For decades, the Choice-Select spread was the “North Star” for beef demand. But with the U.S. cattle herd at a 70-year low and Select supplies shrinking to just 10% of graded carcasses, Don Close, Terrain senior animal protein analyst, says it’s time to stop reading the old signals and start looking at what the modern consumer actually wants.
The recent inversion in the Choice-Select spread is sparking worry that consumers are “trading down” to cheaper, lower-quality beef. Close says in a recent Terrain Outlook the industry needs to quit overreacting to the old Choice-Select signal and start tracking more relevant indicators. For decades, the Choice-Select spread has been treated as a key gauge of beef demand and consumer preferences. An inverted spread — when Select trades higher than Choice — typically raised a red flag that buyers were shifting toward cheaper product. That narrative, he argues, simply doesn’t fit the current structure of the beef supply.
A Different Market Than the 1990s
Close says the conditions that once made the spread meaningful have changed dramatically.
“In previous years, an inverted spread mattered,” he explains. “But the grading percentage then was about 60% Choice or better and about 40% Select. And the majority of retail grocery chains carried Select product. There were also no branded beef programs, and the percentage of carcasses grading Prime ranged from 2% to 4%.”
Today, the entire grading and merchandising picture looks different.
“Now, retail stores predominantly carry Choice or better product,” Close notes. “It is also common for the percentage of Prime carcasses to be 10% to 15% and for there to be more Prime than Selects in the marketplace.”
In that kind of environment — where Select is a much smaller slice of total production and retailers lean heavily on branded and premium offerings — the old read on the spread doesn’t hold.
“In the current market environment, the spread is a meaningless measurement,” he stresses.
Select is Scarce, Not Suddenly Popular
If consumers aren’t suddenly preferring Select, why has Select strengthened relative to Choice? Close points first to a structural decline in Select production.
“The main reason is that the supply of Select product has contracted, which can make it appear that there is an increase in demand,” he says. “The supply went from 50% of graded beef carcasses in the 1990s and early 2000s to about 10% currently. As with any commodity product as supply contracts, the price is going to increase.”
That supply-side squeeze is occurring alongside the smallest domestic cattle supply in 70 years. At the same time, tight lean supplies and growing use of blended products are pulling on every available pound of lean beef.
“Even with the escalation in lean beef trimmings because of imports, the supply of lean beef is exceptionally tight,” Close explains. “Processors are searching for any source of lean beef to increase supplies of lean grinding materials.”
He adds Select also still has a defined role in a couple of key channels.
“There is also demand for Select products in institutional use, primarily hospitals,” Close notes. “Select products are also still used in many prepared frozen foods.”
Combine smaller Select production, a historically tight cattle herd and ongoing demand in institutional and processed channels, and Select’s price strength looks more like a scarcity story than a consumer “trade down” signal.
Will This Inversion Last?
Close does not expect today’s situation to be permanent — but he also doesn’t see the inverted spread as a near-term threat.
“Is this going to be a long-term scenario? I certainly don’t think so. Is the inversion of the spread going to disrupt the current market again? I don’t think that’s the case,” he says.
Instead, he points producers to the economics of feeding cattle.
“When the day comes that grain prices escalate and the cost of gain exceeds the value of gain, the market may have to take another look,” Close says. “In that case, the economics would discourage cattle feeders from fattening cattle as much, leading to more Select beef, a lower Select price and a higher Choice price.”
For now, the numbers still favor feeding cattle to higher grades.
“Currently, with cost of gain running around $1 a pound and the value of gain approaching 250, the inversion of the spread will not be a market factor anytime soon,” he summarizes.
Branded Beef and Prime Demand Call for a New Grading Matrix
Rather than obsess over the Choice-Select spread, Close believes the industry should focus on measures that reflect where beef demand has actually moved.
“A better measurement would be a Choice-branded beef cutout, or a Choice-Prime spread,” he suggests.
That shift would also require updating the grading framework itself.
“The last time USDA beef grading matrix was updated or changed was in 1997,” he explains. “At that time, there were no branded beef products. In my opinion, the grading matrix needs to be updated to incorporate all beef in the upper one-third of Choice and better.”
For Close, the consumer verdict is already in.
“Consumers have proven their demand for ultra-high-quality beef,” he says, pointing to the success of Certified Angus Beef and the expansion of Prime offerings at retail. “Now, protein diets have become the craze. The American consumer is not going to go back to eating a largely Select-based product.”
For producers and market watchers, the message is clear: don’t let an inverted Choice-Select spread distract from the bigger, long-term shift toward higher-quality beef and more relevant pricing signals.
