Wholesale boxed beef prices are about to turn lower for a few weeks before turning higher into the high point of the year, if they follow seasonal norms.
Data from the USDA’s Agricultural Marketing Service shows a seasonal top the second week of March before dipping to the seasonal low the second week of April. Last year, the nearby top happened the third week of March and turned up again the third week of April.
Last week’s average price for those choice carcasses was $223.63 per cwt, up from $221.18 the previous week and up $9.51, or 4.44%, from $214.12 the same week a year earlier. It also was up $4.71, or 2.15%, from the previous five-year average of $218.92.
Last year’s March peak came at $223.12 per cwt, and the 2012-2016 average top was at $221.31.
CHOICE/SELCT SPREAD WIDENING
But a seasonal dip in average wholesale prices does not mean a dip in product buying interest. The spread between wholesale prices for USDA choice product and USDA select is widening and is closely approximating last year’s trend when the market took a drastic swing up into the summer grilling season.
The average weekly spread between 600- to 900-pound choice and select carcasses last week was $7.78 per cwt, up $0.92, or 13.4%, from $6.86 in the same week a year earlier. Compared with the 2012-2016 average of $3.42, however, the spread was $4.36, or 127.5%, wider.
But while comparisons with last year and the previous five-year average are important, perhaps the most compelling part is that the trend is toward more value for choice carcasses until about the first week of June. By then, the Easter holiday is long gone, the Mother’s day observance is past, the Memorial Day holiday is in the rear-view mirror, and advance buying for the Independence Day holiday is beginning to wind down.
Another widening of the choice/select spread won’t come until buying interest for the end-of-the-year holidays kicks in around late July. Last year’s bottom didn’t come until September, and traders were getting worried that the late-year widening of the choice/select spread wouldn’t happen at all.
With a choice/select spread that is notably wide, cattle feeders last year tended to feed the market by feeding cattle just a little longer than normal. This packs on some extra fat, but it also allows the animal to reach its full potential for marbling, the inter-muscular fat that gives the meat its full flavor.
One analyst said it’s likely that cattle feeders will respond the same way this year if the choice/select spread widens dramatically again.
CATTLE, BEEF RECAP
Fed cattle sold last Wednesday on the Livestock Exchange Video Auction at a steady $126 per cwt.
Cash sales this week were starting out steady to $1.00 per cwt higher at $126 to $128 on a live basis. No dressed-basis trading was reported but took place last week at $204 to $204.50, steady to down $0.50.
The USDA’s choice cutout Tuesday was down $0.17 per cwt at $223.73, while select was off $0.74 at $216.75. The choice/select spread widened to $6.98 from $6.41 with 87 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Monday, was $143.17 per cwt, down $0.17. This compares with Tuesday’s Mar settlement of $141.55, down $0.62.