By mid-November Alberta fed cattle averaged a dismal $77.75 per cwt, down more than $17 from the same week in 2008. Consumers made nervous by the troubled economy continue to spend cautiously, seeking out products such as grind and trim cuts that will stretch their dollar a bit further. Most of the value in a carcass comes from the middle meats, which continue to struggle to keep moving though the system. On top of gloomy North American demand, Canada is struggling with a strong dollar that is pressuring fed cattle prices lower. Heavy carcass weights are also weighing on cash sales. In mid-November steer carcasses sat at 886 pounds, 31 pounds above last year’s average. This additional tonnage is obviously a burden on an already slow moving market.
The CanFax cattle-on-feed report in Alberta and Saskatchewan for November 1 came in at 895,596 head, down five per cent on the year. Marketings were also off in October, at 135,865, head, a full 14 per cent behind 2008. October placements of 315,607 head trailed October, 2008 by three per cent but were up 22 per cent over the number placed in 2007. Fed cattle exports to the end of October totalled 450,444 head, a drop of 23 per cent from the 2008 level.
Although the feeder calf market generally trends somewhat in the same direction as the fed prices that has not been the case this fall. The fall run of feeders seems to have overlooked both the rising dollar and the downward movement in the fed market over the past several weeks. Strong buyer interest saw Alberta 550-pound feeder steers average $107.46 by mid-November, a full $6 over the month before, and $3 more than last year. At the same time, 850-steers traded mostly sideways, between $90.00 and $93.25 over the same four weeks. At mid-November 850-feeder steers averaged $91.77/cwt, which is down from $97.17 during the same week in 2008.
The 850-pound feeder basis at press time was 4.40 under the U. S., quite a change from the -21.03/cwt basis set last fall. Indeed, it is even narrower than pre-BSE levels, which indicates Canadian feeder prices are strong in relation to U. S. prices. Buyer interest from the U. S. remains weak in the face of a higher Canadian dollar and mCOOL limitations. Export numbers on feeder cattle continue to trend down, significantly. The total from January to the end of October is only 261,083 head, about 52 per cent fewer than we shipped to the U. S. during from the first 10 months of 2008.
In Canada we have killed 489,917 cows domestically since the start of the year, about 19 per cent fewer than last year to mid-November. In large measure this reflects the diminished supply of cows available, as 2008 was a record year for cow marketings. However, 2009 cow slaughter is still running ahead of the pace set in 2007. Exports of cows for slaughter in the U. S. to the end of October reached 131,417 head, up about three per cent from last year. The number of bulls slaughtered in Canada to date totals 13,686, also down 19 per cent from a year ago while exports for bulls for slaughter were down 23 per cent on the year at 28,626 head.
D1, 2 cow prices seem to have found some steady ground, trading between $33.91 and $34.22 per cwt in the four weeks to mid-November. Last year, over the same four weeks, prices fell from $43.19 to $36.24 per cwt.
Butcher bull prices slipped back seasonally. The October average was $45.96 per cwt, down from $49.98 in September and off nearly $11 from the prices set in 2008.
Debbie McMillin is a market analyst who ranches at Hanna, Alta.
Packers are long on inventory for the near term, which generally does not spur a rally in the cash market. It’s to be hoped the cutout finds some price strength as the holidays approach and consumers look for higher-value products. Increased meat movement is definitely required to see fed cattle prices recover heading to year’s end. Although cattle-on-feed numbers in North America were pegged to be small through the fourth quarter of 2009 current carcass weights are going to be hard to work through in the coming months. In addition to all the demand issues, Canada is still dealing with a rising dollar.
Concerns of smaller feeder supplies due to a smaller beef cow herd, coupled with affordable cost of gain will continue to be the fuel in the feeder cattle market. Optimism looking forward has buyers placing cattle in hopes that short supplies are ahead in 2010. On the flip side, the downward movement in the fed cattle market coupled with the upward movement in the Canadian dollar may ultimately pressure feeder cattle prices lower as year end approaches.
The increase in the number of cows heading south shows the export floor has been reached which should lend support to a steady market if the rising Canadian dollar does not stand in the way. There is likely still a large number of cows ahead to work through heading toward the end of 2009. The total will include seasonal cull cows as well as cows heading to town due to the lack of feed, and the price of feed in many areas. This volume will likely limit any upside in the near term.