Statistics Canada released their July 1 semi-annual cattle inventory report on August 20. Statistics Canada does a good job of breaking down the number of cattle as per the type of farm, which provides a good indication of feeder cattle outside feedlots. Their data also provides an estimate of the number of calves under one year old so that producers can have an idea of the supply side of the fundamentals moving into the fall run. In this issue, I’m going to discuss the detailed information from the inventory report. Second, I will compare the western Canadian supply situation to the environment south of the border.
First, the Canadian cattle herd continues to contract. The total number of cattle in Canada as of July 1 came in at 12.2 million head, down 0.5 per cent from July 1, 2019. Once again, Alberta had 40.4 per cent from the total inventory while Saskatchewan farmers had 21.3 per cent and Ontario had 13.0 per cent. It’s not surprising the cattle herd is based in Alberta and Western Canada in general; therefore, in this article I’ll focus more on the western Canadian numbers.
Statistics Canada breaks down the number of cattle into three types of farms. The first is feeding operations, which are basically finishing feedlots; stocker operations, which are backgrounding farms; and cow-calf operations, which is self-explanatory.
The number of cattle on western Canadian feeding operations (finishing feedlots) came in at 1.271 million head, up 4.6 per cent from July 1, 2019. This is in line with the Canfax July 1 cattle-on-feed report, which also showed a year-over-year increase of five per cent. Canfax numbers are for Alberta and Saskatchewan, while Statistics Canada includes British Columbia and Manitoba in the western Canadian numbers. Without going into detail, I’ll just mention that there were approximately 275,000 head of market-ready supplies backed up on Alberta and Saskatchewan feedlots as of July 1. It will probably take until January 2021 to clean up this backlog. While certain feedlots are fairly current with production, others are still contending with significant inventory, which may limit their buying interest for feeder cattle during the fall period.
The number of heifers for slaughter (over one year old) and steers for slaughter on western Canadian cow-calf and backgrounding operations came in at 828,300 head, down 5.7 per cent from 878,500 head on July 1, 2019. Yearling supplies outside finishing feedlots are tighter than year-ago levels which should keep the market well-supported.
The number of calves under one year old on western Canadian cow-calf and backgrounding operations as of July 1 came in at 2.805 million head, very similar to last year’s number. We can make the conclusion that western Canadian cow-calf producers and backgrounding operators did not hold back on feeder cattle marketings throughout the COVID-19 pandemic.
U.S. feeder cattle producers held back on feeder cattle marketings during the second quarter of 2020. U.S. feeder cattle supplies outside feedlots as of July 1 were 37,400 head, up 300,000 head from last year. Unlike Western Canada, a larger portion of the U.S. is contending with drier conditions and pastures have deteriorated sooner than normal. The U.S. feeder cattle producer has larger supplies to move over the next couple of months.
The situation for calves is slightly different, although we don’t have the U.S. breakdown per farm type. The U.S. calf crop from January 1 through June 30, 2020, was 26.1 million head, down 250,000 head from the January-June period of 2019. We can assume that the calf crop in Western Canada was very similar to year-ago levels given the number of calves under one year old on cow-calf and backgrounding operations.
What does this mean for the feeder cattle market? First, the western Canadian yearling market is functioning to ration demand by trading at a premium to U.S. values. Basis levels for feeder cattle over 800 pounds will remain strong. Canadian year-to-date exports of feeder cattle to the U.S. for the week ending August 8 were 77,585 head, down 50 per cent from last year. Feeder cattle exports for the remainder of 2020 will continue to be down sharply from 2019. The calf market will likely trade similar to year-ago levels during the fall period. Despite the minor year-over-year decrease in the U.S. calf crop, the backlog of market-ready supplies in finishing feedlots on both sides of the border will temper demand for calves.