Fed cattle prices see a boost

The Markets with Deb McMillin, from the May 2021 issue of Canadian Cattlemen

(Photo courtesy Canada Beef Inc.)

Fed cattle

Tighter front-end supplies and higher cut-out values on both sides of the border have boosted fed cattle prices. Although not climbing as rapidly as the cut-out value, the Canadian fed cattle price saw a $2/cwt increase between late March and April 9. The second week of April saw a fed steer average of $150.82/cwt on light trade. The April 9 average is just over $2/cwt higher than the same week in 2020; however, April of 2020 experienced packing plant disruptions throughout North America. When compared to the pre-2020 five-year average for mid-April, the 2021 price is $20/cwt lower. 

After a slow seasonal decline, the average steer carcass weight jumped again in early April to a weekly average at 948 lbs., 46 lbs. higher than the same time last year. The additional pounds coupled with larger slaughter rates have fed beef production up nine per cent through the first quarter of the year when compared with the first quarter of 2020. In Canada, a total of 398,737 head of fed steers had been slaughtered in the first thirteen weeks of 2021, an increase of one per cent. The rise in heifer slaughter was even larger, up 17 per cent to 268,307 head. Exports of live fed cattle, including fed cows, are down 10 per cent to 119,554 head. 

Deb’s outlook for fed cattle: Continued uncertainty around COVID-19 cases, restrictions and vaccination rollout plagues the cattle market. Fundamentally, the market is in good shape to set spring highs over the next few weeks as supplies are tightening, set-aside cattle have been cleaned up, beef demand continues to be strong and grilling season is ahead of us. However, the third wave of COVID-19 has been officially announced and at the time of writing restrictions in many provinces are once again being added, with foodservice and employment changes having an impact on consumer spending. In contrast to Canada, many U.S. states have dropped restrictions and are operating in a more normal fashion. This should help support Canadian prices as well as potentially increase export demand. As we move through the second quarter hopefully COVID-19’s effects will be limited and beef will continue to see a seasonal rally. Expect higher prices in the near term, however, as any disruptions in the supply chain or additional restrictions may be limiting factors.

Feeder cattle

High feed costs, low first-quarter fed prices, poor spring moisture conditions and a bearish projected planting report have set a tough tone for the feeder market. However, even though there are plenty of negatives for the feeder market to overcome, the futures market continues to support feeder prices. Higher feeder and live cattle deferred future prices for 2021 have improved the overall tone of the market and the outlook for the placed-against months. 

The 550-lb. feeder price held steady, sitting at $228.20/cwt on April 9, which is $12.86/ cwt higher than the same week last year. Heavier feeders have strengthened slightly since the end of March, with 850-lb. feeder steers up $1.79/cwt to average $180.79/cwt the second week of April. This is up $20.40/ cwt from the same week in 2020, although last April did see very turbulent markets at the start of the pandemic. When looking back to 2019, the 850-lb. average was down $1.80/cwt. The 850-lb. feeder basis has widened in recent weeks. The basis was -$4.08/ cwt as of April 9. 

Exports of feeder cattle to the U.S. are considerably lower to date. Through the first quarter of 2021, the number of feeder cattle that moved south totaled 16,331 head, down 54 per cent. 

Deb’s outlook for feeder cattle: Demand for lighter classes of feeder cattle will be strong in the coming weeks as grass turns green and buyers fill orders. Any additional spring moisture would be welcomed by the market as pastures in many areas are dry and spring runoff did not fill dugouts as much as usual. The spread between heavy cattle and grasser classes will widen in the near term as buyers look to optimize sale dates later in the third and fourth quarters and avoid the sluggish seasonal fed trend through the summer. In the near term, demand for grass cattle coupled with strength in the deferred futures will support and strengthen light classes of feeder cattle. Heavier cattle should trade in more of a sideways pattern as we move through the spring.

Non-fed cattle

Mild weather through March and April have kept calving losses at a minimum across the Prairies. This, coupled with a smaller Canadian cow herd, has meant tightening cow supplies. Prices through March traded mostly in a range of $86.00- 87.50/cwt. Since the end of March D1,2 cow prices have started to make their seasonal climb. As of the second week of April, the D1,2 average was $88.75/cwt, which is $4.05/cwt under the same week in 2020. 

Cow slaughter as of April 3 was down 15 per cent with a total of 118,158 head killed. Bull slaughter is up 34 per cent at 3,671 head. Overall, through the first quarter of 2021 non-fed production was down 14 per cent. 

Butcher bull prices have climbed from $104.82/cwt at the end of March to an average of $107.93/cwt the second week of April. Exports of live butcher bulls to the U.S. are down 15 per cent to a total of 5,412 head. 

Deb’s outlook for non-fed cattle: In general, the second quarter is where the cull cow highs tend to be made as supplies tighten just as consumers gear up for grilling season. In addition to seasonal grilling demand, ground beef sales have been strong over the past year as more consumers are cooking at home. If processers can continue to operate and keep fed cattle moving smoothly through the system without COVID-19 issues, cow space will be available, supply should be modest and prices seasonally higher as the demand for trim and grinding products is strong. 

About the author

Contributor

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

Comments

explore

Stories from our other publications