You know it’s a tough market when steady declines in cattle slaughter, beef production and total red-meat production translate into year-to-year reductions in fed-cattle prices. USDA reports that U.S. beef production through the first four months of this year was down 3 percent from the same period in 2008, with commercial red-meat production down by the same percentage.

That trend continued through May, with slaughter numbers running well below year-ago totals and beef production down in spite of carcass weights averaging about 12 pounds heavier than one year ago. Live-steer prices, as of late May, averaged about $4 per hundredweight below those of one year ago, reflecting continued uncertainty in beef demand.

The launch of the summer grilling season helped advance prices somewhat during May, and economic signals suggest a trend toward recovery in demand through the rest of this year. During May, for example, consumer confidence posted its biggest one-month gain since April 2003, according to The Conference Board, the industry group that publishes the index. The May index, at just under 55, was up from 40.8 in April, surprising economists who expected a modest increase to 42.

Exports also continue to help support beef prices, although the global economic downturn has created challenges even as market access improves. Beef plus beef variety meat exports during March jumped 5 percent in volume over March 2008 but declined about 1 percent in value, according to the U.S. Meat Export Federation. For the first quarter of this year, beef exports increased 3 percent in volume and 1 percent in value, and accounted for 9.5 percent of U.S. production.

Supplies of finished cattle will remain tight through the summer months, with USDA’s Cattle on Feed report showing May 1 feedyard inventories at 3 percent below the year-ago figure. Placements into U.S. feedyards during April increased 4 percent over those during April 2008, not surprisingly, with corn prices averaging nearly $2 per bushel lower than one year ago.

April marketings dropped 7 percent below the year-ago total, but feedyards marketed more cattle than they placed, shipping 1.87 million head during April, compared with total placements of 1.6 million head.

While recessionary pressure has affected overall beef demand and prices, it also has shifted demand trends for beef cuts and grades. A recent release from the North American Limousin Federation notes that between April 2008 and April 2009, rib and loin primal values fell about 9 percent, while chuck and round primal values increased about 14 percent. By March, the ratio of steers and heifers grading Choice, at 63 percent, was at the highest level since records began in 1997. These forces combined to drive the Choice/Select spread into a narrow range of $2 or less through the first quarter of 2009, meaning favorable yield has gained value relative to quality grade. The release cites a report from Colorado State University rating traits that drive beef carcass value in two grid-pricing systems. The report notes that during times when the Choice/Select spread is less than $5, the proportion of total revenue per head explained by quality grade and yield grade is roughly equal, but less than one-tenth as important as carcass weight.