Over the past few weeks the Canadian fed cattle market responded positively to the slide in the Canadian dollar and bad weather south of the border. Locally, heavy carcass weights delayed packer lift times and beef movement grew sluggish, but those winter storms in the U. S. gave life to the cash market. Snow and windy conditions hammered performance in the feedyards and made it hard to pull cattle. U. S. carcass weights at mid-February dropped 18 pounds below a year ago, reducing the tonnage in the system.
Prices in Canada improved slightly in the first two weeks of February with Alberta steers up $2.60 per cwt to average $79.23. It was a nice change but still $7.70 off the price set in the same week last year. The fed basis at mid-February was $12.65 per cwt under the U. S.
On February 1, Alberta and Saskatchewan cattle on feed totalled 940,546 head, down one per cent from a year ago but five per cent more than February 2008. Placements were 19 per cent larger than last year reflecting the heavier cattle being placed on feed this year.
In the first month of 2010 fed cattle exports dropped six per cent to 42,360 head. Domestic steer slaughter remained largely unchanged at 143,948 head to February 6 but nine per cent fewer heifers were killed.
Contrary to what is going on in the U. S., carcass weights are going up here. By the first week of February they were averaging 867 pounds, about 39 pounds more than last year.
Feeder cattle prices continue to climb, spurred on by lower cost of gain, empty pens and early grass interest. Alberta 550-steers rose $12.39 per cwt from the start of the year to average $112.89 by mid-February. Heavier 850 steers enjoyed a similar run reaching $94.90 at mid month. That was $2.30 shy of the mid-February average in 2009 but nearly $13 better than 2008.
The 850-feeder basis in January averaged -8.28 per cwt which was the tightest January basis since 2003. By mid-February it had widened slightly to $10.13 under the U. S. That’s about 0.50 per cwt stronger than the five-year pre-BSE average basis of -10.62.
Feeder exports remain small; the number of feeder cattle exported in the first month of 2010 was down 86 per cent at 5,300 head from the same time in 2009.
As of January 1, 2010 Statistics Canada reports a Canadian beef cow inventory of 4.471 million head, the smallest herd since 2000. The liquidation of the past few years is clearly evident in this number. We still have 464,500 beef cows over 10 years old in Canadian herds. That is 31 per cent fewer than producers held in January 2009 but these old females still represent about 10 per cent of the total beef cow herd in Canada.
D1,2 prices have been rising since the start of January, by $4 a cwt to $46.65 by mid-February. That’s a little over $3 better than last year, reflecting the continued demand for cow beef on both sides of the border.
In the first four weeks of the year Canadian cow slaughter was off 28 per cent at 66,298 head, but U. S. exports of cows and bulls were up 35 per cent. Butcher bulls in Alberta were priced at $50.51, compared to $46.15 in December.
Debbie McMillin is a market analyst who ranches at Hanna, Alta.
The Canadian dollar came under pressure at the start of February but by mid-month it was back up to the mid-90s again. The direction of the dollar from here will impact what happens in the next several weeks as we head into seasonal strength for the fed market. Positives moving forward include the current fed cattle situation in the U. S. At home as we move into March, fed yearlings are tapering off and the calves are becoming the front-end supply. This should tighten inventories and lower carcass weights. Seasonal trends call for increased demand for middle meats in the coming months and increasing fed cattle prices.
Local interest in grass cattle is starting to have an impact and it will remain strong into spring. There is an opportunity to export calves as U. S. feedyard and stocker operations are concerned with their local feeder supply and may look to Canada to fill their pens. A lower Canadian dollar would definitely be supportive. A positive August feeder market on the futures has also been injecting some optimism into buyers. Feeder prices should remain strong over the next month.
Cull cattle prices remain strong in North America due to increased demand for trim and an overall smaller cow inventory in Canada. In the coming months cows in most Canadian herds will have calved or heavy in calf and not intended for slaughter. This shrinking number of available slaughter cows at a time when supplies are already tight combined with good demand will drive prices higher. The Canadian dollar will have to be monitored but that is about the only downside risk to this market near term.