Now we’re in the money!
September 20, 2011
I’m excited to see the price differential between Choice and Select boxed beef at $11.87/cwt today. Did anyone else notice? It’s a pretty big adjustment from the values under $5.00/cwt. that we’ve seen more often than not over the past few years and as recently as several weeks ago.
I suppose my job with Certified Angus Beef may have something to do with my excitement, but it’s really my interest in cattle and profitability that has me excited. I just like to see the better cattle rewarded in dollars and cents.
The value-based grids offered by packers always generate premiums for the high-grading cattle that avoid discounts. But when the Choice/Select price spread is wider there are more dollars to be had. It’s pretty simple.
With the current Choice value at $11.87/ cwt. above the Select price, the premium per head is right at $40.36 for an 850 lb. carcass. Premiums are paid above the packer’s average weekly Choice percentage, so you’ve got to do some math to adjust accordingly. I’m using 40% of the boxed beef premium in this example, it would be higher in the south.
Providing that the Angus steer met the 51% black-hided requirement, there’s a chance of moving that Choice carcass on up to the upper 2/3’s of the Choice grade and meeting the 10 other carcass specs for CAB®. Doing so generates another $2.50/cwt., or $21.25/head, for a grand total of $61.60 per head. Now we’re in the money!
Folks, every pound is already worth quite a little in this market. Efficient production of high-quality product is not a fad that will fizzle out. It’s a winning plan in any business.
-Paul
Paul Dykstra is a beef cattle specialist for Certified Angus Beef LLC. He works closely with current and prospective licensed feedlots and ranchers in north-central and western states of the U.S to help them profitably meet the demands of a high-quality marketplace through breeding and managing Angus cattle to their utmost potential.
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