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MARKET SUMMARY – for Jun. 8, 2009

Fed Cattle

Concerns of beef demand through the recession did not alter the fed cattle prices through the first four months of 2009. The seasonal pattern remained intact, strengthening through the first quarter to reach a typical spring high. Since then, fed cattle prices have experienced pressure. A combination of recent strength in the Canadian dollar and fallout from the H1N1 virus on the protein sector lead to downward movement in the fed cattle cash market. Fed cattle prices over the first two weeks of May decreased almost $8/cwt. The average fed steer price in Alberta the week ending May 15 was $89.75 which was down nearly $1.75 from the same time last year. The fed steer basis currently sits at -10.95/cwt under the U. S. The number of fed steers and heifers that have been exported for slaughter to date in 2009 is 225,432 head, down 23 per cent when compared to the same weeks in 2008.

The May 1, 2009 CanFax cattle on feed report showed a two per cent increase in the number of cattle on feed compared with May 2008. Although this is an increase when compared to last year it was not due to new cattle being placed on feed. The placements in the month of April were down 22 per cent, reflecting the larger placements earlier in the year as well as the smaller cow herd. The number of cattle in April for domestic slaughter or export for slaughter in Alberta and Saskatchewan totalled 190,119 head which was down five per cent from last April.

Feeder cattle

In most parts of the Prairies calves are heading out to grass, which continues to support prices of light feeder cattle. The 550-pound feeder steer price has averaged $123-124/cwt over the past several weeks up to mid-May. While this is more than $17/cwt higher than in 2008, it’s very similar to the prices seen in 2007. The mid-May average in 2007 was $123.91/ cwt compared with$ 124.17/cwt this year.

Interest has been strong for heavier feeders in the past few weeks. Since the start of April the 850-pound feeder steer price in Alberta climbed more than $4 to an average at the start May of $104/cwt. The rising Canadian dollar started to weigh in on prices by mid-May and 850 feeder steers slipped back to $102.97/cwt. The 850 feeder steer basis was -13.47/cwt which compared to 18.67/cwt under at the same time in 2008. The pre-BSE average 850-pound feeder basis for mid-May is 6.96/cwt under the U. S. market. To mid-May feeder-cattle exports totaled 176,973 head, 34 per cent fewer than the same time in 2008.

Non-Fed Cattle

While the Canadian cow herd still seems to be in liquidation mode it is occurring on a smaller scale than last year. The domestic cow slaughter to date is 294,755 head which is down 19 per cent from a year ago. Bull kill in Canada to date is 4,395 head, 42 per cent behind last year. Exports are actually slightly higher year-to-year reflecting the decline in the Canadian dollar at the start of the year and the large U. S. demand for grinding beef. Total exports of cows and bulls exported to mid-May reached 71,755 head, up seven per cent. D1,2 cow prices peaked in mid-April at $56.01 in the West. Since then the average has slipped back to $53.88 at press time, in spite of a three cent increase in the dollar and the closure of the XL Moose Jaw plant. Butcher bull prices remain strong; the monthly average for April was $66.03 which was nearly $15/cwt above April 2008 prices.

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

Deb’s Outlook

Fed Cattle

There is more pork in the system due to increased domestic production to date, increased imports and decreased exports. Although there is no link to pork and the H1N1 virus the fact that it was referred to as “swine flu” has hurt the North American pork market. This can be viewed two ways for beef consumption. Either retailers will feature and move more beef product or consumers will take advantage of pork price drops therefore putting pressure on summer beef movement. The Canadian dollar has increased in past weeks pressuring the fed market; it is to be hoped that the dollar’s recent rally is short lived. One positive is that Canadian feedlots are very current and carcass weights are lighter. However, North American fed cattle supplies increase heading into the summer and towards fall causing a seasonal decline in prices.

Feeder Cattle

A supportive factor in the feeder market continues to be lower feed costs. An always-unpredictable factor is the Canadian dollar; it will be something to watch in coming months. The recent rally in the dollar is not supportive to the export market and could weigh on local feeder prices. Volumes are generally small this time of year. Quality has been a driving factor in the feeder market in recent weeks and will continue to play a role as the remaining 2008 calf crop is marketed. Feeder prices in the summer should remain mostly steady given a large increase in the Canadian currency is not in the cards and fed prices do not come under excess seasonal pressure.

Non-Fed Cattle

Demand for trim and grinding cuts generally strengthens into the summer. At the same time most cows are out to pasture with calves at side leaving short supplies to meet the large demand. This alone tends to support cow prices through the first part of the summer. Regionally, depending on moisture and pasture conditions, the non-fed cattle supply will remain tight and prices firm in the near term.

About the author

Contributor

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

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