Strong grid premiums add to interest in delivering cattle

USPB Producers Deliver Cattle Against 100% of Delivery Rights

By Stan Linville, CEO

Delivery year 2013 is over and I am pleased to report that U.S. Premium Beef producers delivered against 100 percent of our unitholder-owned delivery rights. Thank you to all USPB producers who made it a goal to deliver high quality cattle in delivery year 2013, in spite of drought conditions that greatly impacted feed costs and cattle feeding profitability.

Our producers continue to adjust their management to deliver cattle that hit the targets set on our quality-based grids. In fact, U.S. Premium Beef producers surpassed last year’s per head average and total grid premium records on cattle that averaged more than 71% Choice and Prime. This was in part due to a USDA Choice/Select spread that averaged $10.62/cwt for the delivery year. Unitholders and associates who delivered to National Beef’s Kansas plants received an average of $69.70 per head above the cash market, or over $54.5 million in total grid premiums. For more detail on delivery year 2013 Kansas cattle results, see DY 2013 Kansas Cattle Performance Summary in this issue.

A service USPB continues to provide to our unitholders is to facilitate the leasing of their un-used delivery rights to other producers. This ser-vice again worked well for both parties in delivery year 2013. Plus, our company was also able to attract a greater number of high quality cattle that were delivered against leased rights. Producers who leased delivery rights through the USPB facilitated program in delivery year 2013 received average grid premiums of $67.59 per head and those cattle averaged more than 70% Choice and Prime carcasses.

As we begin delivery year 2014 we look to build upon the success we had in 2013 by attracting more quality cattle. Our four-week rolling average Choice/Select spread is starting the year at $9.16/cwt and appears to be making a seasonal increase. Cattle continue to both grade and yield well with discounts at manageable levels.

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FY 2013 Annual Meeting Set For March 28, 2014

U.S. Premium Beef’s fiscal year 2013 annual meeting will be held in Kansas City, MO, at the Kansas City Airport Hilton on March 28, 2014. A reception will be held on the evening of March 27 at the Airport Hilton. Watch upcoming UPDATES for more information on the annual meeting.®

DY 2013 Kansas Cattle Performance...

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This was $14.78 per head more than the previous high set last year. This was also the first year that Yield benefit was the largest component of the overall premium.

Quality grades remained high. The Choice and Prime percentage was the fifth highest in company history, down slightly from the records set two years earlier. The percentage of carcasses qualifying for the Certified Angus Beef^® (CAB) brand set a new high at more than four percentage points above last year. The percent qualifying for the Black Canyon Premium Reserve^® (BCPR) branded beef label was also a new high. Likewise, the Ungraded percentage was record low. Ungraded includes carcasses that do not grade USDA Select or better. By comparison, USDA reports the nation-wide average was 5.79% Ungraded.

Throughout the industry, Quality grade was also high. Carcasses from fed cattle graded by USDA in U.S. packing plants averaged 65.59% Choice and Prime. This was the second highest industry average during company history.

The Choice-Select spread improved slightly to become the third highest in company history. The combination of strong premiums and high quality grading resulted in a record high Quality grade premium of $ 31.40 per head. This was $1.90 more than the old record set last year.

During delivery year 2013, USPB average live weight and carcass weight were both new high numbers. Carcass weight increased 24 pounds over the previous high set last year. This was the second largest year-to-year increase in company history. Rising carcass weights have been a consistent trend throughout the industry for over twenty years.

Percentage of Lightweight carcasses was record low and the Heavyweight carcass percentage decreased as a result of the grid change a year ago when the heavyweight threshold increased from 1,000 to 1,050 pounds.

Apparent total feedlot gain is the difference between live pay weight and in weight. On average, 557 pounds of gain were added to USPB cattle during the feedlot finishing period which was also a new high. Placement weights were highest in company history. Apparent average daily gain was new high at 3.58 pounds per day.

The percentage of Yield Grade 4 carcasses increased; however, percentage of Yield Grade 1 carcasses set a new company high for the second year in a row. Therefore, average Yield Grade increased only slightly over last year. The Yield Grade 4 threshold also increased, so as a result, the Yield Grade discount actually decreased and was the smallest in twelve years.

If you have questions about cattle or grid performance, please call me at 866.877.2525.♦