Is it time to change carcass cutout comparisons to prime/choice from choice/select, or possibly a high choice/low choice?
There certainly is more variation in a USDA prime/choice cutout comparison than in the traditional choice/select cutout spread. And, since the US cattle industry currently produces more choice and prime grade cattle carcasses than select or ungraded, in can be argued that a choice/select spread comparison is no longer a valid look at carcass value.
MORE VOLATILITY, BETTER PICTURE
With more volatility and a wider average spread between prices, meat buyers, beef packers, cattle feeders and cow/calf producers would have a clearer picture of where to aim their businesses, a market analyst said. This is something not even a branded beef/choice beef spread cannot do because there is not enough volatility in the spread.
And, a prime/choice or high choice/low choice spread would do that better than the current choice/select spread, the analyst said.
There were times over the last two decades that a monthly choice/select spread was wider than a prime/choice spread, but in general, the prime/choice spread was much wider.
For instance, a Livestock Marketing Information Center graph of monthly comparisons of branded/choice, prime/choice and choice/select spreads showed that average May spreads were $7.84 per cwt, $11.96 per cwt and $12.96, respectively. But, in the most extreme case, the Oct. 1, 2022, branded/choice spread was $9.25 per cwt, the prime/choice spread was $89.78 per cwt and the choice/select spread was $97.14 per cwt.
VALUE CONCERNS CENTER ON MIDDLE MEATS
The relative value of branded, prime, choice or select beef is more pronounced when comparing the various primal cuts and emphasizes why any cutout price spread is even considered important by beef and cattle traders, the analyst said.
An LMIC graph of the various primal cuts from a beef carcass on June 26 showed a significant difference in price between prime grade, branded, choice grade, select grade and ungraded beef, but only in the rib and loin primals. There were small differences when comparing the brisket, but all other primals, like the flank, short plate, round and chuck, showed almost no difference in price.
That concentration of price and quality price difference in the middle meats highlights the uses of these primals versus the other primals. Middle meats are considered higher in eating quality and generally are eaten as steaks or high-value roasts. These cuts often are grilled or baked at higher temperatures for shorter periods of time, making the fat content more important and deserving of a higher price.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $254.99 per cwt to $257.52, compared with last week’s range of $255.83 to $260.00 per cwt. FOB dressed steers and heifers went for $403.87 per cwt to $405.70, compared with $405.60 to $410.81.
The USDA choice cutout Tuesday was down $0.71 per cwt at $385.77 while select was up $0.02 at $365.89. The choice/select spread narrowed to $19.88, from $20.61 with 109 loads of fabricated product and 19 loads of trimmings and grinds sold into the spot market.
The USDA-listed the weighted average wholesale price for fresh 90% lean beef as $460.88 per cwt, and 50% beef was $183.22.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.23 to $1.43 a bushel over the Jul corn contract, which settled at $4.42 1/2 a bushel, up $0.01 3/4.
The CME Feeder Cattle Index for the seven days ended Friday was $371.11 per cwt, down $1.52. This compares with Monday’s Aug contract settlement of $360.50, down $0.12.