Choice-Select Spread

[MikeC]

The boxed beef market was mixed again yesterday with the choice cutout closing $1.02 lower to settle at $137.77 and the select cutout closing $.22 higher to settle at $137.24. Sales volume was good with 408 loads of beef sold (179.70 loads of choice fab cuts, 100.32 loads of select fab cuts, 53.34 loads of trim, 74.16 loads of grinds). The choice/select spread settled at $.54 a loss of $.80.



The beef market was pressured lower again yesterday by further weakness in choice rib and loin cuts. Ribeyes, top butts, and peeled tenders were all sharply lower again yesterday pushing choice cutout values below $1.38, fresh 2 year lows. There were also some markdowns in the chuck roll and inside rounds yesterday adding to the bearishness. Boneless beef markets were mixed with lower pricing noted in the 90% cow beef and higher in the 50% fed cattle trim. I would look for buyers to start stepping into the beef market at current price levels as certain beef cuts start to look attractive from a historical standpoint.
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Only about $4.00 to $5.00 difference between a CHOICE Carcass and a SELECT Carcass? :shock:

Where's the PREMIUM? :roll:

 

[BRG]

Why is this?

 

[shanel]

Could it be because most people cannot afford to gas their car up and go out for a good steak?

 

[smnherf]

It very well could be a sign of economic times. It is probably also partly weather related. Cold, wet rainy snowy weather doesn't encourage people to leave their warm confines and go out to eat. Also could be partially related to lack of an export market. There is money overseas and we aren't able to get it.

Bottom line though is apparently there is enough choice product out there to meet the demand and its kinda troubling considering what it costs to feed these cattle up from select to choice.

Brian

 

[Angus In Texas]

During economic hardships, the choice/select spread as well as other premiums will undoubtedly suffer due to the fact that people have less ability to spend the extra money on better beef. Instead they start eating more ground beef and roasts..... i.e. the cheaper cuts of meat if not substituting other meats for beef. It has a lot to do with everything else costing more but the income staying the same if not less. The quality of food is one of the first things to suffer after discretionary spending on luxury items. It is amazing how much you can save by buying the generic brand, however in some instances it still makes economic sense to buy name brand...... compare per unit pricing as well as the nutrional value of the individual products.

 

[MikeC]

So........by you folks rationale, CAB will go broke this year? :lol:

 

[smnherf]

Dont worry about CAB going broke. They make their money by liscnesing fees.

Could be we have more competeing meats too. Pork production up 10%. AFBF wants US govt to buy extra pork. I belive poultry production is up too. Plus, our carcass weights are up from a year ago. Obviously the livestock sectore has backed off in the light of high dollar corn. I have come to the conclusion that the pork and poultry people must have been figuring on lower corn prices when they seen the 93 million acres of corn planted last spring. We are all paying for it now.

Could be to that our very own checkoff is advertising lean meat. That can't be helping the choice beef demand.

Brian

 

[Frankie]

Dont worry about CAB going broke. They make their money by liscnesing fees.

Could be we have more competeing meats too. Pork production up 10%. AFBF wants US govt to buy extra pork. I belive poultry production is up too. Plus, our carcass weights are up from a year ago. Obviously the livestock sectore has backed off in the light of high dollar corn. I have come to the conclusion that the pork and poultry people must have been figuring on lower corn prices when they seen the 93 million acres of corn planted last spring. We are all paying for it now.

Could be to that our very own checkoff is advertising lean meat. That can't be helping the choice beef demand.

Brian

Pork may be up last year, but Smithfield has announced they expect to cut their herd by 40 - 50,000 sows starting immediately, mostly due to feed costs. I haven't seen anything from the poultry folks, but when the hog folks start cutting back, it's kinda scary.

http://www.bizjournals.com/milwaukee/st ... a=from_rss

 

[Red Bull Breeder]

Hey that check off is mine to and i raise lean beef. It is never a good thing when prices are lower. People are just buying what they can afford.

 

[Brandonm22]

It very well could be a sign of economic times. It is probably also partly weather related. Cold, wet rainy snowy weather doesn't encourage people to leave their warm confines and go out to eat.

That would makes sense a month ago; but it is April now. Folks over half the country are firing up their grills and cooking out. Traditionally, they will pay for better cuts. If we STILL have oversupply of quality product THAT may mean either that demand just isn't there (I rarely buy Choice myself) OR Angus has done such a good job of selling bulls that we simply have too much supply. This is not good news for the doctor on page 188 of this month's Angus Journal who sells the dinky little linebred Angus he imported from Ireland. He admits they don't grow fast, aren't too feed efficient, but they quality grade well.

 

[jfranseen]

Good idea. Cattle that aren't too feed efficient. He must get free feed or can grow his crops for free too.

 

[MoGal]

Well, last year we imported 3 lbs of beef for every 1 lb exported....... guess they'll try to increase it more this year maybe say 5 to 1 ....... US beef producers won't mind ......

I don't know how pork production could be up....... in February at the sale barn a 30 lb pig brought $10.00.... I wouldn't think you could raise them for that. Around here, pork has been the cheaper meat, hams, pork chops, pork steaks @ 99 cents lb........ they've had one or the other on sale for quite a while now. The producer surely isn't making a big profit.

 

[MikeC]

Update: April 10, 2008 - USDA

The USDA reported beef cutout values Wednesday were higher, with the choice cutout value up $1.27 per hundredweight at $140.96 and the select cutout up $1.36 at $140.74. The volume of sales was reported at 353 choice and select fabricated loads and 118 loads of trimmings and coarse grinds.

$0.22 difference between CHOICE & SELECT yesterday!!!!!! Per hundredweight!!!

That amounts to a $1.76 TOTAL PREMIUM on an 800 lb. CHOICE carcass above Select!!!!!!

???????????????????????????????????????????????????????????????????????????????????

Everyone breeding for marbling has just had the stool shot out from under them........

Bring on those Double Muscled - Non-Grading cattle!!!!!!!!!! :lol: :lol: :lol: :lol:

 

[chippie]

I have a friend who owns a restaurant. She said that people are not eating out as much because of everything going up.

It is hard on the restaurants too. Their overhead (supplies) has increased and as a result they have had to increase prices accordingly. A restaurant size bag of flour has almost tripled in price in her area

 

[MikeC]

I have a friend who owns a restaurant. She said that people are not eating out as much because of everything going up.

It is hard on the restaurants too. Their overhead (supplies) has increased and as a result they have had to increase prices accordingly. A restaurant size bag of flour has almost tripled in price in her area

What does that have to do with the Choice-Select spread?

Wholesale beef prices are down substancially from a year ago..................

Some cuts are as much as a $1 per pound lower....

Looks like steak sales would be brisk??????????????????

 

[Brandonm22]

I have a friend who owns a restaurant. She said that people are not eating out as much because of everything going up.

It is hard on the restaurants too. Their overhead (supplies) has increased and as a result they have had to increase prices accordingly. A restaurant size bag of flour has almost tripled in price in her area

Mike is right though. IF the consumer were willing too pay more for USDA Choice than USDA Select the spread should remain even as the wholesale price for beef dropped. If there is no spread (whether prices are raising or dropping) then either the consumer doesn't care what grade steak he is buying OR the packers believe they have enough Choice supply that they don't feel they need to pay a premium for Choice and are just pocketing the difference they get selling wholesale Choice product. Either way, the packers are (intentionally or unintentionally) sending signals through the market that lbs of lean product pay more than quality. I suspect this will change as we get deeper into the grilling season.....but we will see.

 

[MikeC]

Update for yesterday......Thursday:

Through the week, the reported boxed beef carcass cutout value from the U.S. Department of Agriculture narrowed and finally had a situation where the select beef was reported at a higher average value than choice.

 

[MikeC]

Talked to a guy in the packing industry earlier today about the Choice-Select spread phenomenon.

He said it's because the packers have been harvesting 58% choice carcasses for the past couple of weeks. There is an overabundance of Choice beef.

Make sense to anyone?

 

[mwj]

Well Mike the price of grain has not went down so I can not see why there would be an overabundance of choice cattle now :cowboy: Maybe it is all those good angus genetics hitting the kill floor :tiphat:

 

[smnherf]

I think it partially consumer economics, but also the cattle feeding industry and even ethanol has been operating off of the corn bought last fall at 3.25 to 4.50. Also, I believe a lot of cattle may have been forward contracted in the high 90's to 1.00. Those two combinations may be creating a lag effect but once the feeders have to replace these cattle and the cheap corn at todays prices, things will change pretty fast. Fed cattle will have to go up or feeders will need to get a lot cheaper at current corn prices and the choice select spread should widen.

Brian