By Dr. Andrew Griffith
For people in the cattle and beef business, there is no shortage of articles, commentaries, podcasts, or some other media addressing the challenges, opportunities, and intricacies of this extremely dynamic industry. There are some highly intelligent and thought-provoking individuals who analyze and provide insight to cattle and beef markets. Additionally, there are times when one piece of information seems to contradict another piece of information from these individuals, and this can certainly occur. However, more often than not, there is no contradiction. It simply seems that way, because of the size and complexity of an industry that takes one input, cattle, and turns it into hundreds of items including different cuts of beef, ground beef, leather items, and many more.
Analysts of a market can have differing opinions of the same information, which may seem to lead to confusion by those who consume that information. At the same time, those analysts may not differ in opinion much at all, they may just be focusing their 700- to 1,000-word article or their five minutes on a podcast on a different aspect of a specific set of information. A common challenge when analyzing a business as big as the beef business is the inability to cover all aspects of what seems like one simple subject. For instance, Nevil Speer wrote an article titled “Choice-select spread a relic of a bygone era.” I always enjoy reading Nevil’s articles, because they push me to think from a different perspective. I do not necessarily agree with everything in this particular article as it is presented in short form and probably could not address everything Nevil may have desired to share. In this particular article, it leaves me with the impression the select cutout value has little to no use and this carries to the choice-select cutout. This may or may not have been the impression Nevil wanted to leave readers with. However, this information does provide insight into demand dynamics between these two grades of beef relative to the supply. Again, I enjoyed reading this article and respect the viewpoints presented as it has pushed me to think through this aspect of the market.
The thrust of this article is not to pick and choose areas of disagreement. The goal of this article is to bring to light the complexity of the cattle and beef markets. To start, there are seven primal cuts in a finished beef carcass (i.e. rib, chuck, round, loin, brisket, plate, flank). Each of these primal cuts can be fabricated into several different cuts or ground product. Beyond cuts, trim is a portion of every carcass, and it contributes to the ground beef supply. Thus, there are supply and demand dynamics for each individual cut of beef as well as for different mixtures of lean-to-fat ratios of ground beef. Additionally, these supply and demand dynamics differ across quality grades of beef (i.e. select, choice, prime). As an example, the price of steak cuts differ based on quality grade with the highest price for prime grade steak cuts and the lowest price for select grade steak cuts. Alternatively, many of the lower valued cuts from the chuck, round, brisket, plate and flank differ little across quality grade.
The aforementioned information can be misleading since it is being discussed in general terms. It simply goes to demonstrate the complexity of the market. There has been no discussion on the different lean-to-fat ratios for ground beef and how ground beef prices can influence what value cuts get ground instead of being sold as a cut. This then brings the slaughter cow market into the discussion as well as beef imports. There is not enough time in the day or room on this page to discuss it all.
Source : tennessee.edu