Quality cattle result in solid grid premiums

FY 2014 Was a Good Year to Deliver Cattle on USPB’s Grids

By Stan Linville, CEO

Producers who delivered cattle on USPB’s grids at National Beef’s Kansas and California plants received an average of $48.28 per head above the cash market, or over $36.4 million in total grid premiums, both of which lagged only fiscal year 2012’s totals.

USPB producers have now delivered more than 11.6 million head through the company since beginning operations in 1997. For more detail on USPB cattle processed in 2014 at the Kansas plants see FY 2014 Kansas Cattle Performance Summary in this issue.

Regarding financial results, our fiscal year ended December 27 and final results are not yet available. As our previous quarterly filings with the Securities and Exchange Commission during fiscal year 2014 showed, much of the year was challenging for the U.S. beef processing sector.

USPB continued to offer its unitholders flexibility and options for how they managed their delivery right obligation last year. For some, the strong prices for calves off the ranch were just too much for them to consider retaining ownership and finishing their calves. Leasing their delivery rights to other producers through USPB enabled them to still realize a return on their investment in USPB during 2014.

For others whose business is finishing cattle, having the opportunity to lease delivery rights to market their cattle on our grids was a good option to help them maximize the profit potential of their and their customers’ cattle. Although the temptation was strong to simply sell cattle on the cash market, producers who leased delivery rights, on average, realized $51.56 more per head by marketing those cattle through USPB.

I’m reminded of an observation made early in our company’s existence “that in some years USPB producers would make more money from finishing cattle,

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Overall grid premiums average $49.25 per head

FY 2014 Kansas Cattle Performance Summary

By Brian Bertelsen, Vice President, Field Operations

U.S. Premium Beef concluded its fiscal year on December 27, 2014. The USPB value-based grid pricing system continued to reward cattle feeders for delivering superior quality cattle.

For all USPB cattle delivered to National Beef’s Kansas plants, overall premium was the third highest in company history at $49.25 per head more than if they were marketed on the average cash, live market. This was down from the record high set the previous year.

Table 1 on page 2 lists the carcass grid performance and Table 2 on page 3 lists the premium breakdown for the last four years. Quality grade premiums continue to be a major factor driving premiums. The percentage of carcasses grading Choice and Prime was record high, surpassing the old record set during 2011. This marks the seventh consecutive year in which USPB cattle graded over 70%.

The percentage of carcasses that were eligible for the Certified Angus Beef® (CAB) brand was the second highest, very close to the record set the previous year. The percentage eligible for the Black Canyon® Premium Reserve (BCPR) brand was record high. Both of these were driven by a record level of black-hided cattle, which is one of the requirements for both brands. Likewise, the percentage of those black-hided cattle that

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FY 2014 Annual Meeting

To Be Held on March 27, 2015

U.S. Premium Beef’s fiscal year 2014 annual meeting will be held in Kansas City, MO, at the Kansas City Airport Hilton on Friday, March 27, 2015. A reception will be held there on the evening of March 26. The Kansas City Airport Hilton is at 8801 NW 112th St. and the phone number is 816-891-8900. When making reservations request USPB’s annual meeting rate of $109.

There are two positions on USPB’s Board of Directors up for election. Rex McCloy, Morse, TX, and Jeff Sternberger, Ingalls, KS, currently hold these positions. Both have indicated they intend to run for re-election.

Please see page four of this UPDATE for a registration form you can complete and return to USPB if you are going to attend this year’s annual meeting. Watch upcoming UPDATES for more information on the annual meeting.♦

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were five pounds lighter than the previous year. The feed additive, Zilmax®, which dramatically increases carcass weight and yield was not available for use during the entire fiscal year. During the previous two years, within USPB cattle, Zilmax use was a little more common in heifers, thus the more dramatic drop in carcass weight.

This overall drop in carcass weight is contradictory to the 25 year trend of higher weights across the industry. Instead, it is a testament of how USPB carcass weights were dramatically higher during the two previous years.

Yield, or dressing percentage, was significantly lower. Plant average yields decreased even further, to a record low level during company history. This resulted in a Yield benefit per head that was less than the previous two years, but was still the third highest on record.

Feeding conditions appear to have been exceptional as apparent total feedlot gain and apparent average daily gain were both the second highest, down from record high levels the previous year. This is very impressive considering the greater concentration of heifers and the lack of Zilmax usage this year versus the previous year.

met the carcass specifications for each brand, or certification rate, was also record or near-record high for both brands. In total, more than 58% of all black-hided cattle qualified for a branded beef premium on the USPB grid.

All of the discounted Quality grades, Ungraded, Hard Bone, Over 30 Months and Dark Cutters, were at or near-record low levels. This resulted in lower grid discounts for these categories.

The USDA Choice/Select spread was less than the previous year, but nearly average for our company’s history. As a result, Quality grade premium per head was lower than the previous year, but remained the third highest in company history, driven by high quality grading of the cattle.

Within the entire U.S. beef industry, quality grading was also record high during company history, according to reports by USDA for fed cattle harvested in U.S. packing plants. USPB continued to maintain an advantage of over six percentage points more than the industry average.

Carcass weights were down from last year. There were more heifers delivered through USPB than in recent years. In addition, heifers decreased by ten pounds, which was a more substantial drop in carcass weight as compared to steers, which

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