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McMillin: Cattle on feed in Alberta, Sask., higher than year ago levels

The Markets with Deb McMillin, from the September 2019 issue of Canadian Cattlemen

Fed cattle

To mid-August, Canadian fed cattle traded mostly steady, at an average on both sides of $146/cwt since the middle of July. The average steer the second week in August averaged $146.25/cwt which is $3.49/cwt higher than the same week in 2018. The third week of August didn’t see enough trade to establish a price trend. However, bids on cattle offered were lower which was following pressure in the U.S.

Market uncertainty in the U.S. following the fire at the Tyson Plant near Holcomb, Kansas, led to pressure on both the technical markets and cash trade during the last week. The Tyson plant was responsible for six per cent of U.S. kill, killing near 6,000 head per week. While the cash price in the U.S. was under pressure, the wholesale beef market jumped with the potential beef shortage heading into the Labour Day holiday.

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Cattle on-feed numbers in Alberta and Saskatchewan on August 1 were higher than a year ago. There were 797,955 head of steer and heifers on feed on August 1, 2019, which is six per cent above last year. Improved pasture conditions throughout the summer limited the number of calves placed into feedlots. Just 57,788 head were placed, which was nine per cent lower than a year ago. Slaughter numbers are higher than a year ago and feedlots remain current in their markets. Domestic slaughter of steers is six per cent above a year ago, with a total to date of 1,008,708 head. Meanwhile, heifer kill in Canada is up five per cent at 577,766 head slaughtered. Looking at fed cattle exports, including cows, the total to date is 28 per cent higher at 276,399 head.

Deb’s outlook for fed cattle: The U.S. is facing a shortage in kill capacity for the next several months as Tyson rebuilds its Holcomb Plant. Fortunately feedlots in North America are current. However, less kill space and lower bids will lead to an uncurrent situation moving forward. It’s too soon to tell how the kill capacity reduction in the U.S. will affect both the U.S. and Canadian markets. Positives include continued strong export demand, higher wholesale beef prices and positive packer margins. Seasonally, we expect pressure through the third quarter before prices improve heading into tighter supplies and holiday demand.

Feeder cattle

Although the technical markets reacted strongly to the Tyson Plant fire, the feeder market in Canada held steady at just slightly lower the third week in August. Feeder volumes are starting to pick up and basis is seasonally strong heading into the fall run. Pasture condition across much of the Prairies continued to improve throughout July, which will limit early weaning and extend the fall feeder run longer into the fourth quarter. Over the last two weeks, the 550-lb. feeder steer price has held steady at $214.50/cwt, which is down $6/cwt from the first week of August and over $10/cwt lower than the same week in 2018.

The 850-lb. feeder basis generally strengthened in August. Since its widest point during the summer just six weeks ago, the feeder basis has improved over $20/cwt. The current basis is positive to the U.S. market at $7.23/cwt, which is $2.12/cwt stronger than the same week last year. The yearling run is just underway, with larger volumes in heavier weight classes noted at many auction markets. The 850-lb. feeder steer average is currently $188.03/cwt which has strengthened $5.36/cwt from the end of July but is $14.72/cwt lower when compared to a year ago.

Deb’s outlook for feeder cattle: The yearling run is underway with larger volumes starting to head to market. Good demand coupled with a seasonally strong basis should continue to be supportive in the coming weeks. Buyer competition has increased due to expectations of fewer yearlings available as poor spring moisture conditions limited grasser placements. Improved pasture conditions will spread out calf marketings. However, seasonal pressure to the calf market will be noted in the coming month. The recent weakness in both the Canadian dollar and the feed grain price will both be supportive to the seasonal downtrend expected over the next several weeks.

Non-fed cattle

Non-fed cow prices have strengthened over the past several weeks. Lower summer slaughter numbers and smaller cow carcass weights have led to fewer pounds of non-fed production available to meet the summer trim and grinding meat demand.

The D1,2 cow price has improved to $92/cwt which is an $8/cwt increase since the summer low of $84/cwt and $3.87/cwt higher than the same week a year ago. Weekly cow slaughter is down when compared to the same weeks last summer. However, year-to-date is still five per cent larger at 314,854 head. Butcher bull average price the third week of August was $108.17/cwt, which was down $1.65/cwt from a year ago. Bull slaughter to date in Canada is down nine per cent to 9,146 head, while exports are unchanged for the year at 24,674 head.

Deb’s outlook for non-fed cattle: Although pastures improved as a result of the summer rains, in many cases the moisture came too late to benefit the 2019 hay crop. Winter forage supplies will influence culling decisions in many areas as ranchers evaluate forage stocks. Cow numbers will increase through the third quarter but should be tighter than typical fall volumes as we move through the fall run of 2019. Many cows were sold last fall due to lack of winter feed and then again in the spring prior to the late June rains. It is expected the cow supplies will be lower which, coupled with the weaker Canadian dollar and good demand for grinding and trim meats, should help limit the downside of the fall market.

About the author

Contributor

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

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