The difference between choice and select beef prices likely will continue to narrow into mid- to late February, extending a seasonal move that began the last week of November.
That conclusion was drawn from USDA Agricultural Marketing Service data compiled by the Livestock Marketing Information Center.
CONSUMER PREFERENCE CHANGES
Previous observation and meat buyers agree that once the Thanksgiving, Christmas and New Year’s holidays are over, consumer preference shifts away from choice beef and toward select, or even ungraded beef. Many do not see a reason to pay more for choice roasts than they do for select. Many others are feeling a pinch in their wallets after the holiday season and divert more of their income toward paying off bills.
Some observers, especially those in northern states, have said the long nights put consumers into a seasonal malaise that won’t be broken until the days lengthen, the weather warms and the grills can come out again. This won’t happen until March or April.
Once spring is in the air, consumers will have their bills paid down to less painful levels and will switch back to buying more choice beef to put on the grill.
In preparation, meat buyers, both grocery and restaurant, will begin booking more choice steaks for delivery in the spring season, and the wholesale choice/select spread will begin to widen again – in late February and into early March.
GRILLING SEASON PUSH HELPED BY TIGHTENING SUPPLIES
That push to buy more choice beef for the grilling season demand helps push prices higher, but the seasonalities of the slaughter mix begin to change, too, helping to push choice prices higher and widening the choice/select spread.
At that time, more cattle that entered the feedlots younger and at lighter weights begin to show up in the slaughter mix. These cattle tend to be lighter in weight when they exit the feedlot also, and many of their carcasses do not quite make it to choice grade.
However, AMS data indicate that the seasonal slide in the percentage of choice carcasses in the total slaughter mix isn’t the whole story behind the seasonal late-winter/early spring widening of the choice/select spread.
One must go back to beef production at that time of year. Steer dressed slaughter weights are declining and won’t bottom until late April. Thus, less total beef is being produced, and since the consumer demand for choice beef is climbing, or at least it will, and supplies of all beef, including choice, are declining, prices for choice beef will go up in relation to select.
The percentage of choice beef production in the total slaughter/production mix can be correlated to the decline or rise in the dressed weight of the cattle being slaughtered. The change over time isn’t as great as the change in dressed weight, but it’s there.
Knowing this, many meat buyers will try to book product deliveries during the winter but only if tight supplies are expected.
CATTLE, BEEF RECAP
Cash cattle traded last week at $123 per cwt on a live basis, up $4 from the previous week, and at $195 dressed, up $5.
The USDA choice cutout Monday was up $0.94 per cwt at $215.35, while select was up $3.14 at $210.66. The choice/select spread narrowed to $4.69 from $6.89 with 70 loads of fabricated product sold into the spot market.
No delivery notices were served for Dec live cattle.
The CME Feeder Cattle index for the seven days ended Thursday, was $147.26 per cwt, up $0.06. This compares with Friday’s Jan settlement of $148.85, down $0.22.