The wholesale value of boxed beef remains elevated by historical standards but is below last year where it may stay.
USDA Agricultural Marketing Service data compiled and graphed by the Livestock Marketing Information Center in Denver showed last week’s weekly negotiated boxed beef cutout value for choice 600- to 900-pound carcasses to be $263.27 per cwt. This was down $0.47, or 0.18%, from the $263.74 of a week earlier, down $23.01, or 8.04%, from last year’s $286.28 but up $50.56, or 23.8%, from the 2016-2020 average of $212.71.
CHOICE PRICE LESS VOLATILE
Over the year, the choice boxed beef value has remained relatively stable when compared with last year. However, last year was the COVID year, and all markets were disrupted to an inordinate amount.
The choice cutout was more volatile through the first quarter than it has been since then where it has been back and forth within a narrow $20-per-cwt range.
When compared with the previous five-year average, things look a little more normal other than missing out on a definite spring rally.
It also showed a general weakness going into October followed by a rally for the holidays. A subsequent decline as the year nears an end would not be contrary to the norm.
CHOICE/SELECT SPREAD UNUSUALLY WIDE
But whatever the boxed beef price is doing, the price of choice beef remains unusually high when compared with the price of select beef. In the markets, this is called the choice/select spread.
The choice/select spread is falling, but this may be an early iteration of the normal drop-off that occurs in December as retail and restaurant buying drops off after holiday stocking up is done.
The choice/select spread followed the 2016-2020 average through mid-June when the average was dropping away into the summer lows. This year’s choice/select spread kept rising as the average slipped away.
This year’s weekly choice/select spread peaked the last week of October at $31.60 but dropped to $27.42 by last week.
As with the choice cutout value, the weekly choice/select spread is hard to compare with last year’s COVID disruptions. Last year, there were two distinct peaks in June and September that were related as much to supply disruptions and government economic stimulus payouts. This year, there were no government handouts, but supply issues remained.
Many of the supply issues were related to drought. More cows were sent to slaughter, increasing the percentage of select beef in the total while edging out choice production.
Also, drought forced many cattle off of dried-up pasture and into feedlots where they consumed high-priced feed and were offered to packer buyers as soon as possible, further crossing up the usually choice/select production.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $150.85 to $154.20 per cwt, compared with last week’s range of $151.44 to $155.03. FOB dressed steers, and heifers went for $238.59 to $242.19 per cwt, versus $235.92 to $240.89.
The USDA choice cutout Monday was up $0.70 per cwt at $255.57 while select was up $0.40 at $233.23. The choice/select spread widened to $22.34 from $22.04 with 86 loads of fabricated product and 26 loads of trimmings and grinds sold into the spot market.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $2.05 to $2.25 a bushel over the Dec futures and for southwest Kansas were steady at $1.00 over Dec, which settled at $6.59 1/2, down 8 1/4.
The CME Feeder Cattle Index for the seven days ended Friday was $174.64 per cwt down $0.72. This compares with Monday’s Jan contract settlement of $182.62, up $1.85.