Choice/Select Beef Supplies Tight; Spread Widens

Beef production has dipped below a year ago over the last couple of weeks, leading to some higher fed cattle prices and a widening of the already wide choice/select wholesale price spread from the USDA, said David Anderson, Extension agricultural economist for Texas A&M University, in a study for Extension agents from the Livestock Marketing Information Center in its In The Cattle Markets publication.

The Choice-Select spread tends to increase seasonally this time of the year and that seasonal trend is occurring again but at a much higher wholesale price level this year, Anderson said.

The data highlights that even though beef production remains large, the makeup of these supplies is important, he said.  The US is producing a little less fed beef and a little more cow beef relative to last year, and fewer cattle yielding prime- and choice-grading carcasses are tightening up supplies even more.

Relatively tight supplies of prime and choice beef are contributing to historically wide price spreads and high values for high quality grade beef, he said.




Over the last four weeks, total beef production declined by more than 0.5% below the same period a year ago, Anderson said.  But not all beef is the same.  Over this period, fed steer and heifer slaughter was down 1.7%, while cow slaughter was up by 4.2%.

Digging a little deeper, fed steer slaughter over the period was down 6.5% while fed heifer slaughter was up 6.7%, he said.

Dressed weights also continued to be down about two pounds a head from last year during the last month for steers, heifers and cows, Anderson said.  Combining weekly slaughter and dressed weights left fed beef production about 2.2% lower than a year ago while cow beef was up 3.8%.




To dig in a little deeper, the percent of carcasses presented for grading over the last month that graded prime and choice ran about 1.6% and 2.6% below a year ago, respectively, Anderson said.  And, about 7.7% more carcasses graded select than a year ago.

Combining the percent of carcasses by grade and pounds of fed steer and heifer beef produced indicates that over the last month prime beef production was almost 4% below a year ago, he said.  Choice beef production was almost 5% lower than a year ago, while select production was about 5% higher.

The prime boxed beef cutout averaged $279.55 per cwt over the last month compared to $214.81 last year, Anderson said.  Over the same period the choice cutout averaged $215.76 per cwt compared with $202.48 last year.

That leaves the prime/choice spread at $63.80 per cwt this year compared with $12.33 last year, he said.  The average choice/select spread grew to a whopping $25.76 per cwt over the last month compared with about $11 last year and $11 over the last five-years.




Cash cattle changed hands last week at $108 to $109 per cwt, up $1 to $2 from the previous week, while dressed-basis trading was at $172, up $2.

The USDA choice cutout Thursday was down $0.17 per cwt at $218.11, while select was up $1.23 at $192.60.  The choice/select spread narrowed to $25.51 from $26.91 with 115 loads of fabricated product sold into the spot market.

No cattle were posted Thursday for delivery against the Oct contract.

The CME Feeder Cattle index for the seven days ended Wednesday was $145.15 per cwt, up $0.03 from the previous day.  This compares with Thursday’s Oct contract settlement of $144.20, down $1.02.