Beef production will likely decline by less than the decline in cow and total cattle and calf inventories would indicate, largely because the continuing upward trend in
dressed weights offsets some of the inventory decline. A case in point: year-to-date Federally inspected beef production for the week ending August 1, 2009 was just
over 4 percent below cumulative production for the corresponding week of 2008, based on slaughter that was just over 5 percent below cumulative 2008 slaughter.
The National Restaurant Association reports that June was the 13th month of declining same-store sales. This implied source of declining demand for high-end
beef contributes to the narrow spread between cutout values for Choice and Select beef. While it has improved in May and June, the monthly spread was below $2 for
February, March, and April 2009, and has been well below the 5-year average during the first half of 2009. The narrow spread between Choice and Select cutout
values will likely persist as long as the percentage of beef grading Choice and better remains high by historical standards.
Drop credits have crept upward over the last few weeks after falling to a weekly low of $7.10 per cwt the week of July 11, 2009. Prices for most separate
byproducts have increased slightly or have remained steady, resulting in an increase in the whole drop credit despite overall weakness in the general byproduct market.
And while it does not seem like much, a 10-percent increase in the drop credit at current levels can amount to about $10 per head, enough to influence weekly kill
rates and provide some support for fed cattle prices.
Average monthly retail prices for Choice beef continue to fluctuate around $4.31, averaging almost 3 percent above year-earlier through June, despite wholesale beef
prices that have declined by almost 6 percent. The July price of $4.18 per pound for Choice beef marks the largest decline thus far in 2009.
While the average monthly all-fresh beef price averaged 1.4 percent above yearearlier through June, the July-over-July decline of almost 4 percent was only the second month-over-month decline thus far in 2009—the only other decline being the less-than-1-percent decline in June. Per capita beef disappearance is down by almost 2 percent, which could partially explain some of the increase in retail prices. Poultry and abundant pork supplies at much lower relative prices and beef exports that are declining, despite a weaker dollar, continue to compete with consumer meat dollars.
Source : ERS - Livestock, Dairy, & Poultry Outlook/