The difference between wholesale choice and select beef prices likely will continue to narrow until the last week of February, if normal trends are followed.
The difference, called the choice/select spread, closed up from an unusually wide range through the summer and fall and now is near last year and the previous five-year average.
It’s difficult to tell exactly why the choice/select spread became so wide at that time. Demand for choice-grade beef was strong, and slaughter rates didn’t seem to keep up with the demand. The fire that closed Tyson Foods’ Finney County, KS, beef plant only seemed to exacerbate the situation.
However, beef production and buying interest appear to have leveled out to more normal ranges now that the Tyson Foods plant is back in operation.
THE LATEST NUMBERS
The weekly average choice/select spread last week was $14.67, choice over select, according to data from the USDA’s Agricultural Marketing Service. This was down from $17.77 two weeks ago and down from a high of $27.23 the second week of October.
Last week’s spread of $11.50, choice over select, was below the previous five-year average of $14.24.
Looking ahead, the choice/select spread likely will decline further. The seasonal reasons for this are strong and rooted in holiday habits and winter weather.
Now that grocery stores and restaurants have secured their desired choice meat offerings for the Christmas and New Year’s holidays, buying at the wholesale level has faded, as it always does. In January, consumers settle into a routine of roasts, Hamburger Helper and bill paying.
There will be some modest activity for choice beef products for the Valentine’s Day observance, but such buying rarely shows up in weekly average price changes at the wholesale level.
CHOICE BOXED BEEF VALUES RETURNING TO NORMAL
A closely related statistic is the weekly average wholesale price for choice boxed beef. This weighted average of the primal cuts of the beef carcass has been very volatile since the Tyson fire in early August.
In a general sense, the boxed beef cutout value has followed normal trends, aside from the initial scare that beef supplies would tighten suddenly after the plant’s closing, but it has done so in a very exaggerated way. A seasonal dip to a low the first week of October happened, but the cutout had to drop from a post-fire high of $239.87 per cwt the last week of August to get there.
From the early October seasonal low of $212.58 per cwt, the cutout shot up to this year’s weekly average high of $240.66 the last week of November.
From there, the choice cutout has fallen back to last week’s average of $219.14.
CATTLE, BEEF RECAP
Cash cattle trading was reported last week at $118 to $120.50 per cwt on a live basis, with the higher prices coming on Friday, steady to up $1 from last week, and at $188 to $190 on a dressed basis, steady, with higher values also on Friday.
The USDA choice cutout Tuesday was down $4.27 per cwt at $212.81, while select was off $2.04 at $203.47. The choice/select spread narrowed to $9.34 from $11.57 with 93 loads of fabricated product sold into the spot market.
No new contracts were tendered for delivery against the Dec delivery month Tuesday.
The CME Feeder Cattle index for the seven days ended Monday was $145.10 per cwt, up $0.49 from the previous day. This compares with Tuesday’s Jan contract settlement of $145.15, down $0.10.