Prime: profitable and possible
By : Miranda Reiman
Some think a dramatic increase in Prime grading beef spells oversupply. When will packers have enough?
“I can tell you, we haven’t reached that point today,” says Steve Williams, head of procurement for JBS USA. “I don’t see a time in my lifetime when Prime’s not a big premium. I just don’t see it.”
Supply of the uppermost tier of beef has doubled in recent years, with up to 6% of the nation’s fed cattle harvest grading Prime. That has opened new doors, says Mark McCully, vice president of supply for the Certified Angus Beef ® (CAB®) brand.
“In a lot of cases, supply has fueled the demand, which in turn has given producers incentive to produce more,” he says.
For the last decade, the average annual spread between Select and Prime ranged from $25 to $50/cwt., and about $35 for 2016.
“The last five years our percent Prime has doubled, and those spreads have stayed the same…the demand is there,” Williams says, fending off myths that it might be simply a factor of cattle numbers: “Weights are up, beef production hasn’t tailed off.”
Bringing in his colleague in sales helps explain.
“In years past, consistency of supply has been hit or miss,” says Chris Ross, program director for JBS USA. “Whether cost of gain is up or market factors due to weather—it’s been a tough deal to get a consistent supply of Prime. Now, we’re seeing that turn around and it’s an upward trend, which really helps us from the sales side.”
In the last five years, weekly Prime production on a carcass-weight basis rose 8.9 million pounds, from 13.7 million per week in 2012 to 22.6 million in 2016.
“It’s given us a great opportunity to expand our customer base and really supply that demand,” Ross says.
Cattlemen like Jerry Kusser, of Highmore, S.D., are seeing years of focus pay off.
“We wanted to know if we were going in the right direction and which ones made the most money,” the rancher says of carcass data collection that goes back to the 1980s. He credits that, heavy use of artificial insemination and strict genetic selection for cowherd function and end-product merit for stellar grading ability.
Last year, 88% of his 458 steers qualified for CAB and CAB Prime, including 68% of that highest grade.