Angus Journal

FEB 2017

The Angus Journal® is a monthly magazine known for in-depth coverage of American Angus Association® programs and services; the Angus business; herd management; and advertising reflecting genetics and herd philosophies.

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122 n ANGUSJournal n February 2017 T he beef market tells you what it wants. You just have to pay attention. "We know there are signals out there in the marketplace for quality. As you move further away from the end product, we know those signals are … not quite as distinct," said Mark McCully, Certified Angus Beef LLC (CAB) vice president of supply development, at the 2016 Angus Convention in Indianapolis, Ind., in November. The brand's vice president of supply made sense of many of those economic indicators. "We need to make sure we're watching the long-term trends and don't get too carried away with some of the short-term 'noise,' because the decisions we're making in our breeding programs are really about the next two, three, five years," he said. On a carcass-weight basis, there's 37% more Prime beef today than just two years ago, compared to Select grade, which is down 21.7%. "This year we actually see a higher percentage of dollar contribution is coming from branded product than Select," McCully said, noting that branded beef accounts for 16.3% of total industry revenue (see Fig. 1). "Not all beef is created equal, and not all beef brings the same price out in the marketplace," he said. Through the third quarter of 2016, carcass cutout values showed a $35-per- hundredweight (cwt.) advantage for Prime over Select. That reward potential may help explain why 78% of cattle today sell on alternative marketing agreements like value-based grids, compared to just 52% a decade ago. The bar on such arrangements keeps moving higher. When 76% of fed cattle are grading Choice, beating plant averages is more difficult than it was in 1997 when barely more than half reached that level. Most grids only pay a Choice premium on that share of a load that exceeds the plant average. "We get this question a lot: 'Have we gotten them to grade high enough? We've selected for quality long enough — maybe we ought to go select for something else,' " McCully said. "If you want to continue to reap the premiums, or if your customers do, you've got to be better than the average. That's how these systems work." Producers sometimes tell him they must give up pounds to get quality, but he showed that the average carcass qualifying for the Loud and Clear Beef market demands quality. by Miranda Reiman, Certified Angus Beef LLC Angus Convention 2016: Angus University Fig. 1: Dollar contribution by grade 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD Prime Choice Select Branded Ungraded Fig. 2: Carcass cutout spreads 60 50 40 30 20 10 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1-Q3 Source: Urner Barry, USDA (Prime). Ch - Se CAB - Ch Pr - CAB PHOTO BY LAURA CONAWAY, CERTIFIED ANGUS BEEF LLC @ "We need to make sure we're watching the long-term trends and don't get too carried away with some of the short-term 'noise,' because the decisions we're making in our breeding pro- grams are really about the next two, three, five years," said Mark McCully, CAB vice president of supply development.

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