The difference between wholesale prices of choice and select grades of beef, known as the choice/select spread, is widening rapidly, according to USDA data compiled, graphed and published by the Livestock Marketing Information Center in Denver.
The choice/select spread last week was listed at $20.96, up $4.24, or 25.4%. from $16.72 the previous week, up $10.57, or 101.7%, from $10.39 in the same week last year and up $7.61, or 57.0%, from the previous five-year average of $13.35.
2023 CHOICE/SELECT SPREAD HOLDING WIDE
The data showed that the choice/select spread has held at a comparatively wide position all year and appears to be ready to surpass the 2017-2021 average annual high of $24.11 earlier in the year than the usual mid-June peak.
However, while the choice/select spread is widening and is tracking the 2017-2021 weekly average price line at a higher level, it still hasn’t surpassed the annual peaks of either the five-year average or last year.
And the spread currently seems to be widening as a faster rate than last year or the 2017-2021 average.
WIDE SPREAD MAY NOT LAST
But at the midpoint of the year, this year’s weekly choice/select spread may be more likely to follow the five-year average than last year’s line, a market analyst said. Seasonal trends appear for a reason, so unless there is a good reason, price trends have a tendency to mimic seasonal moves, although usually at higher or lower levels.
The late-spring peak in the choice/select spread can be linked to an early year beef production decline as more calf-fed cattle are slaughtered and to a surge in consumer demand for good grilling fare, the analyst said. Both tend to change about the same time of the year.
Last year, there was good reason for the choice/select spread to diverge from the average and remain very strong through the year – people felt they had the money to spend on quality beef, the analyst said. This year may be different with less government assistance, although the relatively low unemployment rate could keep consumers feeling like they have money to spend.
There simply is no way to tell, the analyst said, although beef production could slide this year as fewer feeder cattle become available for feedlots to purchase and feed to slaughter weight and condition.
The US cattle industry currently is divesting itself of cattle as extended drought dries out pasturelands and prevents cow/calf producers from keeping the herds they would like to have. The land simply will not support optimal, per-acre grazing, so many have sold calves early and even sold cows to cope.
Weather forecasts call for some drought mitigation, but they can’t be sure.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $175.12 per cwt to $181.74, compared with last week’s range of $174.50 to $182.37 per cwt. FOB dressed steers, and heifers went for $274.40 per cwt to $277.48, compared with $274.41 to $284.12.
The USDA choice cutout Tuesday was down $0.78 per cwt at $309.24 while select was down $2.34 at $288.66. The choice/select spread widened to $20.58 from $19.02 with 106 loads of fabricated product and 19 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 $1.71 to $1.83 a bushel over the Jul corn contract, which settled at $5.80 a bushel, down $0.04 1/2.
The CME Feeder Cattle Index for the seven days ended Monday was $202.82 per cwt, up $1.01. This compares with Tuesday’s May contract settlement of $205.95 per cwt, down $3.75.