Source: Livestock Marketing Information Center | Jan. 23, 2020
The percent grading prime appears to be continuing to grow in 2020. The first two weeks of the year showed nationally a quarter to half a percent higher than in 2019. USDA AMS releases a weekly estimated grading percent for steers and heifers that tracks these estimates back to 1997. Last year, prime graded beef was high, ranging from 6.86% to 10.47% weekly. The five-year average ranges from 4.35% to 6.80% with the highest values in the fourth quarter.
Genetic improvement has been on a steady march forward, but in 2018 it seemed supplies outpaced the market, as the prime-choice spread dropped when nationally the supply of prime graded beef jumped from 6% in 2017 to 7.95% in 2018. In 2019 it continued to move upward, averaging 8.60%.
Regions 1-5 (regions are listed on the USDA AMS report NW_LS196) typically produce the highest percentage of prime beef, ranging from 10.88% to 13.80% in the five-year average. In 2019 this region on a weekly average saw 17.03% of carcasses grade prime. This is compared to 3.72% in region 6, 8.68% in regions 7-8 and 9.20% in regions 9-10. Region 1-5 also had the largest jump in 2017 to 2018 gaining over 3% in that single year, and 2% in region 7-8, while the other two region combinations reported increases less than 2%. Last year the increase in all regions was less than 1%. Conversely, the percent grading Select has dropped significantly. Last year, U.S. Select was 9.13% of carcasses compared to the five-year average of 12.23%. Choice graded beef has also increased volume, although 2019 levels were similar to the five-year average of 69.36%.
The first two weeks of 2020 show even more cattle presented for grading are grading prime. Region 1-5 showed the second week of the year approaching 20%. However, these gains in percent grading prime do not appear to be the case for all regions. Region 6 and region 9-10 figures are lower than last year in comparative weeks, while region 7-8 are showing smaller gains.
Heavier cattle weights could be a contributing factor, but within the last three years, there seems to be a clear push from cattle feeders to achieve the higher prime grading. Spreads between prime and choice have not been as low as they were in 2018 but have not been maintaining historical premiums, either. Interest from retailers, such as Costco and now Walmart, to offer prime cuts may be short-lived. A U.S. recession and/or contraction in the cattle industry could put pressure on future demand for prime graded beef moving forward, if it no longer is price competitive or consumers are watching their wallets.