With the end of 2017 in our sights we’ll soon be reflecting on the year in beef. Undoubtedly, we’ll toast to what has been a pretty decent run with record-large production and very good demand to go with it. Factoring heavily in that success for CAB in our 2017 fiscal year (October to September) was a record year in international markets with a 26.4% sales tonnage increase beyond U.S. borders.
While riddled with politics and barriers unrelated to product acceptance, the CAB brand continues to make inroads and add “brand loyalists” across the globe. Geof Bednar, International Director, reports CAB brand products are enjoyed at licensed retailers and restaurants in 49 other countries, with double-digit percentage growth last year in every region.
Global trade accounted for 15% of total CAB brand sales for the year compared to total U.S. international beef sales at 10% of whole-muscle cuts. Growth was led by Asia with Japan up 50%, and Korea up 81%. Emphasis has been on providing licensed partners with a “brand experience,” brought about through educational seminars such as our International MBA (Masters of Brand Advantages) training for foodservice leadership, with attendees from 18 countries.
None of this can be done without the 102 licensed international distributors serviced by every major packer and 30 exporter suppliers. In 2017 the brand attracted 10 new international distributors, 8 new retailers in Canada, Colombia, Egypt, Japan, Korea, Mexico and the United Arab Emirates (UAE). To cap all of this off, an exciting and delicious beef bacon product for the Halal market is proving to be popular and has a lot more potential, introduced now into every Middle Eastern country with CAB distribution.
Last week’s fed cattle market average of $117/cwt. was destined to be down from the week prior’s unexpectedly higher $121/cwt. Weaker Live Cattle futures led negative news, as each day saw a lower close on December and February contracts. The consensus has it that these contracts were oversold and so far this week the slight up-tick is marking a point of stability and a momentary end to the downward slide.
The federally inspected harvest last week was much reduced at 633K head while packers remain profitable and are expected to continue a slight slowing of the pace in weekly head counts. That’s in an effort to maintain margin in a market that expects cheaper cattle input costs, but also cheaper beef cutout prices.
In the boxed beef market, we see weakening cutouts across the quality divisions as the Certified Angus Beef (CAB) brand cutout was down $2.50/cwt., Choice was down $2.30/cwt. and Select fell by $3.60/cwt. Lower trending beef cutouts are very much the norm for early December through the Christmas holiday, but the softening market started a week early this year with a slightly lower cutout the week before last as well. Price spreads between CAB, low-Choice and Select are holding at expected seasonal levels with some increase on the CAB/Choice price spreads for middle meats above a year ago.
Across the CAB carcass last week we saw only solidly positive pricing on the rib with a 15¢ increase on ribeye roasts, those selling at wholesale levels between $6.50 and $7.15/lb. Up and down ribeye rolls were priced mildly higher last week for what we’d call overall steady to just slightly higher for the rib primal. CAB tenderloins reached their year-todate high with the heavy CAB tenderloins priced at $12.98/cwt., adding 22½¢ for the week. Otherwise, strip loins and short cut loins were of little interest to buyers and saw significant discounting, the most negative price action for any subprimals last week. On the chuck end of the carcass, the flat iron, teres major and chuck flap meat continue to roll out with good demand while other chuck items faltered and saw packers discounting them. The same applied to every round item, discounting and push lists the theme there. Thin meats and CAB grinds were also cheaper with ground chuck and round continuing a predictable seasonal slide to lower prices while ground sirloin was about 30¢ higher than a year ago at $3.14/lb., though still the lowest this year.
Checking The Charts
As noted in Market Update, the CAB/Choice cutout spread saw strength in middle meats, but was overall steady to lower and near the 2015 trend line. The developing trend below shows fed steers in the weekly harvest up just 2% year-to-date while heifers are up 12%, signalling cow herd expansion has ground to a crawl as the cattle cycle nears an impasse.
An FYI on Grading Maturity Determination
After input from industry stakeholders, consideration of more recent research, and months of procedural process, USDA announced a change to modernize the grading standards by allowing carcass maturity as determined by dentition to be used when assigning quality grade. Studies have shown that beef from carcasses determined by dentition to be under 30 months of age but exhibiting advanced skeletal maturity (B and C) was equally as palatable as beef that did not exhibit advanced skeletal maturity. The new standard will allow carcasses determined to be under 30 months, based on dentition, to be classified as “A” maturity as long as skeletal maturity has not advanced to the oldest categories of “D” or “E.” The latter two age groups will not be eligible for Prime through Standard grades. Carcasses found to be over 30 months of age will still have quality grades assigned using current standards. The revised standard goes into effect December 18th, with more details available at https://www.ams.usda.gov/content/usda-announces-changes-us-beef-grade-standards.