Summer fed supplies have been ample to sustain the lower demand for beef in North America. Pork supplies have also been large through the summer. The shaky North American economy will continue to drive the market for the remainder of the summer and fall. One positive for the fed cattle is that seasonally beef demand usually increases heading into fall as families get back to their more regular schedule and the weather cools. Also, its expected supplies of market ready fed cattle will be smaller later in the fall. Staying current continues to be important. Canadian feedlots have remained current through the summer and kept carcass weights down. This is even more important in the U.S. Any backup in the movement of cattle there will be harder to overcome. The worry is that dropping U.S. corn prices will encourage feeders to take advantage of the cheaper cost of gain to add more pounds rather than sell into a lower market. One final worry is the gaining resilience of the Canadian dollar of late.
The drop in corn prices will continue to support feeder prices. Local feed costs at this time of the summer continue to be the wildcard as far as fall-run feeder prices are concerned. While cost of gain has cheapened south of the border it is still unknown how competitive our feed cost will be this fall. Drought conditions across many areas of the Prairies have left grain and forage production below expectations.
A negative in the feeder market is that risk-management opportunities are very limited at this time particularly on heavier feeder cattle at their current price levels. This could limit any near-term upside as feedlots struggle to lock in any positive return.
Heading towards fall the Canadian dollar will continue to affect the market, a low dollar and cheaper corn could encourage increased U.S. buyer competition.
Summer demand for trim is generally high as consumers are still reaching for inexpensive options at the supermarket. This trend is supportive of all trim and grinding meats and should help retain support for D1,2 cow prices as summer wraps up. Recent rains in the west are holding many pastures at bay as producers wait and see if more rain and forage growth tells them to keep or cull. Limited moisture coupled with a Canadian dollar that continues to show strength could significantly pressure cow prices through the fall run when the bulk of the cows come to town.
A combination of ample competitive meats, smaller exports and sluggish beef movement this summer troubled cash markets. In late July fed cattle tumbled to $84.15/cwt from the spring high of $100.15, a decrease of $16/cwt. The other contributing factor was the recent strength of the Canadian dollar. As a result the July Alberta to Nebraska fed cash basis widened to -9.14 from the seasonally narrow -4 of just four weeks earlier.
On July 1 CanFax reported 770,936 head on feed in Alberta and Saskatchewan, down two per cent year-to-year. June placements were down 10 per cent — resulting in the lowest level of placements since 2003 — reflecting 2008’s smaller calf crop and the reluctance of finishing lots to draw in more cattle despite widespread drought conditions in the west. Marketings were up nine per cent in June at 207,233 head in June as domestic steer and heifer slaughter was just shy of 192,000, a level not seen since 2006.
Light-weight feeder cattle prices climbed quickly through the spring and reached a high at $124/cwt in May. Since then prices have fallen back seasonally as volumes of lightweight cattle decreased, fed cattle prices came under pressure and the dollar moved higher. In mid-July the Alberta 550-lb. feeder steer average was $110, down $14 from the spring high but still $1.25/ cwt higher than the same week in 2008. In contrast to the fed cattle and lightweight feeders the 850-lb. feeder steers have enjoyed continued strength in 2009. Prices through May were just over $100/cwt, dipping down to $96-99 through June and then back up to $102 to $103 by mid July. The recent rally can be traced to lower corn prices in the U. S. in response to a recent USDA report of higher than expected acreage for corn.
The drought in many areas of the Prairies continues to shadow the non-fed market in the west with some areas experiencing record dry conditions. Burnt out pastures and poor hay crops brought more cows to town this summer, along with a larger than normal number of cow-calf pairs. D1,2 cow prices reflected the increased volumes. By the second week of June D1,2 cow price dipped below year-ago levels for the first time since January 2008. From April 17 when the average reached $56.01/ cwt to June 12 prices dropped more than $13.50 to a low of $42.49. In July the market corrected with some welcome rains, pushing the average back to $48-49/cwt. Butcher bulls on average dropped down $6.60/cwt to $56/cwt from May to June but that was still $1.50 higher than June 2008.