It’s no secret that the difference between the USDA’s choice and select boxed beef prices (known as the choice/select spread) is narrowing rapidly, but it’s not so obvious that it remains higher than last year or the 2017-21 average.
Starting out the year with a seasonally wide weekly spread of $26.79, the spread last week was reported by the Livestock Marketing Information Center at $17.03, a drop of $9.76, or 36.4%, in just four weeks.
By comparison, last week’s choice/select spread of $17.03 was $8.12, or 91.1%, higher than the $8.91 reported in the same week a year ago and $11.41, or 203.0%, higher than the $5.62 reported for the same week in the previous five-year average.
MOVERS AND SHAKERS
It’s normal for the choice/select spread to narrow in January. The 2017-2021 average declines unevenly for the first six weeks of the year, although the rate of decline isn’t as steep.
Once it bottoms out about the third week of February, it begins a long, albeit uneven, rise to the annual peak about the second week of June. This coincides with an increase in the percentage of cattle that were placed on feed at lighter-than-ideal weights because of the seasonal decline in pasture availability.
The annual spring rise in the choice/select spread also coincides with the gradual increase in back yard grilling activities among consumers. Grocers have to keep beef on the front pages of their weekly advertising fliers or risk losing customers to competitors who do.
The increase in the spread also is aided by a desire among consumers for choice beef because the extra fat works better on the grill, and consumers are gearing up for the Memorial Dan and Independence Day holidays.
Once those holidays are done, the spread declines to a seasonal low in mid-summer as consumer buying interest wanes, only to be supported in the fall by extra holiday buying. But once that is done after the Thanksgiving Day holiday, the spread drops off toward the annual low in February of the following year.
LAST YEAR
But supply side influences can alter things easily, even more easily than demand-side influences.
Last year, the spread did not exhibit much of a summer decline. Fewer choice-grading carcasses were being found among the cattle being slaughtered, so the spread remained wider than the 2017-21 average from late June through to the end of the year.
Which brings up an issue for this year. Supplies of fed cattle are projected to decline as the year moves along. This could support the choice/select spread and keep it riding higher than the average all year.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $155.57 to $157.50 per cwt, compared with last week’s range of $154.80 to $160.00. FOB dressed steers, and heifers went for $244.42 to $248.76 per cwt, versus $244.52 to $249.16.
The USDA choice cutout Thursday was up $0.03 per cwt at $265.10 while select was up $0.88 at $253.66. The choice/select spread narrowed to $11.44 from $12.29 with 126 loads of fabricated product and 24 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 $1.65 to $1.80 a bushel over the Mar corn contract. Bids in Kansas were steady at $0.75 over Mar, which settled at $6.75 1/4 a bushel, down $0.05 3/4.
The CME Feeder Cattle Index for the seven days ended Wednesday was $180.90 per cwt, up $0.53. This compares with Thursday’s Mar contract settlement of $185.92 per cwt, up $2.67.