Determinants of the Choice-Select spread

Thumbnail Image
Date
2023-09-24
Authors
Fournier, Luc
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract

The Choice-Select (C-S) spread is the difference between the Choice and Select carcass cut-out values and is an important market indicator for feedlots and producers within the United States. It presents the direct discount for Select grading cattle carcasses. Over the past several decades the Choice-Select spread has generated extensive seasonality, which can cause financial stress on feedlots and cattle producers due to fluctuating prices. The goal of this research is to quantify the determinants of the Choice-Select spread. Results from partial adjustment econometric models suggests the percentage quantity of Choice graded beef (i.e. relative supply of Choice beef) was the most influential determinant for the Choice-Select spread; that is, a 1% increase in quantity resulted (P = 0.058) in a $21-24/cwt decrease in the spread. The estimation also found that $1 change in consumer demand driven wholesale boxed beef prices lead (P < 0.01) to a $0.069-0.072/cwt increase in the spread. The model also identified a statistically significant (P = 0.037) seasonal effect of roughly $0.684-0.80/cwt on the spread during the months of April to August (the grilling season).

Description
Keywords
Beef, Choice-Select spread, United States
Citation