It’s surprising with inflation so strong, but consumer demand for choice beef does not seem to be waning.
Weekly choice boxed beef prices reported by the USDA are off a little, but the difference in the wholesale prices of choice and select beef remain firm and strong. This indicates wholesale prices for choice and select beef are sagging while the price spread remains solid.
PRICE SPREAD NEAR STEADY
Last week, the weekly choice/select wholesale price spread was $25.99 per cwt, up $0.08, or 0.31%, from $25.91 a week earlier, down $0.86, or 3.20%, from $26.85 a year ago, and up $13.88, or $114.6%, from the 2016-2021 average of $12.11.
Comparisons with last year may be next to invalid as the COVID pandemic swept the country, and travel and gathering rules changed often, a market analyst said. It’s more significant to look at the previous five-year average.
Looking at the average, the choice/select spread should have narrowed in the summer to a bottom sometime in August. The spread then tends to widen into the first week of December before falling off to a February low.
This year, the spread hung with the average through about June where the average fell away into the summer doldrums and this year’s spread kept climbing. Its relative strength when compared with the average is noteworthy, especially when considering that food prices for consumers have risen considerably this year.
CUTOUT VALUE SAGGING
Meanwhile, the wholesale cutout value of choice beef carcasses is sagging, although it remains well above the 2016-2020 average.
The USDA reported last week’s cutout for 600- to 900-pound choice carcasses at $246.73 per cwt, down from $250.05 just one week earlier and below last year’s $297.79 but more than the previous five-year average of $204.18.
Whether it continues to sag is anybody’s guess, but it could remain strong through the end of the year.
URNER BARRY ON CAB
“The Certified Angus Beef market this week seems to be beating on the same drum. Supplies are short and demand has not waned in any significant fashion.
“While grade has slipped to some of the lowest levels seen in the last ten years, we saw a noteworthy uptick in the week prior. But as the consumer has become accustomed to higher grading beef, grading continues to be well below the level needed to meet supply and demand needs.
“It seems participants are not holding their breath for this to change anytime soon either as draught conditions do not seem to be improving and the cost of gain continues to be historically high. But as the commodities cutout continues to struggle, a pullback in production seems eminent at this point which may give cattle just enough time to improve on grade.”
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $143.00 to $147.00 per cwt, compared with last week’ range of $142.00 to $147.86. FOB dressed steers, and heifers went for $224.47 to $227.94 per cwt, versus $222.00 to $227.67.
The USDA choice cutout Thursday was up $0.30 per cwt at $247.36 while select was off $2.23 at $216.99. The choice/select spread widened to $30.17 from $27.84 with 157 loads of fabricated product and 52 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 $1.95 to $2.05 a bushel over the Dec futures and for southwest Kansas were steady at $1.00 over Dec, which settled at $6.75 1/2, down $0.08 1/2.
The CME Feeder Cattle Index for the seven days ended Wednesday was $175.69 per cwt up $0.11. This compares with Thursday’s Oct contract settlement of $175.72, down $0.82.