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The Markets – for Aug. 15, 2011

FED CATTLE

The volatility in fed cattle pricing this summer was due largely to non-cattle factors. But in recent weeks smaller Canadian showlists, strong futures and firm demand here and in the U.S. pushed prices higher. By mid-July fed cattle hit a historically high $103.97 per cwt in Alberta, up more than $16 from the year before. The cash basis at mid-July was -2.94 per cwt, nearly 6.50 narrower than the same week last year. Typically the fed basis will weaken over the next several months as the supplies of market-ready cattle increase and demand drops down from the start of the summer.

The Alberta and Saskatchewan July 1 cattle-on-feed report estimated total cattle on feed up two per cent over 2010 at 803,936 head. Historically, that number is three and four per cent higher than July 2009 and 2008, respectively, and nine per cent below 2007 and 2008. Placements through June were the smallest since June 2003, at 66,348 head, down one per cent from last year. Placements in the first half of 2011 were down 15 per cent so it was no surprise when June marketings were down 17 per cent from a year ago.

Domestic steer slaughter to date is off 13 per cent at 715,397 head. Heifer kill is also down by 10 per cent at 517,856. This shrinking slaughter combined with falling exports reflects the tightening supply situation. Exports of fed cattle at 215,260 head are down 38 per cent from a year ago.

FEEDER CATTLE

Feeder cattle prices across the board have drawn some additional support from the jump in fed cattle prices. Feeder volumes are seasonally low, however these tight supplies generated a small rally in recent weeks in step with fed cattle prices. After dipping down to $143.25 per cwt in early June 550-pound feeder calves bounced back to $150 in the first week of July. The June average for 550 steers was $146.73, almost $26 higher than 2010.

Eight hundred and fifty feeder steers tracked right along with the fed steers as feedlots looked ahead to the start of the yearling run by averaging $120 and $117.50 per cwt in the first two weeks of July after getting down to $115.50 in the second week of June, which was still $15 ahead of 2010.

The cash-to-cash feeder basis widened towards the end of June and start of July, however by mid-July it had narrowed to 10.04 per cwt, which is 4.95 tighter than last year. The trend in the next few weeks is for the basis to tighten as yearling demand increases.

NON-FED CATTLE

Cow prices declined $10 per cwt from the $80.45 peak as increased freezer stocks of processing beef tempered demand, and larger volumes of cows in the southern U.S. were forced to town by drought. In mid-July Alberta D1,2 cows averaged $70.94, which is still $13.16 higher than the same week last year and $22.85 better than 2009. Butcher bulls backed off slightly by mid-July averaging near $83. To date 2011 bull slaughter is down six per cent at 11,892 head while cow slaughter is down 15 per cent at 246,081. Non-fed exports are down 22 per cent at 97,568 head through the first half of the year.

DebbieMcMillinisamarketanalystwhoranchesatHanna,Alta.

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Debbie McMillin is a market analyst who ranches at Hanna, Alta.

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