UNITED STATES-US recession challenging the fed beef market
The impact of the US recession is becoming increasingly apparent with clear indications that US beef demand is waning. While the latest USDA Cattle on Feed and Livestock Slaughter reports indicated fed cattle marketings and cattle slaughter had both dropped 6% in January on a year ago, to 1.737 million head and 2.668 million head respectively, current production seems to be more than adequate to meet demand, as boxed beef prices continue to slump.
According to USDA’s monthly wholesale boxed beef cutout indicators, February estimates for Choice boxed beef cutout prices have fallen approximately 7% on both the previous month and the same time last year. The decline has been less for Select beef (which is a grade below Choice), but it still recorded a 4% fall on January and a 5% decrease on February 2008.
Industry sentiment remains negative on the outlook for US beef demand over coming months, and there is little optimism that US cattle prices will improve. On the US CME Live Cattle futures market, the June 09 contract settlement price this Wednesday was 82.9USĀ¢/lb, 11.73USĀ¢/lb lower than the same time last year. Cattle placements in US feedlots during January lifting by 4% on January 2008.. However, this is not indicative of strong feeder demand, but rather a result of feeder cattle having been carried over from late last year and now needing to be moved off pasture, particularly in areas where dry conditions persist.
Analysts are predicting large placements to continue during February, but expect feeder supply to tighten during March and April. The higher placements certainly point to higher fed cattle marketings in several months time, which are likely to place further downward pressure on prices if beef demand continues to deteriorate.