Demand still favors higher quality

February 20, 2011

What a wild beef market these days!

I’ve read articles that assume beef prices are going up simply because cattlemen have demanded more in the face of higher corn prices. Of course it’s not that direct, but true in the long run because of supply and demand. The recently narrow spread between Choice and Select boxed beef prices—negative for a day or so—had some reporters speculating again as to the logic behind this supply and demand signal.

Some said it was the bad weather that reduced dining traffic at high-end steakhouses, turning them instead to Select at retail; others said it was the good weather that allowed cattle to better realize their Choice potential.  

Some said it was because many people prefer Select beef when tenderness is equal—a dubious point since Select is NOT equal in tenderness but significantly less. Oklahoma State research showed toughness in 1 of 4 Select steaks, compared to 1 in 10 Choice and 1 in 50 Certified Angus Beef® (CAB®) brand steaks.

Again, some say the spread is erratic because major buyers are committed on contracts and unable to act on opportunities to buy Choice at less than Select for that day or so. Others say what’s left in the Choice box having removed premium Choice for brands is less worthy of a premium over Select, especially as the Choice supply maintains a sustained upward trend.

Mark McCully, CAB assistant vice president, supply, produced a white paper to examine what the Choice/Select spread is telling us. Among his findings: Select cutout values since 2002 have had essentially no effect on the spread. “That tells us a narrow Choice/Select spread does not point to more demand for Select beef,” he said.

There’s ample evidence that most consumers still favor Choice over Select, and they willingly lay down more dollars for the CAB brand . Demand, a measure of volume and price,can be inferred from the chart below,too, where a half-billion more pounds of Choice than Select beef last year sold on a wider average weekly spread.

Read more of Paul Dykstra’s 2010 summary

Well, it’s a nice day here, so we’re about to put a couple of CAB steaks on the grill. Wish I could link to the sensory experience that promises, but you’ll have to try it yourself!

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