McMillin: Cattle-on-feed numbers above year-ago levels

The Markets with Deb McMillin, from the October 2020 issue of Canadian Cattlemen

Fed cattle

Fed cattle prices held mostly steady in September, with a sideways trading range of $133/cwt to $134/cwt. The week ending September 25 saw fed cattle prices average $134.01/cwt; however, cattle were purchased with a longer pickup time and buyers were less aggressive, leaving the market slightly softer as September ended.

Increased carcass weights indicate a less current position in the market. The mid-September average steer carcass weight was 938 lbs., a jump of 18 lbs. in one week and 19 lbs. heavier than the steer carcass weight the same week in 2019.

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Fed cattle slaughter to date is down three per cent in steer slaughter and back four per cent for fed heifer kill from a year ago. However, the backlog created when plants were shut down due to COVID-19 outbreaks has not been as detrimental to the market as originally expected. Steady summer fed-kill rates and reduced non-fed numbers worked through much of the backlog and wholesale beef demand was strong enough to keep product moving.

Cattle-on-feed numbers in Alberta and Saskatchewan totalled 772,889 head on September 1. While on-feed numbers remain above a year ago, fewer cattle were placed on feed throughout August (108,197 head). Good grass conditions and later weaning accounted for the difference in placements as the change was noted in the light weight classes.

Slaughter cattle exports are higher than a year ago. Including fed cows, the number of fed cattle exported as of the second week of September totalled 338,731 head, which was five per cent above the same time period in 2019.

Deb’s outlook for fed cattle: More contracted cattle will limit buyer competition in the near term for the fed cattle market. However, as we move through the fourth quarter, increased demand for higher priced middle meats to source holiday requirements, coupled with a reduction in front-end supply, should support a seasonal rally. In general, prices should be stronger as we near the end of 2020. A second wave of COVID-19 cases in Canada and the U.S. may be a limiting factor in fed cattle prices as would any further disruption in food service beef movement.

Feeder cattle

Yearlings coming off grass are in demand and set a new average high again in late September at $193.59/cwt, which was a week-to-week improvement of $2.73/cwt and $1.26/cwt higher than the same week in 2019. The 850-lb. feeder basis has been positive for much of the third quarter, but narrowed to $3.43/cwt. The five-year average basis for the end of September is $2.86/cwt.

Light volumes of calves on offer coupled with feedlot optimism have kept buyers procuring calves offside and steadied prices through much of September. By the third week in September, the 550-lb.-calf average had slipped back $3/cwt to $213.21/cwt, which is just $0.10/cwt back from the same week one year ago. Cattle sold with forward delivery dates for October and November are still selling at the top end of the sale range.

Feeder exports are down considerably when compared to a year ago. The most recent data available (September 12) shows the total down 48 per cent, with a total export of 85,899 head.

Deb’s outlook for feeder cattle: As fall grass is used up and harvest wraps for many producers, herds will be brought in and calves weaned. Larger volumes, anticipated by mid-October, are expected to be met with seasonal pressure in calf prices. Increased feed grain prices have not had an impact on the feeder market yet; however, the increased numbers coupled with rising costs and 2020 feedlot losses will all affect the feeder market as we start the third quarter. Hopefully, the technical markets will provide some risk management opportunities to create optimism in feeder purchases against the 2021 market. As well, hopefully the fed sales meet a solid fourth quarter rally which generally would funnel down to the feeder market. Remaining yearlings should hold steady as buyer competition is still strong for these weight classes and numbers of yearlings still out on grass are limited.

Non-fed cattle

Good harvest weather and fall grazing have kept cow supply light and prices solid through September. In September, the D1,2 cow price in Western Canada traded from $82.64/cwt to $84.83/cwt, with the September 25 average at $82.88/cwt. This average is $2.91/cwt lower than a year ago and when compared to a five-year average, down nearly $12/cwt.

Canadian cow slaughter is well below a year ago. Pasture and feed conditions have been good and not forced cow sales. As of September 19, the cow slaughter numbers are down 20 per cent from a year ago, to 290,009 head.

Bull slaughter is also down. A total of 8,406 head have been slaughtered as of September 19, which is 26 per cent under a year ago. Bull exports are also under year-ago levels, down eight per cent at 29,593 head as of September 12. The average slaughter bull price was $111.72/cwt for the week of September 25, down slightly from recent weeks but $8/cwt above the same week in 2019.

Deb’s outlook for non-fed cattle: Increased time at home over the past several months has boosted retail beef sales. Ground beef demand is still strong as many families continue to cook more at home. This is fully supportive to the cull cattle market in both Canada and the U.S. Winter feed supplies are good in most areas and cull rates have been high in recent years, which should lead to fewer cows marketed in 2020. However, as we move through fall run, the number of cows available will see a seasonal but manageable increase, which will limit the downside.

About the author

Contributor

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

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