade Prime over the past decade. Cattle in the same week in 2008 graded only 3.21 percent Prime. But the biggest increase has been in the past year. The 9.81 percent far surpassed the 6.57 percent figure of the same week last year.
The dramatic improvement in the percentage is the result of better genetics, more sophisticated feedlot management and rations, and more heifers in the slaughter mix. Heifers have the ability to add more intra-muscular fat (marbling) than steers with no additional back fat.
Moreover, heifers aren’t the lightweights they used to be. Their carcass weights currently range between 830 pounds and 840 pounds and they hit a record 854 pounds in the last week of November 2015. This was 60 pounds heavier than in the last week of September 2007.
When I began writing about the industry in 1987, I asked all fed beef packers what their ideal carcass weight was. Their reply was 650 to 800 pounds. How times have changed and how much more productive the industry has become.
The increase in the Prime percentage in November came at the expense of the Select percentage, as the Choice total increased slightly from the week before to 71.09 percent. The Select figure declined to 16.16 percent. The Prime-Choice total of 80.9 percent was second only to the record 81.1 percent set the week ended Feb. 23 this year.
Prime’s increase over the past year means the price spread between Prime beef, branded beef, and Choice beef has narrowed considerably. Prime beef for many years sold at a premium to branded beef of at least $20 per cwt. USDA’s comprehensive boxed beef report for the week ended Nov. 16 revealed that Prime beef sold at a $7.23-per-cwt premium to branded beef, a $13.07-per-cwt premium to Choice beef and a $25.53-per-cwt premium to Select beef.
The narrowing of Prime’s premium has been a boon for white tablecloth restaurant and retail buyers looking for the highest-quality beef, but it has come at the expense of those who produce Prime and branded beef.
Meanwhile, JBS USA is now the No. 1 beef processor in the U.S. for the first time in terms of slaughter capacity. In my annual survey of the top 30 packers, it reported a current capacity of 29,000 head in its nine U.S. plants. This put it 1,000 head above Tyson Foods, which has an estimated capacity of 28,000 head per day in six plants. JBS USA also slaughtered more cattle than Tyson in 2017, 6.800 million head versus an estimated 6.760 million head for Tyson.
Tyson however remains the No.1 U.S. beef company in terms of sales because it harvests only fed steers and heifers. JBS’s slaughter is 20 percent cows. Tyson’s fiscal 2017 sales totaled $14.823 billion, versus $13.500 billion for JBS. Cargill remains the third largest processor with a capacity of 23,000 head per day, a 2017 slaughter total of 6.300 million head and sales of $12.3 billion. National Beef Packing remains No. 4 with a capacity of 12,000 head per day, a 2017 slaughter of 3.230 million head and sales of $7.35 billion.
Daily slaughter capacity at the nation’s 30 largest beef processors increased slightly in the past year due to the larger fed cattle and cull cow supplies. But no new plants emerged. The Top 30 currently have the capacity to process 126,870 head per day in 52 plants. That’s 1,155 head more than a year ago, when there were also 52 plants. The top five packers have a combined capacity of 99,000 head per day in 27 plants, down from 99,500 head a year ago.
Another interesting trend is that the top packers’ market share declined quite a bit last year versus 2016. The top three packers had a 2017 market share of total commercial cattle slaughter of 61.7 percent, down from 63.1 percent in 2016. Their share of steer and heifer slaughter declined to 69.1 percent from 70.8 percent in 2016. The top five packers’ share of commercial slaughter was 78.2 percent versus 78.2 percent in 2016. Their share of steer and heifer slaughter was 84.2 percent versus 86.6 percent in 2016. The declines mean smaller packers are processing a greater share, a sign of a healthy beef processing industry. — Steve Kay
(Steve Kay is editor/publisher of Cattle Buyers Weekly, an industry newsletter published at P.O. Box 2533, Petaluma, CA, 94953; 707-765-1725. Kay’s Korner appears exclusively in WLJ.)
