After an unseasonal rise and fall over the summer, the difference between wholesale prices for USDA choice and select beef caught the seasonal trend and is widening again.
If the trend continues as per the 2014-2018 average, the choice/select spread, as it is known in the industry, will continue to widen until the first week of December. At that point, it will narrow rapidly as buying interest for high-quality steaks and rib roasts drops.
The data come from the USDA’s Agricultural Marketing Service and are compiled by the Livestock Marketing Information Center in Denver.
SPREAD JUST ABOVE 5-YEAR AVERAGE
Last week’s average choice/select spread was $11.36. This was up from $10.86 the week before and the most recent low of $9.98 two weeks ago.
What makes comparisons so unusual this year is last year’s wide divergence from the five-year average. Last year, it was like consumers just discovered choice beef was better tasting, and they wanted more of it. Even prime beef was showing up in supermarket meat cases.
Last year, the choice/select spread began an uneven rise the second week of February and didn’t look back until it hit its peak at $27.23 the second week of October. From there, it played catch-up with the seasonalities through December.
This year’s price graph more closely resembles the 2014-2018 average with its widest point of $23.83 coming the first week of July followed by a decline into a summer low.
What didn’t follow the norm was that mid-summer hump.
CUTOUT BOOST LEADS MID-SUMMER HUMP
That mid-summer widening of the choice/select spread, though, came after an earlier boost in the total cutout value from the USDA.
From a low of $201.24 per cwt the third week of July, to a near-term high of $229.91 the first week of September, the choice/select spread widened to show continued interest in quality eating beef for the Labor Day holiday.
Going forward, the choice/select spread may widen again into the year-end holidays as grocers and restaurants gear up for increased holiday demand for rib roasts and steaks. Traditionally, there is a noticeable increase in buying around the holidays for standing rib roasts. Steaks usually come later – in December – for surf-and-turf specials.
STEER PRICES MOVING HIGHER
In correlation with the increased buying interest for ribs and loins for the year-end holidays, Southern Plains fed steer prices usually increase unevenly. But this increase often moves through winter in a move that doesn’t correlate to increased consumer interest in grilling product.
Once the holidays are over, consumer interest usually retreats into survival mode to pay Christmas bills and get through the winter. Through the winter, cattle price strength often is associated with harsh winter weather and a preponderance of calves that were placed at lighter weights, limiting supplies.
Last year, late-year cattle prices marched decidedly higher.
CATTLE, BEEF RECAP
Fed cattle trading this week was seen at $109 per cwt on a live basis, steady to up $2 from last week. Dressed-basis trading was reported at $169 per cwt, up $2 to down $1.
The USDA choice cutout Tuesday was down $2.18 per cwt at $212.44, while select was off $0.26 at $200.08. The choice/select spread narrowed to $12.36 from $14.28 with 129 loads of fabricated product and 29 loads of trimmings and grinds sold into the spot market.
There were no delivery notices against the Oct live cattle futures market Tuesday.
The CME Feeder Cattle Index for the seven days ended Monday was $140.71 per cwt, down $0.52. This compares with Tuesday’s Oct contract settlement of $138.12 per cwt, up $0.82.