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CME: Lowered Prices Pressure Beef Demand

05 October 2009

US - Fed steer prices remained under pressure this past week as beef packers struggle with soft wholesale beef prices and continue to limit the number of cattle slaughtered, according to Steve Meyer and Len Steiner.

Total US cattle slaughter for the week was 635,000 head, 15,000 head lower than the week before and steady compared to year ago levels. Steer and heifer slaughter for the week is estimated at 505,000 head, some 2.8 per cent lower than the week before but 2.6 per cent higher than the comparable week a year ago. Cow slaughter for the week is estimated at 130,000 head, 5.8 per cent lower than a year ago.

With all the talk of the ramp up in US dairy cow slaughter, some may find it surprising that cow supplies are not larger than a year ago. Keep in mind, however, that we also had a dairy cow retirement program in place during the second half of 2008 while beef cow liquidation was in full force last year. The problem in the beef market at this time is not excess supply, rather continuing weak demand. The soft demand was precipitated by the recession, and the fact that the unemployment rate currently stands at almost 10 per cent.

Beef demand has been further pressured by lower prices for competing meats. The top chart to the right paints a somewhat depressing picture for the beef market. Futures for 2009 and 2010 show little change and cattle prices are pegged at price points that are well below where they were in 2007 and 2008.

Daily Livestock Report - Copyright © 2008 CME. All rights reserved.

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