Choice Beef Production Capped By USDA

The percent of monthly beef production graded choice or select has declined so far this year, and the reason can be put on the back of the USDA.

The US method of producing beef for the table produces more carcasses that are graded choice by USDA meat inspectors or cameras than it does select.  For the uninitiated, choice-graded beef has more intermuscular fat, called marbling, and generally is more tender and flavorful than select-graded beef, which has less marbling.

Since about 2013, the spread has tended to widen.  The annual average monthly spread between the percent of slaughter graded choice and that graded select in 2012 was 34.3 percentage points.

In 2013, that spread had widened a bit to 37.1 percentage points.  It continued to widen into 2017 with an annual monthly average of 56.3 percentage points.  This year so far, the average monthly difference is 55.5 percentage points.




At least some of the change might be attributed to an increase in cow slaughter, but this does not tell the tale of why the percent grading choice and that grading select has narrowed this year.

Cows are older animals and do not produce well-marbled beef.  The meat often is tougher and less flavorful and so almost all of it is ground into hamburger where it enjoys willing acceptance by consumers.

It is apparent that cow slaughter has increased, and if increased cow slaughter were the answer to the narrowing choice/select production percentages, one would expect the spread to be narrowed by an increase in the percentage of select carcasses at slaughter and not a decline in the percentage of choice carcasses.




Higher prices for choice carcasses often were linked to the rise in choice beef production over the last five to six years.  But if the difference in wholesale prices between choice and select beef were the answer to the question of why are production percentages narrowing, it would be reasonable to think the wholesale choice/select price spread would be narrower than normal.

But that doesn’t appear to be the case either.  AMS data shows that the choice/select spread has been right on track with the 2012-2016 average since early July.  And before that, it was above the five-year average, sometimes well above.




Since the gap narrowed from the choice side, something must have happened to the choice-grading carcasses.

But not really, said a feedlot manager.  He said the total change can be blamed on the USDA.  In January, the USDA’s Food Safety and Inspection Service upgraded the computer programs that grade the carcasses, moving some from grading choice and grading them select.




Cash cattle traded early last week at $111 to $112 per cwt on a live basis, up $0.50 to $1 from the previous week, and at $174 to $175.50 dressed, steady to up $0.50.  Then on Friday, cattle traded at $114 to $115 live, up $3.50 to $4, and at $180 dressed, up $5 to $6.

The USDA choice cutout Wednesday was up $1.33 per cwt at $216.93, while select was up $1.15 at $204.03.  The choice/select spread widened to $12.90 from $12.40 with 96 loads of fabricated product sold into the spot market.

There were no steer delivery tenders and no other retenders, demands or reclaims Wednesday.

The CME Feeder Cattle index for the seven days ended Tuesday, was $154.13 per cwt, up $0.47.  This compares with Wednesday’s Nov settlement of $153.47, up $1.30.