Choice Cattle Getting Less Respect

Cattle feeders currently are aiming for a higher percentage of their cattle to grade choice rather than select, but lowered profitability may change their minds.

That is, unless one of two things happen: (1) packers resume paying premiums for cattle that yield choice-grading carcasses or hold out the promise of strong premiums in coming weeks or months, or (2) packers continue to discount select-graded carcasses.

As it stands now, USDA Agricultural Marketing Service and National Agricultural Statistics Service data compiled by the Livestock Marketing Information Center show that the cost of producing those choice-grading carcasses exceeds the price they are receiving for the steers.

Actually, choice fed steer prices in the Southern Plains have been below breakeven since March.  That month, the average fed steer price in the Southern Plains was $124.91 per cwt, $6.06, or 4.63%, below the average cost of $130.97 to feed that animal.

Since then, choice fed steer prices have held below their breakeven value, although the trend has followed the breakeven, just at a lower level.




However, as unprofitable as it has been to produce those choice steers, cattle feeders’ production of them continues apace.

The monthly percent of beef grading choice as a percent of beef graded has held near 71% for most of the year.  The figure has shown some seasonal shifts, but has held near 2017 levels all year and above the 2012-2016 average.




Seasonally weak choice beef prices in relation to select make it improbable that packer buyers will open their wallets for choice cattle in the near future.  Besides, if feeders keep the choice cattle coming, they won’t have to pay up for them.

The spread between wholesale-level choice and select beef appears to have peaked a little early this year, hitting a seasonal top of $16.05 the second week of November.  Since then, the choice/select spread has declined.

Last year, the seasonal peak in the choice/select spread took place in the first week of December at $21.65, and the five-year average peak comes the same week at $15.70.

Once the seasonal peak in the choice/select spread is set, it tends to drop off into late February where it begins its climb to the annual top, which associated with the peak of grilling season in June.

Cattle feeders have reason to hope for better times as weekly average slaughter prices have been moving unevenly higher since late August.  This trend follows very closely with the 2017 pattern into the end of the year and beyond, and hope springs eternal in the heart of a cattle feeder.




At the Fed Cattle Exchange video auction Wednesday, 219 head of fed cattle sold at an average $117.83 per cwt, up from $116.75 the previous Wednesday.

Cash cattle traded last week late at mostly $118 up to $118.50 per cwt on a live basis, up $1 to $2 from the bulk of the previous week’s action.  On a dressed basis, cattle traded at mostly $183 up to $183.50 per cwt, up $3 to $3.50.

The USDA choice cutout Thursday was down $0.59 per cwt at $212.67, while select was up $1.36 at $198.22.  The choice/select spread narrowed to $14.45 from $16.40 with 69 loads of fabricated product sold into the spot market.

The CME Feeder Cattle index for the seven days ended Wednesday, was $145.53 per cwt, down $0.85.  This compares with Thursday’s Jan settlement of $144.20, down $1.27.