More on Price Spreads

In April we discussed the notable shift in the spring Choice-Select price spread as the Choice premium dropped to nearly $0.00/cwt. in spot market pricing. The trend has extended into May with the spread remaining well below $5/cwt. with numerous excursions with the Select cutout becoming premium to Choice.

Market analysts have appropriately focused on the rapid decline in Select carcasses, dropping from 12% of the fed cattle mix in December to average just 8% since February. This historically small Select share has created a scarcity in the category compared to the lower 1/3 Choice price, which is literally what’s left in the Choice box after Premium Choice brands, like Certified Angus Beef ^® , have been marked up for a premium end point.

When considering the higher Select value, this year’s exceptionally small cull cow harvest is also important domestic ground beef demand is quite strong, with more than half of beef consumption in this category. The chart shows the relationship of the Choice-Select spread with weekly cull cow harvest since 2010. It’s clear that the cyclical trend of cow harvest has been closely aligned with the fluctuations in the Choice-Select price relationship. As cow harvest declines the value of lean, Select end meats increases as those cuts become attractively priced in relation to lean cow cuts. It’s a simple substitution effect as 90% lean trim inflates in value under supply constraints.

The second chart depicts the relationship of Select carcass supplies versus imported beef. Since the majority of imported beef is lean trim, destined to be ground a blended with 50% domestic lean trim, there is a clear relationship. As Select carcass supplies have declined, the imported tonnage has increased to replace tonnage while the market seeks to maintain balance in lean beef supply. Adding in domestic cull cow supplies to this chart would further illustrate how all three sources of lean beef volumes adjust to supply a relatively steady volume of ground beef for domestic consumption.

In contrast to the lean beef discussion, Certified Angus Beef ^® brand cutout values have performed within expectations so far in 2026. The CAB cutout has averaged $17.63/cwt. above USDA Choice since January, just $0.90/cwt. lower than the same period last year.