To anyone who’s been paying attention, the choice boxed beef cutout value reported by the USDA has been falling, but many may not have noticed that the difference between choice and select beef prices has been dropping even faster.
Since peaking at $37.22 in the second week of June, that difference, known as the choice/select spread, fell to $21.84 the last week of June, a drop of $15.38, or 41.3% in two weeks, according to data from the USDA’s Agricultural Marketing Service and compiled by the Livestock Marketing Information Center. The spread last week bounced to $22.32, but this remains much higher than last year or the 2015-2019 average.
By contrast, the choice boxed beef cutout value peaked the last week of May at $338.56 per cwt and has declined to last week’s $283.04, a fall of %55.52, or 16.4%, in five weeks.
BEEF PRICES STILL ELEVATED
Despite the losses, however, the choice boxed beef cutout and the choice/select spread remain elevated, compared with a year ago.
Last week’s choice/select spread was $22.32, up $15.23, or 214.8%, from $7.09 during the same week last week and up $8.89. or 66.2%, from the previous five-year average of $13.43.
And, last week’s choice beef cutout value at $283.04 per cwt, was up $76.50, or 37.0%, from $206.54 during the same week last week and up $62.73, or 28.5%, from the previous five-year average of $220.31.
The choice beef value continued to point lower after last week’s number were tabulated, but the choice/select spread made a small bounce. In both cases, further weakness would not be out of the question, a market analyst said, particularly in light of seasonal trends.
Consumer demand for beef in general, and choice beef in particular, tends to wane in the hot part of the summer, making it hard for wholesale (boxed) beef prices to rally. So, since prices already are higher than last year or the 2015-2019 trend, it would be difficult for market analysts to predict they will stay there unless something in the market changes.
BEEF PRODUCTION AN ISSUE?
Elevated overall beef production might be an issue for elevated beef prices and price spreads. Beef production through last week this year has totaled 14.326 billion pounds, up 5.3% from 13.610 billion last year, according to USDA numbers.
That increase comes on the back of a 4.9% increase in year-to-date slaughter numbers. Through last week, the US had slaughtered 17.290 million cattle, up 4.9% from 16.490 million during the same period of 2020.
But Cattle on Feed reports have indicated the number of slaughter-ready cattle could fade in coming months, a victim of declining herd sizes.
CATTLE, BEEF RECAP
Fed cattle traded this week at $119 to $125 per cwt on a live basis, steady to down $1 from last week. Dressed-basis trade was at $196, steady to down $6.
The USDA choice cutout Wednesday was down $0.46 per cwt at $272.88, while select was off $2.99 at $253.75. The choice/select spread widened to $19.13 from $16.60 with 112 loads of fabricated product and 24 loads of trimmings and grinds sold into the spot market.
The USDA reported Wednesday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.07 to $1.15 a bushel over the Sep futures and for southwest Kansas were unchanged at $0.70 over Sep, which settled at $5.68 1/4 a bushel, up $0.17.
The CME Feeder Cattle Index for the seven days ended Tuesday was $152.83 per cwt down $0.16. This compares with Wednesday’s Aug contract settlement of $156.95 per cwt, down $1.87.