Packers may pay a Choice premium for cattle anywhere north of 65% or 75% Choice, depending on region and grid format. This results in a net Choice carcass price of either $8.82
or $6.30/cwt. over the cash market average, respectively. At a carcass weight of 880 lb. that starts a pen of 100% Choice cattle from $55 to $78 per head above the cash carcass price.
The 2021 to 2022 track record for high-quality boxed beef pricing suggests a projection that tighter cattle supplies this year will support a continuation of premiums near the record highs. CAB grid premiums started the year with a $5.02/cwt. average across the packers with this week’s high of $10/cwt. by at least one packer. Added on top of the Choice price, the CAB carcass value then averages in a range from $99 to $122/head, depending on the Choice value. With a $10 premium at the top of the CAB range, the carcass generates a value just over $155/cwt.
In 2022, record Prime and CAB Prime premiums over Choice were all the rage, and appropriately so. The 11% dip in estimated total Prime carcass tonnage last year spurred the October grid premium to average $32/cwt. over Choice. While marbling genetics continue to progress and feedyards may manage cattle carefully to fulfill their quality grade potential this year, a lot would have to change to bring Prime carcass tonnage measurably higher in a smaller pool of fed cattle.
Market prices illustrated above aren’t predictive of every week ahead in 2023. Seasonal demand trends and cattle grading fluctuations tend to rule the ebb and flow of premiums throughout most years. While this is true, different demand levers have elevated premiums in a more
prolonged fashion during the second half of the past two years.
Everyone downstream from the packer needs to be prepared to see more frequent, potentially wider price spreads for quality within the shrinking supply setting. That’s a decent bet without factoring in any major socioeconomic changes ahead. From the cattlemen’s perspective, evidence shows that pressing ahead with a quality carcass mindset is the course to pursue.
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