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Beef quality price spreads widen

Fewer Prime and Choice cattle contributing to wide price spreads and high values for high-quality beef.

While beef production remains large, the makeup of the supplies reveals that the U.S. is producing a little less fed beef and a little more cow beef relative to last year, according to Texas A&M AgriLife Extension economist David Anderson.

Beef production has dipped below year-ago levels over the last couple of weeks, which Anderson said is leading to some higher fed cattle prices and a widening Choice/Select price spread.

According to Anderson, beef production over the last four weeks has been more than a half-percent below the same period in 2018. Further, he pointed out that not all beef is the same. 

Over the last four weeks, fed steer and heifer slaughter was down 1.7%, while cow slaughter was up 4.2%. Fed steer slaughter was down 6.5%, while fed heifer slaughter was up 6.7%. Additionally, he relayed that dressed weights continue to be about 2 lb. per head lower over the last month for steers, heifers and cows. Combining weekly slaughter and dressed weights leaves fed beef production about 2.2% lower than a year ago, while cow beef production was 3.8% higher.

Diving a little deeper into the data, Anderson said of the carcasses presented for grading over the last month, those grading Prime and Choice are running about 1.6% and 2.6% below last year, respectively. About 7.7% more carcasses are grading Select than a year ago, he added.

“Combining the percent of carcasses by grade and pounds of fed steer and heifer beef produced indicates that, over the last month, Prime beef production has been almost 4% below a year ago," he said. "Choice beef production is almost 5% lower than a year ago, while Select production is about 5% higher.”

According to Anderson, the Prime boxed beef cutout has averaged $279.55/cwt. during the last month, compared to $214.81 last year. Over the same period, the Choice cutout has averaged $215.76 versus $202.48 last year. That leaves the Prime/Choice spread at $63.80/cwt. this year versus $12.33 last year.

“The average Choice/Select spread has grown to a whopping $25.76/cwt. over the last month, compared to about $11 last year and $11 over the last five years. The Choice/Select spread tends to increase seasonally this time of the year, and that seasonal trend is again occurring, but at a much higher price level this year,” he noted.

Anderson said fewer cattle grading Prime and Choice is tightening up supplies even more, contributing to historically wide price spreads and high values for high-quality grade beef.

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