Although the fed market typically moves lower from spring into summer the tight supplies and good demand for beef have created a very strong move against the normal trend. The cash market continues to set new records. The last week of June saw Alberta fed cattle average $155.64/cwts over $36 higher than the same time last year. Supplies remain tight overall but volumes are even smaller when looking at the cash trade. A large number of cattle were contracted earlier in the year at a good profit but still less than the current highs in this market. The cash-to-cash basis has narrowed since the start of the year, and currently sits at $10.09/cwt under the U.S.
The Canfax cattle-on-feed report continues to post higher inventories in Alberta and Saskatchewan. June 1 inventories were up nine per cent over last year at 888,581 head. Much of this increase was placed in the first couple months of the year. May placements by comparison were down 17 per cent. Marketings are also up seven per cent year to date in 2014. Domestic steer slaughter is up seven per cent while the heifer kill is running 10 per cent ahead of last year with a combined fed slaughter of 1,090,312 head. The current state of the industry is evident by looking at the carcass weights. Steer carcasses averaged 827 pounds at press time, 19 pounds lighter than last year, while the year-to-date carcass has lost 31 pounds on average. Although the Canadian slaughter is larger than a year ago, exports of fed cattle to the U.S. are down five per cent at 193,384 head to mid-June.
Following the fed market, the feeders moved up to a new price range in 2014. Several factors are driving North American prices: positive feeding margins, higher deferred fed cattle futures, recent moisture leading to lower grain prices and better pasture conditions as well as a smaller overall cow herd and tighter feeder supplies. Light volumes of 550-weight feeders currently average $238.40, or $88.65/cwt better than a year ago. Heavy feeders also continue to break records with 850-weight Alberta steers averaging $201.38/cwt at the end of June, an improvement of $74.71/cwt from last year. A smaller number of grass yearlings is expected at the end of the summer, which has feeders looking to secure their requirements early. Some producers have already listed their grass yearlings with forward delivery dates and some grass cattle have been sorted and sent to town with heavier cattle to cash in on these boom prices. The feeder basis remains wide, averaging $25.55/cwt under the U.S. on the year compared to $18.67 under at this time last year. At the end of June the cash-to-futures basis was $28.95 under. The pace of exports to the U.S. has slowed in recent weeks but overall is still running 43 per cent ahead of last year.
D1,2 cows hit a new record at the end of June at $110.38/cwt, $35 better than 2013. This kind of strength in cow and bull prices this late in the summer is unusual. However, the value of trim buoyed up by the demand for ground beef continues to push this market ahead. Butcher bulls are averaging just over $120. Domestic cow slaughter is down four per cent year to date at 202,388 head while bull slaughter is up eight per cent with 1,797 head. The tight numbers are also pushing exports down, by 11 per cent, with 126,354 cows crossing the border year to date, Bull exports are running 11 per cent ahead of last year at 33,912 head.
Debbie McMillin is a market analyst who ranches at Hanna, Alta.
This summary appears in the July 2014 print issue of Canadian Cattlemen