Fed cattle
Canadian fed cattle prices are not experiencing the price strength that has been seen recently in the U.S., which is abnormal but has been the case a few times this year. Western Canadian feedlots were not as current as was expected for October. Reduced weekly kill numbers and decreased beef exports are contributing factors. As a result, we’ve seen larger carcass weights, longer lift times and a wide basis.
Steer carcass weights in early October were over 20 lbs. larger than a month earlier at 964 lbs., while lift times are being pushed several weeks out. The mid-October fed trade on the cash market was too light to establish an average. However, in early October, the market hovered around $180/cwt, about $23.61/cwt higher than a year earlier. Although the Canadian dollar continues to weaken, the widening spread between Canadian and U.S. prices has weakened to the basis. The fed steer cash-to-cash basis at the start of October was -$20/cwt, nearly $23/cwt wider than the same week last year and $18/cwt wider than the five-year average.
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Slaughter data shows recent fed steer kill numbers below year-ago levels. At the same time, fed heifer slaughter week- to-week comparisons are larger. In early October, fed steer slaughter was down two per cent to total 1,380,955 head while heifer slaughter is up four per cent at 793,837 head. Fed cattle exports, including cows, to mid-September are 13 per cent ahead of last year at 361,057 head. However, exports have been smaller than the weekly comparisons last year for the previous 10 weeks. Beef exports in August were 18 per cent under a year ago, with most key export markets reporting a decline.
Deb’s outlook for fed cattle: Fundamentally the fed market is poised to rally before the end of 2022 but to what extent depends on many other factors. Beef demand seems to be reacting to inflation and potential recession concerns as global economic issues weigh on consumers. Supplies are expected to tighten, but in the very near-term carcasses are large and lift times are long, limiting seller leverage. Expect price improvement as buyers look towards holiday needs. However, economic pressures and slower product movement may limit upside.
Feeder cattle
While the weaker Canadian dollar typically equates to strength in the Canadian feeder market, it hasn’t offset rising feed prices. Barley prices have spiked since August, an increase of 20 per cent in the past two months to a mid-October barley price f.o.b. Lethbridge of $438/tonne. That barley price is five per cent higher than the same week in 2021 and nearly 85 per cent higher than mid-October two years ago. At the same time, feeder run volumes have increased, trucking has been limited and fed supplies are not moving as quickly as anticipated, lowering the feeder market.
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Feeder calf price pressure by mid-October reduced the 550-lb. average of $8.98/ cwt from the high posted in September. The mid-October 550-lb. steer average in Alberta was $264.65/cwt which is $48.73/ cwt higher than the same week in 2021. Grass yearling volumes have slowed seasonally. The 850-lb. feeder price average in mid-October was $237.42/cwt, which is $5.53/cwt lower than the recent peak, but still over $46/cwt, higher than a year earlier. The 850-lb. feeder basis is -$2.39/ cwt, which compares to a year ago when the basis was -$4.60/cwt. The five-year average is a positive basis of $2.58/cwt. Feeder exports for the first nine months of the year are 83 per cent larger than the same period in 2021 to a total this year of 167,174 head.
Deb’s outlook for feeder cattle: As the feeder run continues through early November, auction market volumes are expected to be large, creating moderate pressure in the feeder market. The largest unknown in feeder price direction is the increased feed cost. Until the feed grain price levels out, feeder prices will be volatile. Increased forage supplies this year will move additional feeders into backgrounding lots for the winter as well as encourage retained ownership and female replacement. The lower Canadian dollar supports the Canadian feeder cattle market; however, barley cost is currently trumping the currency advantage. It is unclear yet if there is potential for a rally in feeder prices later in the fourth quarter.
Non-fed cattle
Cull cattle numbers have remained manageable through the fall run. Mild fall weather and ample forage have kept cows at home and will encourage fewer herd reductions this year. D1,2 cow prices have been mostly steady. At the same time, canner cow prices in the U.S. have been pressured. The mid-October D1,2 cow price average is $104.20/cwt, which is $28.40/ cwt higher than last year and the highest October D1,2 cow prices since 2015. Cow slaughter to October 8 is 342,996 head, a one per cent increase from a year ago. Bull slaughter is down 17 per cent at 11,467 head while butcher bull exports are 11 per cent larger at 11,409 head. Slaughter bull prices, while still strong, decreased slightly to average $129.89/cwt.
Deb’s outlook for non-fed cattle: In general, non-fed prices during the fall run are pressured lower. Open fall conditions have kept cows out on grass in many areas. This may spread out the volume of cows expected to hit the market this fall. In addition, many herds were aggressively culled over the past few years, which could leave fewer cows to market this fall. Additional winter feed stocks will limit need to reduce herds. Cow prices should remain mostly steady over the coming weeks. Strong seasonal trends would suggest a rally towards the end of the year in line with fed cattle strength, tightening cow supply and demand for more economically priced beef due to inflation decreasing purchasing power.
