Historically basis tends to narrow towards the end of the year, which is supportive of a fed market heading into the holiday season when higher priced cuts are generally favoured. However there are negative factors ahead a large number of market ready cattle that were forced into U.S. feedlots this summer by drought, negative packer margins and wide AAA/AA, Choice/Select spreads already in place. Looking into 2012, strong deferred live cattle futures continue to fuel optimism.
Cost of gain remains a negative factor to watch as we wrap up the year, but strong underlying factors buoyant live cattle futures, fewer calves and excess feedlot pen space continued to push up prices toward the end of the fall run. Calves managed with contracts made available by rising prices on the spring futures will continue to gain strong support. Any pressure late in the fall is likely to fall on the lighter calves that will finish next summer, a typically slow time for meat movement. Top quality feeder calves and heavy calves will continue to bring high prices on this strong fall market.
The lows for cull cattle will come soon if they haven t been posted already. But as numbers start to slow towards the end of the year prices will pick up. The smaller Canadian herd leaves fewer slaughter type cows available. And higher bred stock prices will keep anything destined to be herd builders at home rather than off to the packing plant as in the past few years. Supplies of non-fed cattle will remain tight.