Choice-Select Spread
- Thread starter MikeC
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Brandonm22
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Yes and people are watching what the packers are doing too and it could be influencing their bull buying decisions. If the packers wants Choice and high Choice they needs to step up to the plate and pay for it. IF not, pounds always pay.
Red Bull Breeder
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This may be fun to watch for a while.
Brandonm22
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Yes, and people bought Black bulls to capture that 2006 Choice premium. IF there is NO Choice premium, why not just buy the growthiest bull to be the terminal sire of your calves since the packers are essentially paying the same thing per lb for ALL the calves.....and if you give up some Yield Grade to get that Choice grade you really lost money on those breeding decisions.
Brandonm22":t3fhzout said:
First: Do you honestly believe the spread will stay $2-3?
Second: Do you think putting more Select/Standard beef into the market will help beef demand?
Third: You can find "Black" bulls that are competitive with any breed in feed efficiency and pounds weaned.
Fourth: In the past I've posted a link to a Drovers article saying that YG1 steers are more likely to get sick in the feedlots and their dams are less likely to breed back than cattle that carry some backfat.
Fifth: It seems like only yesterday MikeC was telling us that, even with all those Angus bulls in the pastures, the percentage of Choice was dropping. But the percentage of cattle grading Choice is up considerably over last year. Will that continue?
Sixth: If producers can confidently tell themselves that the Choice-Select spread isn't going to be important in the future, go buy those non-marbling animals and sell commodity beef. Remember they're competing with imported Mexican cattle. If they want to produce beef that will bring the consumer back for more, if they want to aim for a branded beef program, if they expect to retain ownership, if they want to build a reputation for quality cattle, they need to make their bull selections based on those traits, not just pounds. There are lots of choices and decisions. Producers should do what they think best for themselves and their programs.
an article i read recently
4/23/2008 9:22:00 AM
Choice vs. Select Beef - Fooled Again?
Choice beef is worth more than Select grade. That's because consumers prefer higher quality, and have been willing to pay more for it. So, why did Select beef sell for more than Choice for a few days this spring?
Was it an April Fools market? You could look at it that way--it sure wasn't because consumers wanted more Select beef. Historically, any time Select beef trades even with Choice, something strange is going on.
A couple of years ago, we'd think it wild fantasy to read about corn above $6 a bushel, beans in the teens and wheat that went to the moon on northern spot markets before settling back into mere earth orbit. Unfortunately for livestock producers, this is reality today.
Hay and pasture acres are being plowed under to make room for grain. Yet, we have increased supplies of pork and poultry that rely entirely on grain. Finished cattle this spring came in at record heavy weights. Nobody really knows why quality grade improved along with yield grade.
With a U.S. recession looming, softer demand for beef could be no surprise. It has struggled since 2004, as retail beef prices climbed but average quality remained about the same.
The point is, a lot of unexpected factors came together as the carcass beef prices neared its expected $1.50-per-pound market ceiling. The unexpected will shake up a commodity market, and most beef is a commodity.
Today's big food companies and purveyors manage risk by locking in beef purchases in the price dips. They aren't going to run up the price when they see all the signs pointing lower. In some respects, the recurring $1.50 ceiling is a self-fulfilling market prophecy.
With orders locked in, those big players were unable to take advantage of the 10% increase in Choice beef this spring. Nor could purveyors find new customers overnight for beef that had been predictably scarce. The short-term narrow Choice-Select spread shows us that our market is not so nimble as to reflect true value all the time.
Regardless of the how and why, cattle producers were seeing red, and doubly so if they counted on premiums for Choice beef this spring. In their disgust, some of them were seeing this April Fools market as a new reality. They wonder why anybody should try to produce quality at a discount to the traditional floor price of Select.
They think back to the rock anthem of their youth and vow, "We Won't Get Fooled Again!"
Before we get to Roger Daltrey's rallying scream for revolution, cool it for a moment. Don't read too much into this market, because it is already settling back into more familiar, although lower trends. If Abraham Lincoln was right, then each of us can be fooled some of the time, so take care.
There are challenging days ahead, but let's not compound the stress by shifting so much into a survival mode that we set ourselves up for failure with consumers. The surest way to get fooled again would be to assume that, suddenly, consumers no longer prefer the taste of well-marbled beef.
Our key market indicator, the Choice-Select spread, is becoming less reliable. Ten years ago, commodity Choice beef included much more of the upper two-thirds share of the grade than today. Now that an estimated 85% of Choice is from the lower third, there is less value difference between it and Select beef.
Even with that narrowing advantage, the long-term trend still favors Choice. The growing rewards for quality are more obvious in the market history of premium Choice and Prime beef brands. As an industry, we need to bring all of our ingenuity and technology to bear on producing high quality beef efficiently and profitably.
Steve Suther, Director, Industry Information, Certified Angus Beef
ROB
4/23/2008 9:22:00 AM
Choice vs. Select Beef - Fooled Again?
Choice beef is worth more than Select grade. That's because consumers prefer higher quality, and have been willing to pay more for it. So, why did Select beef sell for more than Choice for a few days this spring?
Was it an April Fools market? You could look at it that way--it sure wasn't because consumers wanted more Select beef. Historically, any time Select beef trades even with Choice, something strange is going on.
A couple of years ago, we'd think it wild fantasy to read about corn above $6 a bushel, beans in the teens and wheat that went to the moon on northern spot markets before settling back into mere earth orbit. Unfortunately for livestock producers, this is reality today.
Hay and pasture acres are being plowed under to make room for grain. Yet, we have increased supplies of pork and poultry that rely entirely on grain. Finished cattle this spring came in at record heavy weights. Nobody really knows why quality grade improved along with yield grade.
With a U.S. recession looming, softer demand for beef could be no surprise. It has struggled since 2004, as retail beef prices climbed but average quality remained about the same.
The point is, a lot of unexpected factors came together as the carcass beef prices neared its expected $1.50-per-pound market ceiling. The unexpected will shake up a commodity market, and most beef is a commodity.
Today's big food companies and purveyors manage risk by locking in beef purchases in the price dips. They aren't going to run up the price when they see all the signs pointing lower. In some respects, the recurring $1.50 ceiling is a self-fulfilling market prophecy.
With orders locked in, those big players were unable to take advantage of the 10% increase in Choice beef this spring. Nor could purveyors find new customers overnight for beef that had been predictably scarce. The short-term narrow Choice-Select spread shows us that our market is not so nimble as to reflect true value all the time.
Regardless of the how and why, cattle producers were seeing red, and doubly so if they counted on premiums for Choice beef this spring. In their disgust, some of them were seeing this April Fools market as a new reality. They wonder why anybody should try to produce quality at a discount to the traditional floor price of Select.
They think back to the rock anthem of their youth and vow, "We Won't Get Fooled Again!"
Before we get to Roger Daltrey's rallying scream for revolution, cool it for a moment. Don't read too much into this market, because it is already settling back into more familiar, although lower trends. If Abraham Lincoln was right, then each of us can be fooled some of the time, so take care.
There are challenging days ahead, but let's not compound the stress by shifting so much into a survival mode that we set ourselves up for failure with consumers. The surest way to get fooled again would be to assume that, suddenly, consumers no longer prefer the taste of well-marbled beef.
Our key market indicator, the Choice-Select spread, is becoming less reliable. Ten years ago, commodity Choice beef included much more of the upper two-thirds share of the grade than today. Now that an estimated 85% of Choice is from the lower third, there is less value difference between it and Select beef.
Even with that narrowing advantage, the long-term trend still favors Choice. The growing rewards for quality are more obvious in the market history of premium Choice and Prime beef brands. As an industry, we need to bring all of our ingenuity and technology to bear on producing high quality beef efficiently and profitably.
Steve Suther, Director, Industry Information, Certified Angus Beef
ROB
Brandonm22
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Frankie I am not predicting what the Choice-Select spread WILL BE because I honestly don't know; but 2-3 years ago a lot of commercial cattlemen bought Angus bulls too go on Angus cross cows knowing that they would sacrifice some heterosis, some pounds, some yield grade, and some muscle ; because they were promised that quality pays. If those guys retained ownership they are getting burned big time right now by that decision. As more Angus have entered the cow herd, we ARE getting more Choice carcasses on the kill floor. That however is not translating into more $$$s for the cattlemen. That COULD change; but right now it is looking like a well run 3 way cross system beats straightbreeding Angus in the only thing that matters and that is $$$$s in the bank.
houstoncutter
Well-known member
Your never gonna please the packer......unless you can grow a steer that is yeild grade 1, half the steer is CAB, the other half high grade quality select, and dont forget the steer needs too be able to age while its still alive.....Point being , grow what makes you a profit. The packers are always gonna change what they want because that is the only way they can discount what your selling. Of course you want see that discount reflected in the price of the beef they are selling.
Not only is the Choice-Select Spread very close at $3.36, "Select" Boneless Ribeye Primals are selling for more than "Choice".
Imagine that. :lol:
http://www.ams.usda.gov/mnreports/lm_xb403.txt
Imagine that. :lol:
http://www.ams.usda.gov/mnreports/lm_xb403.txt
Red Bull Breeder
Well-known member
Hey Mike C give us a update grilling season should be coing full bore with the Fourth of July right around the corner.
Red Bull Breeder":36w83yym said:
$6.50 per cwt or $52 per head.
Should be much, much more. With the feedlots about $100 per head in the red, and the packers about $70 per head in the black, they could pay more..............................
Red Bull Breeder
Well-known member
Still a pretty thin spread.
