The increase in cow slaughter this year has contributed to the increase in non-choice beef production, widening the choice/select production gap and affecting prices, said Brenda Boetel, agricultural economist at the University of Wisconsin-River Falls, in a letter to Extension agents called In The Cattle Markets, published by the Livestock Marketing Information Center in Denver.
NOT ALL BEEF IS EQUAL
The first three quarters of 2022 saw 1.7% more beef production than a year ago, Boetel said. Since the end of August, weekly beef production has averaged a year-over-year increase of 3.7%.
But not all beef is the same, she said. The first three quarters of 2022 saw steer slaughter down 1.7%, while heifer slaughter was up 0.9% and cow slaughter up 0.7%.
Dressed weights for all cattle have averaged 0.86 pounds less than the 2021 average for the first three quarters, Boetel said. The average decrease is due to a decline in dressed weights of cows slaughtered, being down an average of 7.8 pounds relative to 2021. Dressed weights for steers and heifers were up more than four pounds from 2021.
Combining weekly slaughter and dressed weights leaves fed beef production about 1.6% higher than a year ago while cow beef production is up 4.3%, she said. The percent of carcasses presented for grading over the last month that graded prime and choice ran about 1.4% and 0.7% fewer than a year ago, respectively.
About 0.7% more carcasses have graded select than a year ago, Boetel said,
WIDER CHOICE/SELECT SPREAD
The Choice boxed beef cutout has averaged $252.65 since Sep. 1, compared with $316.90 over the same period in 2021, she said. The select cutout has averaged $228.38 versus $284.21 during the same period in 2021.
The choice/select spread since Sep. 1 has averaged $24.26 per cwt this year compared with $31.69 last year, Boetel said.
The choice/select spread tends to increase seasonally from the end of January until mid-June and then decrease until end of September before resuming an increase until just before the December holidays, she said. Except for a short-lived dip after the Labor Day holiday, the choice/select spread has been rising steadily since the end of February when it was at a negative $2.00 on Feb. 23 (meaning the select boxed cutout was higher than choice boxed cutout).
Even though beef production has remained above 2021 levels, the make-up of beef production is important, Boetel said. The decrease in beef produced from finished steers and heifers relative to cows has tightened the supply of choice graded beef, which in turn is widening the choice/select spread.
A market analyst said the spread could narrow again when cow slaughter declines.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $144.00 to $148.91 per cwt, compared with last week’ range of $143.00 to $147.00. FOB dressed steers, and heifers went for $225.42 to $229.84 per cwt, versus $224.47 to $229.75.
The USDA choice cutout Thursday was down $0.13 per cwt at $246.53 while select was up $1.60 at $215.86. The choice/select spread narrowed to $30.67 from $32.40 with 161 loads of fabricated product and 35 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 $2.00 to $2.15 a bushel over the Dec futures and for southwest Kansas were steady at $1.00 over Dec, which settled at $6.97 3/4, up 4 3/4.
No live cattle contracts were tendered for delivery Thursday.
The CME Feeder Cattle Index for the seven days ended Wednesday was $174.03 per cwt down $1.01. This compares with Thursday’s Oct contract settlement of $174.75, down $0.75.