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Another Choice Beef Surprise Coming?

Published on: 11:55AM Jul 23, 2009

The chart of the week is the estimated number of cattle slaughtered that graded prime. Up until roughly 18 months ago, the trend for the percentage of premium graded cattle was downward. But since then there has been an abnormally high percentage of cattle that have graded at least choice. Due to this, choice and prime beef production were notably larger than the prior year during the better part of the winter despite the lower overall beef production. As one can tell from the chart, however, prime cattle slaughter has been trending below year ago levels in recent months as the prime grade percentages have returned to more normal levels. Choice cattle slaughter has mostly remained above a year ago up to this point. Consequently, in this time period some choice beef cut prices have not appreciated as much as their prime counterparts. Going forward I will be watching both choice and prime cattle grade percentages closely. In three of the last four months reported to date, the monthly average weight of cattle placements into feedlots has been below the same month a year ago. In May, the average placement cattle weight decline compared to the prior year was the largest for any month since September 2006. Typically, lighter cattle placement into feedlot weights translate to lighter cattle slaughter weights which is not favorable for premium cattle grades. This would suggest that the percentage of cattle grading choice could wane over the next few months. If we do get a downturn in cattle slaughtered that grade choice, it may be bullish for the choice beef markets even in this challenging economic environment.

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