Beef Buzz News
Betting the Spread - OSU's Derrell Peel Interprets the Dynamics of the Wholesale Boxed Beef Market
Tue, 19 Sep 2017 10:52:32 CDT
It is important for cattle producers to follow wholesale boxed beef prices on a regular basis, in order to keep a pulse on what sort of demand is out there in the market for their beef, as it gets closer to entering the pipeline. Extension Livestock Market Economist Dr. Derrell Peel spoke with Radio Oklahoma Ag Network Farm Director Ron Hays about the history of this year's choice/select spread which for the second time in 2017, has come very close together at the wholesale level.
Listen to Ron Hays discuss with Derrell Peel his interpretation of recent wholesale market dynamics
"it's not uncommon to have kind of the second low," Peel said. "The most pronounced seasonal low in choice/select spread happens early in the year in February and March and we had that this year. Then it goes up."
But it has become more common, Peel says, to see the spread dip back down during the summertime now. He explains that has happened this year, but in an exaggerated way. In fact, at one-point last week, Peel reports that select price overcame choice by a few pennies. It has widened since then to nearly $4.00, but this confirms a tendency in the market this year to lean towards a weaker choice/select spread. There are several things at play here causing the spread to behave as it has. Among the many reasons, though, one stands out in Peel's mind as a major contributor to this situation - a weakness in the middle meats, where the choice market is stronger. Looking ahead, however, Peel believes the spread will continue to widen in response to normal seasonal pressures.
"Seasonally, we look for that choice/select spread to widen back out in the fourth quarter," he said. "There is more demand for some of the middle meats as we move into cooler weather, so we'll see some seasonal strength in those middle meats as we move into the fourth quarter."
Listen to Ron Hays discuss with Dr. Derrell Peel his interpretation of the dynamics of this year's choice/select spread and its reflection on the current wholesale meat market, on today's Beef Buzz.
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