8 September 2008

3 minute read

North America

Ron Plain

Demand for poultry turned positive in July. Some of the change in our demand index from January-June to January-July was due to an error in calculation for January-June.

The January-July demand index shows beef demand at a negative 3.7 percent, pork at a negative 3.9 percent, broilers at a positive 0.8 percent and turkey at a positive 3.5 percent.

Demand growth for poultry and the current stressed financial situation many consumers find themselves now is consistent with theory because a dollar will buy more protein as broilers than as beef.

The good news for the beef industry is that the demand for live cattle was up 1.5 percent for January-July compared to the same months of 2007. Live hog demand for January-July was up a whopping 8.9 percent from 12 months earlier.

Most or all of the demand growth for live fed cattle and live hogs is due to larger exports and smaller imports. Remember, net beef imports as a percent of production declined from 7.9 percent in January-June of 2007 to 3.59 percent in January-June of 2008.

Live slaughter steer and heifer weights are still above a year earlier even with the high feed prices. Steer weights for the week ending August 16 were seven pounds per head and heifers were four pounds per head above a year earlier. However, the weight difference has narrowed a little in the last two months in early June. Steer slaughter weights were 10 pounds heavier than a year earlier.

Feeder cattle and calf prices were not well tested this week at Oklahoma City because of the Labor Day holiday.

Wholesale beef prices showed Choice beef Friday morning at $156.26 per cwt, down $4.03 per cwt from last week. Select beef at $152.22 per cwt was down $1.61 per cwt from seven days earlier.

The weighted average live fed cattle price through Thursday for the five-market area at $97 per cwt was down $1.85 per cwt from last week. The weighted average carcass price for the five-market area through Thursday at $154.40 per cwt was down $1.30 per cwt from seven days earlier.

The five-market steer prices for January-July averaged $92.92 per cwt this year. With a $2 per cwt basis, the futures market is now projecting a $103.23 per cwt price for the first half of 2009. To get the futures price, the supply of beef needs to decline 5-6 percent or demand to grow 5-6 percent. With the weak consumer demand for beef, all of the demand increase likely will be from export growth.

Current projections are for the beef supply in the first half of 2009 to be down 1-2 percent from this year. If the supply projection is in the ball park, demand would have to be up 4-5 percent to get the future prices now projected. It is possible, but probably not the most likely with the weak general economy.

Slaughter this week under Federal Inspection was estimated at 590 thousand head, down 2.6 percent from a year earlier.

TheCattleSite News Desk