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MARKET SUMMARY – for Feb. 8, 2010

DEB’S OUTLOOK

FED CATTLE

Early yearling placements last summer ensured ample market-ready cattle at the start of 2010. But supplies were expected to tighten by the end of the first quarter and into the second right when consumers start dusting off their grills. Let’s hope the recovery has been enough to be reflected in their beef purchases this spring. Our strong Canadian dollar is expected to encounter some downward pressure over this same period. This scenario indicates prices will remain sluggish at the start of 2010, then begin to improve as we move toward the second quarter.

FEEDER CATTLE

USDA’s latest report projecting an increase in corn production and supplies in the 2010/11 will lend support to the feeder cattle market in the coming months. Just to be sure the department will revisit the numbers in March, so stay tuned. Seasonally, Canada’s feeder cattle market picks up strength at this time of year as numbers tighten and buyers keep one eye on the weather and the other on potential supplies of grass cattle. The strong Canadian dollar is an X factor. If it comes under pressure from a surging U. S. Greenback as some analysts predict, buying pressure and prices should rise. An opposite move would bleed the cash market just as quickly.

NON-FED CATTLE

Historically, cow volumes tighten in the first quarter as calves start dropping and time and pen space become limited. As a result cow prices generally rise in the first quarter, peaking in late spring or early summer. That pattern could be exaggerated this spring. With the high cost of gain last fall many of the opens at weaning time never made it to a feeding pen. So fewer cows and consistent demand for trim in North America should support higher slaughter cow prices in the coming months.

FED CATTLE

Thanks to slow meat sales, shrinking exports and a high dollar Alberta fed steers averaged $85.67 per cwt in 2009, a full $4.34 below 2008. They posted $79.26 in the first week of 2010.

The Alberta fed basis averaged -8.48 on the year, although it narrowed considerably in the second half, down to -7.29 through December. This compares to -15.60 per cwt during Dec. 2008.

On Jan. 1, 2010 according to Can-Fax there were 966,410 head on feed in Alberta and Saskatchewan feedlots, down seven per cent from the year before. Placements were off two per cent with the largest decrease in the heavy feeders. The final number of fed cattle exported to the U. S. in 2009 is 543,078, 20 per cent fewer than in 2008. Fed cattle slaughter in Canada in 2009 rose 1.6 per cent compared to 2008.

FEEDER CATTLE

Lightweight feeder cattle prices ended 2009 fairly steady with Alberta 550-pound feeder steers hovering between $104.30 and $104.76 per cwt over the final four weeks of the year. Then they broke to $103.38 in the second week of 2010. Heavyfeeder prices found some pressure at year-end, slipping $2 per cwt from November to average $89.72 through December. By mid-January 850 weight steers were trading at $90.50, a decline of 38 cents from December. The feeder basis has been extremely tight for the past several months, shrinking from -20.02 in the fourth quarter of 2008 to -7.14 by the final quarter of 2009. The December basis averaged -9.09. The last time the December feeder basis was that narrow was 1999. Annual feeder exports declined by 55 per cent in 2009, to 273,764 head.

NON-FED CATTLE

Producers continued to liquidate the cow herd in 2009, although not as aggressively as the year previous. Canadian cow slaughter, at 602,855 head, was well off the 750,838 killed in 2008. Exports were higher though, as 178,769 cows were shipped to slaughter in U. S. plants last year compared to 162,677 head in 2008. All in we disposed of 120,000 fewer cows in 2009 than in 2008.

D1,2 cows in December went for an average $35.94, up slightly from the $34.11 posted in November. The tighter numbers pushed prices up by mid-January to $43.36/cwt, about $3 ahead of the first two weeks in 2009.

Annual bull slaughter in Canada slipped to 15,992 head last year compared to 20,390 in 2008. Another 35,118 butcher bulls were shipped stateside, which is also down from 43,998 sent south in 2008. Bull prices averaged $54.58 on the year in Canada, up $2.25 from 2008. This higher average can’t mask the fact that bull prices struggled in the fourth quarter when they were running at $45.54 per cwt, almost $7.00 less than the same quarter of 2008.

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

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

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