Choice/Select spread upside down, but will it last?
It finally happened. The average Choice-Select spread for carcass beef dipped below zero for the week ended April 4.
The spread for the week averaged negative 13 cents. That's the first time a weekly average has gone negative since 1989, according to the CME Group's Daily Livestock Report, even though the spread has dipped below zero on a few isolated days over the past year.
By comparison, the average Choice-Select spread for the first week in April in 2007 was $9.14 per hundredweight for boxed beef. Last year it was only 88 cents, according to statistics compiled by the Livestock Marketing Information Center.
Other than being a somber statistic, this isn't like a futures market breaking through a point of resistance — the spread will likely restore itself to positive territory in a matter of days, according to Oklahoma State University Extension Livestock Marketing Specialist Derrell Peel.
"It will get fixed pretty quickly as people jump on the opportunity to buy Choice cheaper, which should bring it back to par in a few days or a week or two," he told Meatingplace.
The milestone is a grim reminder, however, of the thinning spread trend over the past year as heavier cattle, improved genetics and better grading techniques have increased the percentage of cattle grading Choice at the same time the recession has driven consumers out of restaurants and from Choice steaks to Select hamburgers at the supermarket.
Read the full story at MeatingPlace.com