WELLINGTON, N.Z. — A turnaround in the U.S. beef market may occur early in 2009, according to a recently-released study from the Meat Importers Council of America – in spite of the economic slowdown, said Mike Petersen, chairman of Meat & Wool New Zealand.

"A higher cattle slaughter in the U.S. and Canada has peaked and is now dropping quickly," he added. "At the same time fed-cattle inventories are about 6.8% below year ago levels and point to a notably lower fed-cattle slaughter in the first quarter of 2009, and probably the entire first half of next year."

U.S. beef supplies will be smaller in the first quarter of 2009, and the latest cattle-on-feed report shows a continued decline in the number of cattle on feed and cutbacks in cattle placements. Soft demand from feedlots has caused animals to spend more time on grass.

Overall, the Canadian and U.S. cow slaughter, while still more than 10% higher than the same time last year, appeared to have peaked and is now dropping quickly, Mr. Petersen said.

"While the improving supply situation in the U.S. is positive, it cannot be viewed in isolation, and some recovery in global credit markets and the impact that has on countries like Russia will also be key factors in the beef market in first part of 2009," he added. "If Russia, and to a lesser extent the E.U., re-emerge as active beef buyers in the new year, this will absorb product from South America that otherwise could be landed in the U.S. and more than off-set anticipated tight domestic supply."

M.I.C.A.’s December update has profiled the recent collapse of beef prices, saying the current situation has significant implications for global meat markets. Beef prices rose sharply in the first half of this year as buyers across continents were buoyed by expectations of significant price increases for grain and energy. It is clear that they significantly overestimated demand and the collapse in energy prices led to a cascading impact on other values.

Hot markets like Russia stopped buying beef in part because of financing issues, while the U.S. market has again become a preferred destination for New Zealand, Australia and Uruguay beef exports, the study said.