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CME: Q2 Choice Beef Supplies 1% Higher Compared to a Year Ago

17 July 2019

US - The Choice-Select spread has steadily climbed to over $23 per cwt in mid-July, approximately $5 per cwt ahead of the five year average, according to Steiner Consulting Group, DLR Division, Inc.

Last year, the Choice-Select spread ran up to similar heights as part of a seasonal move in June. This year’s rally is coming much later and is supported by smaller supplies of Choice beef.

Demand for high quality grilling meats usually helps drive seasonal behavior. Cooler temperatures this summer could explain the later than normal rally ahead of 4 July. However, the change in the amount of Choice beef available is proving to have a large impact, as well.

Nationally, steers and heifers grading Choice was above a year ago in the first quarter of 2019. The last eight weeks have shown that pattern has shifted and a smaller percent of beef is grading Choice than in 2018. The most recent week shows that percent is hovering just over 70 percent of graded beef (see graph below).

Over the first quarter, steer and heifer Choice beef supplies were estimated to be 1.4 percent higher (calculated based on steer and heifer slaughter at respective dressed weights). In the second quarter of 2019, Choice beef supplies calculated to only 1 percent larger than last year.

When comparing the last eight weeks to a year ago, the combination of lower dressed weights (a discussion in the 10 July DLR publication) and a smaller percent of steers and heifers grading Choice has led to a 1 percent decline year-over-year in Choice beef available. This coincides with a $9.52 per cwt run-up in the Choice- Select spread. If these two trends persist, it could support a higher spread well into the third quarter compared to a year ago.

The implication of a lower Choice grading percentage and depressed cattle weights provides some indication that cattle on feed supplies are very current. With the June Cattle of Feed report pending (release scheduled 19 July), we refer to May numbers.

May’s daily average fed cattle marketings were up over 600 thousand head per day from last year. Weekly actual slaughter indicates that trend should continue in the June Cattle on Feed report even though June 2018 had a large daily average marketing number as well.

Daily Livestock Report - Copyright © 2008 CME. All rights reserved.

TheCattleSite News Desk

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