A monthly column written for Beef Central by US meat and livestock industry commentator, Steve Kay, publisher of US Cattle Buyers’ Weekly
ADDING value at every stage of the trip from farm to plate is the focus of the beef industries in all the major beef-producing nations.
Beef Central constantly highlights the improvements and developments that take place in Australia. The single biggest development in the US in the past 25 years is the move from selling grainfed cattle “live, on the average” to a pricing system that rewards individual carcase quality.
Among other developments, some are unheralded until their results begin to produce surprising numbers. One such example is how grainfed heifers have helped the US industry produce a record amount of USDA Prime beef this year.
Heifers of course are the foundation of all cow-calf herds. But those that go to a feedlot and then to harvest have significantly improved the quality of beef at the top end.
The first week of November saw US slaughter cattle grade a record 9.81 percent USDA Prime. This beat the prior record of 8.96pc set the week before. This number would have been unthinkable just a few years ago.
The industry over the past decade only slowly increased the percentage of cattle that grade Prime. Cattle in the same week in 2008 graded only 3.21pc Prime. But this past year has seen a huge increase. The 9.81pc far surpassed the 6.57pc figure of the same week last year.
The dramatic improvement in the percentage is the result of everything from better genetics to more sophisticated feedlot management and rations. But the game-changer has been more heifers in the slaughter mix. Heifers have the ability to add more intra-muscular fat (marbling) than steers, with no additional back fat, hence the higher Prime percentage.
Moreover, heifers aren’t the lightweights they used to be. Their US average weekly carcase weights currently range between 377kg (830 pounds) and 381kg (840 pounds) and they hit a record 388kg (854 pounds) in the last week of November 2015.
This was 27kg (60 pounds) heavier than in the last week of September 2007.When I began writing about the US industry in 1987, I asked all fed beef packers what their ideal carcase weight was. Their reply was 295 to 364kg (650 to 800 pounds). How times have changed and how much more productive the US industry has become.
The increase in the USDA Prime percentage in November came at the expense of the Select (US graded beef’s lowest quality classification) percentage, as the Choice total increased slightly from the week before to 71.09pc. (USDA Choice grade roughly equates to AusMeat marbling score 2+ – editor).
The Select figure declined to 16.16pc. The Prime/Choice total of 80.9pc last week was second only to the record 81.1pc set the week ended February 23 this year.
Prime’s increase over the past year means the price spread between USDA Prime grade beef, branded beef and Choice beef has narrowed considerably. Prime beef for many years sold at a premium to branded beef of at least US$20 per cwt and up to US$30 on Choice beef. A USDA report in mid-November revealed that Prime beef sold at a US$7.23 per cwt premium to branded beef, a US$13.07 per cwt premium to Choice beef and a US$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 that produce Prime and branded beef.
Cattle Buyers’ Weekly’s annual survey of US slaughter capacity
Meanwhile, JBS USA is now the Number one beef processor in the US for the first time in terms of slaughter capacity.
In my annual survey of the top 30 packers, JBS reported a current daily capacity of 29,000 head in its nine US beef plants. This put it 1000 head above Tyson Foods, which has an estimated capacity of 28,000 head per day in six plants. JBS USA also slaughtered a few more cattle than Tyson in 2017 – 6.8 million head versus an estimated 6.76 million head for Tyson.
Tyson, however, remains the Number one US beef company in terms of sales because it harvests only fed steers and heifers. JBS’s slaughter is 20pc cows.
Tyson’s fiscal 2017 sales totaled US$14.823 billion, versus US$13.5 billion for JBS.
Cargill remains the third largest US processor with a capacity of 23,000 head per day, a 2017 slaughter total of 6.3 million head and sales of US$12.3 billion. National Beef Packing remains number four with a capacity of 12,000 head per day, a 2017 slaughter of 3.23 million head and sales of US$7.35 billion.
Daily slaughter capacity in the US’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 1155 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 61.7pc, down from 63.1pc in 2016.
Their share of steer and heifer slaughter declined to 69.1pc from 70.8pc in 2016. The top five packers’ share of commercial slaughter was 78.2pc, the same as in 2016. Their share of steer and heifer slaughter was 84.2pc versus 86.6pc in 2016. The declines mean smaller packers are processing a greater share, a sign of a healthy US beef processing industry.