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Cattle prices hold mostly steady

The Markets with Deb McMillin, from the September 28, 2020 issue of Canadian Cattlemen

Fed cattle

Good demand, strong cut-out value, steady kill rates and good retail featuring have contributed to mostly steady prices throughout the summer months. However, the start of September brought a seasonally lower move in the cash fed cattle market. Typically, larger front-end supplies lead to longer packer lift times and larger carcass weights. This coupled with students returning to school, family costs and busy schedules often slows beef movement in early fall.

At the start of September, the average fed steer price in Alberta was $133.56/cwt, which was down $6.51/cwt when compared to the same week in 2019. The average was down $4.23/cwt from the summer high achieved in mid-August. Cash-to-cash basis in early September was +$1.16/cwt, which had narrowed in the past two weeks and was just $1.89/cwt wider than the same week in 2019.

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Lighter spring placements coupled with kill numbers similar to year-ago levels has helped ease some of the additional COVID-19 caused front-end supply. Fed steer slaughter to date in Canada is down just four per cent at 1,089,687 head, while heifer slaughter is also four per cent lower at 609,198 head.

Fed cattle exports, including cows, are seven per cent higher than a year ago, with a total of 316,510 head exported to the end of the third week in August. Carcass weights are creeping higher, which is seasonal. However, at the end of August the average steer carcass weight surpassed the year-ago level to an average of 918 lbs., up eight lbs. from 2019.

Deb’s outlook for fed cattle: A normal seasonal decline is expected through the end of the third quarter and as we move into the fourth quarter. Expect the cash market to be pressured in the near term. The fourth quarter should strengthen as supplies tighten and buyers look towards holiday demand for higher-priced middle meats. In addition, optimism regarding global boxed demand and anticipation for a growing export demand to end the year should be supportive. However, we need to be mindful of the ever-changing COVID-19 conditions and how they will potentially affect the economy and consumer spending.

Feeder cattle

Contrary to the fed cattle price, yearling market prices have remained steady in recent weeks. Grass yearlings selling at the start of September averaged $189.83/cwt on 850-lb. feeder steers. The volume of yearlings has picked up in recent weeks and has been met with good buyer demand.

Canadian feeders traded at a premium to the U.S. market with a current basis level at +$9.11/cwt. Over the past few years, it has not been uncommon to see a positive basis this time of year. Last year, the start of September saw a basis of +$15.73/cwt, while the average over the past five years has been +$4.05/cwt.

Calendar calf prices were mixed but overall lower at the start of the month as volumes were light and quality varied. Deteriorating pastures will cause numbers on offer to increase quickly as hot and dry conditions dry up fall grass across much of the Prairies.

Steers weighing 550 lbs. averaged $213.79/cwt the first week of September, which was $5.71/cwt under the same week in 2019. Some forward sales for delivery in October and November would indicate prices are on par with fall run last year.

Harvest is well underway in many areas and feed grain yields are high across North America. Feed barley is trading at the lowest fall run levels in over two years. Exports of feeder cattle are half the number of feeders exported during the same time period in 2019. To the third week in August, exports were down 50 per cent at 80,542 head.

Deb’s outlook for feeder cattle: Although feedlots have experienced negative margins through much of the spring and summer, the fall cost of feed is lower than recent years and there has been opportunity to manage some risk on new placements, which has been positive for the feeder market. Yearling demand continues to be strong, which will support heavier feeders coming off grass in the coming weeks. Over the next month calf volumes will increase as ranchers start to wean calves off grass. Fall feed costs and forage availability are favourable to the fall run. Seasonal pressure is expected as numbers pick up; however, early indications suggest prices might be similar to last year.

Non-fed cattle

Along with lower fed prices, reported non-fed prices have been lower in recent weeks. The number of cull cows and bulls on offer continues to be light; however, seasonally larger fed supplies are being realized and packers are still working through the fed backlog which limits non-fed hook space. This is evident in the cumulative non-fed slaughter numbers for 2020. The number of cows killed to date is 270,051 head, which is down 20 per cent from a year ago. Meanwhile, bull slaughter is down 28 per cent at 7,457 head. In addition, live butcher bull exports to the U.S. are down six per cent to 26,004 head.

After a long period through July and August of mostly steady D1,2 cow prices, the average at the start of September was down to an average of $84.83/cwt, down $4.67/cwt from the August high, and down $4.59/cwt from the same week a year ago. Bull prices have also seen some pressure, dropping to an average of $112.96/cwt at the start of September.

Deb’s outlook for non-fed cattle: Ample winter feed stocks in many areas suggest cull cow volumes could be lighter this year as many producers have culled hard over the past few years. If supplies are manageable and non-fed kill space is available, this should limit the fall cow run’s seasonal downtrend before fourth quarter demand helps to support prices moving towards the end of 2020.

About the author

Contributor

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

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