Prime beef may be losing its luster with buyers while branded and choice product are holding their own or even gaining.
USDA-Agricultural Marketing Service data compiled by the Livestock Marketing Information Center show that prime beef’s portion of the comprehensive beef cutout has declined in relation to branded and choice product. The relationship of branded and choice product to select and ungraded beef appears to be holding.
The latest data available sows the comprehensive cutout value was $207.53 per cwt, down $1.71, or 0.82%, from $209.24 the previous week and down $1.79, or 0.86%, from $209.32 the same week a year ago.
RELATIONSHIPS NARROW
In the latest data, prime beef’s cutout value was listed at $230.06 per cwt, $8.77, or 3.96%, higher than branded beef’s value of $221.29. A year earlier, prime beef was reported at $266.37 per cwt, up $49.36, or 22.75%, from branded beef’s $217.01.
However, other quality labels of beef held much closer values when compared with a year earlier.
For instance, branded beef’s latest value was reported at $221.29 per cwt, up $5.08, or 2.35%, from choice’s value of $216.21. A year ago, branded was reported at $217.01 per cwt, up $4.74, or 2.23%, from choice’s $212.27.
Price relationships between other quality grades or designations showed similar variations.
But while the data show that the wholesale price of prime beef in relation to the other cuts is down, it does not show why.
SUPPLIES UP
It might be tempting to think of this as a demand issue. Thoughts that this could be the first inkling of an economic slowdown in the US.
However, economists say actual demand for a certain product tends to change slowly unless something is introduced or taken away, such as export markets. Economic conditions can affect demand, but it’s hard to separate buying ability from demand in these cases.
It could be argued that buying interest for prime beef has fallen off with export market uncertainties, but these market gyrations have concentrated on China, which is not yet a demand center for US prime beef.
What seems more likely is a change in supply.
Prime beef is a small portion of total US production, averaging less than 10% each week, according to the USDA. What is measured is choice and select beef production, and it’s likely that many consumers have a hard time differentiating between choice and prime.
Total beef production is up, and the percentage of choice beef production over select production is up as well, according to USDA data.
What is more likely with the narrowing of the prime/choice spread is that supplies of quality meat have gone up, satisfying a more lethargic demand growth.
CATTLE, BEEF RECAP
No cattle traded on the Livestock Exchange Video Auction Wednesday. Fed cattle sold two weeks previous at $106 per cwt, down $4 from the prior Wednesday.
Cash trade was reported last week at $110 to $111 per cwt on a live basis, steady to up $1 from the previous week and at a steady $173 to $175 per cwt on a dressed basis.
The USDA choice cutout Monday was down $0.38 per cwt at $203.76, while select was off $0.70 at $195.67. The choice/select spread widened to $8.09 from $7.77 with 90 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Friday, was $148.27 per cwt, up $0.11. This compares with Monday’s Aug settlement of $152.37, up $1.65.