BIF 2018: Focus on Quality

Mark McCully
Vice President, Certified Angus Beef LLC

Within Certified Angus Beef they market over 1 billion pounds of beef and certify over 5 million cattle.

Quality can have a broad definition. For this talk, McCully will focus on Quality Grade (marbling).
Consumer satisfaction improves with high marbling. Beef with a Prime Quality Grade has a nearly 100% consumer satisfaction.
We have improved tenderness in the industry through multiple avenues (genetics, management, beef handling, beef cutting and processing). Because of improvement in tenderness, McCully feels marbling becomes even more important.

The percent of cattle that are grading Choice and Prime has increased over the past 10 years. For a long time we were increasing carcass weight with little change in quality grade. In the last ten years, we have seen a significant improvement in quality grades.

We have increased the amount of Prime beef pounds by 92.8%. We have increased Premium Choice by 72%. Select quality grades have decreased by 40%.
Percent of boxed beef sales have increased from 10% of sales to 20%.

The spread between Select and Choice is $10. The spread between Choice and Branded is $5.50. The spread between branded and CAB is $6. The spread between CAB and Prime is nearly $20. Even though there has been a 21% increase in tonnage of Choice and Prime, the spread between grades has stayed consistent. This likely reflects the strong demand for quality beef.

Yield Grade 4 and 5 discounts have decreased over time, allowing feeders to more aggressively chase Quality Grades.

Five Rivers looked at performance differences between low grading and high grading cattle. There is no difference in average daily gain, feed to gain ratio, and cost of gain. We can increase the quality of our product without sacrificing efficiency.

Is marbling a free trait? Are there unfavorable genetic correlations for other traits, including maternal traits? Right now the data says there are not unfavorable correlations and we can improve marbling without harming other traits.

Bigger supplies are allowing customer access. This is allowing retailers to promote quality beef in their advertisements. Further, ground beef is no longer quality grade neutral. Retailers are marking Prime Grade ground beef.

We have added value to the beef carcass. We have identified new ways to fabricate a carcass. More of the carcass is being marketed as a steak item, rather than a roast. This means there is increased value of marbling beyond the middle meats.

As we look at export opportunities, quality grades will be a driver of demand.

What are our industry targets?
What should they be?

NBQA 2016 Targets 2018 Year to Date Should be our goal?
% Prime 5 7.6 15
% Upper 2/3 Choice 35 23.3 45
% Low Choice 35 48.1 30
% Select 25 17.6 10


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