In early 2015, the eight-week moving average for sales of Prime and Branded (combined) surpassed the Select category for the first time.

Nevil Speer

April 6, 2015

2 Min Read
Industry At A Glance: Beef sales are becoming less of a commodity

In recent weeks, Industry At A Glance has focused on the improving grading trends within the slaughter mix and the resulting long-run shift in production. All that discussion has some very important ramifications upon beef sales.

More specifically, the improvements in USDA Quality Grade have served to increase the relative supply for beef sold as Prime or via a branded program. Clearly, that’s a beneficial occurrence for the beef industry, as beef sold at the higher end of the market generates more revenue that ultimately gets transferred back to the production sector. Moreover, beef sold at the higher end of the market possesses increased quality and consistency. Thus, selling more of it means more consumers purchasing product with a higher probability of a favorable eating experience.  With all that said, the industry witnessed an important occurrence in early 2015. The eight-week moving average for sales of Prime and Branded (combined) surpassed the Select category for the first time. Moreover, the gap has widened in the ensuing weeks; at the end of March, Prime and Branded sales (combined) comprised 17% of total sales, while Select accounted for only 14%, respectivelyThe evidence points to a favorable reality. Consumers are buying more product that demands a price premium and decreasingly competes head-to-head with other proteins in a commodity setting. That ultimately sends price signals back into the production sector to create even more product to meet that demand. The occurrence seemingly reveals the importance of a virtuous loop for the beef industry. Lastly, that decommoditization buffers the market from conventional/traditional market corrections that typically occur when operating in a strictly commodity orientation.

How do you perceive these long-run trends in the industry? What implications might occur from this transformation in the future? Do you foresee this trend continuing in the years ahead?

Leave your thoughts in the comments section below.

 

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About the Author(s)

Nevil Speer

Nevil Speer serves as an industry consultant and is based in Bowling Green, KY.

Nevil Speer has extensive experience and involvement with the livestock and food industry including various service and consultation projects spanning such issues as market competition, business and economic implications of agroterrorism, animal identification, assessment of price risk and market volatility on the producer segment, and usage of antibiotics in animal agriculture.
 
Dr. Speer writes about many aspects regarding agriculture and the food industry with regular contribution to BEEF and Feedstuffs.  He’s also written several influential industry white papers dealing with issues such as changing business dynamics in the beef complex, producer decision-making, and country-of-origin labeling.
 
He serves as a member of the Board of Directors for the National Institute for Animal Agriculture.
 
Dr. Speer holds both a PhD in Animal Science and a Master’s degree in Business Administration.

Contact him at [email protected].

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