The seasonal narrowing of the difference between choice and select wholesale beef prices this year is steeper than normal but could be showing the beginning signs of flattening – also a seasonal move.
It is common for the spread in USDA-reported wholesale choice and select beef carcass cutout prices to narrow in January as consumer buying of the more expensive choice beef gives way to the cheaper select beef. But this January’s decline was much steeper than is usual, a chart of weekly USDA beef cutout price spreads by the Livestock Marketing Information Center shows.
It’s also very common for the choice/select spread to show a general curved bottom on the graph before a general widening as spring/early summer buying heats up.
STARTING VERY WIDE
This year’s choice/select spread had a way to go to drop into more common territory with a $29.53 difference between 600- to 900-pound weekly carcass prices. This was up $9.68, or 48.8%, from $19.85 in the same week last year and up $18.77, or 174.4%, from the 2019-2023 average of $10.76.
It isn’t quite fair to say all of the drop in the choice/select spread is because of shifting consumer buying patterns, a market analyst said. The USDA-reported prices are wholesale prices, meaning shifts are as much what beef buyers expect to be able to sell to consumers during a given time period in the future from when a beef order is placed with a packer.
Such predictions are based on historical in-store sales data, the consumer price index and recent sales trends, the analyst said. They could be wrong, but they usually aren’t far off.
MAKING AN ANNUAL BOTTOM
The annual narrow point, or bottom, in the choice/select spread usually occurs in mid- to late-February, according to the five-year average. From there, it widens again to peak in June or September and again in November.
However, those three peaks are very close at around $25.00, and variations in any given year could vary from that model.
For instance, last year, there was a summer peak the first week of July at $24.38 followed by a decline to $11.73 the second week of September. From there, it rallied unevenly to peak at $36.31 the last week of November.
So, predicting where the choice/select spread will go from here is a little like divining the future by reading tea leaves or the entrails of an economist, the analyst said. The only part of the year that is somewhat predictable is the first half.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $203.52 per cwt to $207.17, compared with last week’s range of $201.58 to $204.93 per cwt. FOB dressed steers, and heifers went for $316.06 per cwt to $324.85, compared with $314.56 to $321.61.
The USDA choice cutout Tuesday was up $2.37 per cwt at $332.45 while select was up $1.41 at $321.96. The choice/select spread widened to $10.49 from $9.53 with 98 loads of fabricated product and 27 loads of trimmings and grinds sold into the spot market.
The USDA-listed weighted average wholesale price for fresh 90% lean beef was $360.97 per cwt, and 50% beef was $116.40.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.21 to $1.31 a bushel over the Mar corn contract, which settled at $4.85 1/4, up $0.03 1/4.
The CME Feeder Cattle Index for the seven days ended Monday was $279.06 per cwt, up $1.13. This compares with Tuesday’s Jan contract settlement of $281.82, up $2.10, and Mar’s $278.25, up $3.00.