The weekly average choice/select wholesale price spread is holding above a year ago and has recrossed the 2012-2016 average on its way to a seasonal high, according to USDA-Agricultural Marketing Service data.
The difference between wholesale prices for the USDA’s choice and select grade carcass cutout value is defined as the choice/select price spread. It is watched closely by cattle and beef traders for signs of changes to consumer demand or changes in total supplies of choice or select beef.
SPREAD BOTTOMS RIGHT ON TIME
This year’s fall run to a seasonal top for the weekly average choice/select spread began right on schedule, when compared with the 2012-2016 average – about the first week of August. This is when grocers start placing their orders for choice and prime beef cuts that will be featured in holiday advertising fliers.
From there, the five-year average moves up to an annual top that approximates the spring/early summer peak that comes about the first week of June. This peak occurs as retail and restaurant meat buyers pull back from the wholesale market after securing their needs through the Independence Day holiday.
After Independence Day, there isn’t much of a holiday to hang the beef market’s hat on until the Thanksgiving Day holiday, followed closely by the Christmas holiday. The Labor Day holiday the first Monday of September is considered a beef holiday, but it’s meat of choice is ground beef, which hardly plays into the wholesale choice/select price spread.
RIB ROASTS GAIN POPULARITY
The Thanksgiving Day holiday is pretty much given over to turkeys with a secondary emphasis on hams, but there is an assemblage of consumers that likes “prime” rib roast for the table. Many times, these roasts are not USDA prime grade roasts but are choice instead, but the name often carries over.
Some market analysts will say that increased consumer interest in rib roasts for the holidays is tied directly to the state of the economy at the time holiday meat purchases are made, and long-term data will give this argument some credence. This year, with the economy growing, and unemployment low, many retail and restaurant meat buyers may be counting on this demand kicker.
But to get their rib roasts in hand, meat buyers couldn’t wait around until late August to get started with their holiday orders like they did last year. A more timely approach was needed in order to secure the product they needed.
Given the price trends, and the strong performance of choice beef in spring and early summer, the choice/select spread could challenge last year’s fall top of $21.65 per cwt.
CATTLE, BEEF RECAP
Cash cattle trading was reported last week in the Plains at $110.50 to $111 per cwt on a live basis, steady to up $0.50 from the previous week. On a dressed basis, activity was reported at $174 to $175, steady to $1 higher.
The USDA choice cutout Tuesday was up $1.00 per cwt at $210.28, while select was down $0.80 at $196.86. The choice/select spread widened to $13.42 from $11.62 with 77 loads of fabricated product sold into the spot market.
There were six heifer delivery tenders and no steer delivery notices Tuesday at zero. There were no other retenders, demands or reclaims.
The CME Feeder Cattle index for the seven days ended Monday, was $155.06 per cwt, down $0.31. This compares with Tuesday’s Oct settlement of $155.07, down $0.57.