Recent reductions in fed-cattle slaughter for third-quarter 2009 appear to have shifted some beef production into early 2010. Larger year-over-year August 2009 placements of feeder cattle in 1,000-head-or-larger feedlots will likely dampen the earlier expectation that fed cattle supplies would be inadequate to meet demand during the last part of 2009 and early 2010.

August 2009 placements were not only larger year-over-year, but feeder cattle placed on feed were in the heavier weight categories, especially the over-800-pound category. These heavier cattle will likely reach market weight sooner than would lighter weight placements, most likely coming to market during the first quarter of 2010. Along with the shift in fed cattle supplies into the future, dressed weights have been above seasonal trends and packers have been applying discounts to large carcasses and live cattle likely to produce large carcasses. These heavier dressed weights will continue to contribute to beef supplies, keeping downward pressure on cattle and beef prices.

Consumers willing to buy beef are benefiting from increased quality as a result of increases in the proportion of cattle grading Choice and higher due to heavier slaughter weights. At the same time, lack of consumer demand, largely due to the economic downturn, is driving the general stagnation in the cattle and beef sectors.

Weekly average Choice cutout values hit their most recent summer peak of $143.67 per cwt during the week of August 29 and have weakened since. Byproduct allowances have also declined by more than $1 per cwt since reaching an annual peak of $9.46 during the week of September 5. This has reduced packer margins, and, combined with slow beef movement at retail spilling into wholesale activity, has caused packers to reduce slaughter rates in recent weeks. September 2009 retail prices for Choice beef, at $4.13 per pound, were 2 percent below those of August 2009 and 8 percent below September 2008, continuing a general decline in retail prices that began after the August 2008 record high of $4.53.

Source: Livestock Dairy & Poultry Outlook