Fed cattle supply interest picks up in new year

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

Fed cattle

The start of fed cattle trading in 2021 saw active interest in supply with prices higher than year-end. The backlog from the spring of 2020 appears to have been cleaned up and packers are looking to secure additional inventory.

The first weekly average reported in 2021 was $145.53/cwt. This was $1.16/cwt higher than the end of 2020 but is $18.18/cwt under the same week last year. Cash-to-cash basis at the start of January was +4.81/cwt.

Steer carcass weights continue to run above year-ago levels but higher grain prices generally will lead to smaller carcass weights, which should be the case as we move through the first quarter. The last week of 2020 recorded an average carcass weight of 929 lbs., which compares to the same time one year previous of 905 lbs.

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Preliminary data shows steer slaughter ended 2020 two per cent higher than 2019, with a total number of steers killed at 1,745,925 head, while heifer kill was down three per cent at 889,953 head. Exports of fed cattle for slaughter, including cows, nearing the end of December was one per cent higher than a year ago at 486,939 head.

The last cattle-on-feed report of 2020 stated that on December 1, the number of cattle on feed in Alberta and Saskatchewan was seven per cent lower than the previous year, at 1,055,260 head. It was the second consecutive month the report has shown fewer cattle on feed. Placements through November were also lower, down 24 per cent, totaling 263,643 head.

Deb’s outlook for fed cattle: Typically fed cattle prices pick up through the first quarter of the year as calf supply tightens and yearlings are still on feed. This should be the case in 2021, but the rate of price increase could be limited by supply carried over from the set-aside program. Slower beef movement due to COVID-19-related foodservice shutdowns will continue to negatively impact the market. However, retail demand is expected to remain strong and demand for higher-priced middle meats should pick up as consumers look towards spring grilling. Live cattle futures point to the seasonal rally as well. Expect prices to improve over the coming weeks but remain cautious as so many uncertainties are still at play in the market.

Feeder cattle

Very minimal trade volumes have been seen the through the first week of 2021. These light feeder volumes were met with cautious buyers as grain prices continued to climb, feeder futures started the year softer and fed cattle struggled to gain seasonal momentum.

Heavier classes of cattle are trading under year-end prices. At the start of 2021, 850-lb. steers were averaging 173.88/cwt, which is down $2-3/cwt from the bulk of the December trade, and more than $13/cwt below where they started 2020. The 850-lb. feeder basis narrowed since the holidays, moving from -7.42/cwt at the end of the year to +0.51/cwt at the start of January.

Lighter-weight calves sold at an average of $218.75/cwt. This was slightly improved from the weeks leading up to Christmas, but $6/cwt under the average for 550-lb. steers at the start of 2020. Feeder exports will end 2020 significantly below the totals that were seen in 2019. To the third week in December, the number of feeder cattle exported totaled 118,052 head, which is down 36 per cent from the year previous.

Deb’s outlook for feeder cattle: Feed grain costs will continue to be limiting factors to feeder cattle prices. Feedlot losses were significant through 2020, which has buyers guarded. Heavier feeder demand is low as high feed costs and projected fed prices for early summer do not bode well for profitability forecasts. Buyer attention will turn to moisture levels and potential pasture conditions in the next month as they assess needs for grass cattle. As people starting putting together grazing packages, lighter classes of feeder cattle should strengthen. However, to what extent prices strengthen will also depend on the fed market, an undistributed flow of cattle through the system with limited COVID-19-related issues and, of course, the feeder grain market increasing cost of gain.

Non-fed cattle

Prices have improved slowly and steadily since D1,2 cows in Western Canada hit their lows in November. The first week of 2021 saw an average at $75.40/cwt, which is $7/cwt above 2020 fall lows but still down over $13/cwt from the start of last year. While much of the year Canadian cow prices were below their U.S. counterparts, the end of 2020 saw D1,2 cow prices again at a premium to U.S. canner cows.

Cow slaughter in Canada ended the year 20 per cent under 2019 totals at 407,524 head. Bull slaughter in Canada ended 2020 down 14 per cent, with a total of 13,709 head killed domestically. While annual totals were not yet available, butcher bull exports were also lower, down 12 per cent to the third week of December, a total of 41,579 head exported.

The first week of 2021 recorded the slaughter bull average at $99.42/cwt. This is up almost $2/cwt from the end of last year, but still down nearly $3/cwt from the start of 2020.

Deb’s outlook for non-fed cattle: Cows placed on feed through the fourth quarter are expected to come to town over the next several weeks, increasing volume, but supply should remain manageable. Consumers, eating more at home, are looking for economical protein options, which will support ground beef sales. Cull cow prices generally increase through the first quarter of the year, and 2021 should see slow but steady improvement in the coming months.

About the author

Contributor

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

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