March 2, 2009

The impact of the US recession is becoming more apparent with clear indications that domestic beef demand is on the decline.

While the latest USDA reports indicated fed cattle marketings and cattle slaughter had both dropped 6 percent on-year in January to 1.737 million head and 2.668 million head respectively, supply is exceeding demand as boxed beef prices continue to drop.

Industry sentiment remains negative on the outlook for US beef demand for the coming months, and there is little optimism that US cattle prices will improve.

While cattle placements in US feedlots in January increased 4 percent, it is not indicative of strong feeder demand but rather a result of feed cattle having been carried over from late 2008 and now requires to be moved off pasture, particularly in areas where dry conditions persist.

Analysts expect large placements to continue during February, but project feeder supply to tighten during March and April.

The higher placements indicate higher fed cattle marketings in several months' time, which are likely to place further pressure on prices if beef demand continues to decline.