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CME: Choice-select Boxed Beef Spread Above Same Week Last Year

06 December 2019

US - The choice-select boxed beef spread was $21.07 the last week of November, this was 47 percent above the same week last year, according to Steiner Consulting Group, DLR Division, Inc.

Since early July the spread has been ranging from $20 to $27 per cwt which is well above last year, the five-year average, and typical seasonal patterns. The choice-select spread is the difference between the choice and select boxed beef price. The spread is used to gauge the relative value of choice products over select products and is an indication of supply and/or demand factors influencing both grades.

Typically, the choice-select spread starts to narrow following peak demand around 4 July. This year the spread has remained elevated which is likely due to strong demand for choice product and lower available supplies of choice product.

Another factor that is contributing to the choice-select spread remaining elevated is the amount of cattle grading choice. Through the end of November, the average percent of total cattle slaughtered that graded choice was 64.1 percent, this is 10.2 percent below last year. Similarly, the year-to-date average percent of cattle slaughtered that graded select was 15.5 percent, down 11.0 percent from last year.

Although, for the first half of the year select graded cattle was tracking below the prior year but during the second half, proportionally, more cattle have been grading select. Interestingly, total cattle slaughter through mid-November is 1.3 percent above last year at 30.4 billion head. Slaughter data does not indicate that there is a lack of cattle available but there is a lack of choice cattle.

One factor that may be contributing to the lower available supplies of choice product are cattle graded for branded programmes. Branded programmes typically include higher quality grade cattle which may contain cattle that grade choice and/or prime.

The USDA-AMS National Steer & Heifer Estimated Grading Percent Report (NW_LS196) provides the percent of choice grade USDA certified in the upper 2/3rd and this category has been steadily increasing. Year-to-date this category has been averaging 31.8 percent of total cattle slaughtered which is 1.2 percent above last year’s average.

Branded boxed beef prices have been commanding an average of $5.3 per cwt above the choice boxed beef price indicating that there may be more choice product going into channels for branded products. The relatively higher price for branded boxed beef products over choice products and more cattle qualifying for branded programmes may be contributing to lower available choice products. More information on the USDA Certified Beef Programmes is available here.

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