Fed cattle prices held up well in the fall of 2010 and performed better than expected given concerns over rising feed costs in the U.S. Alberta fed steers posted a new annual high averaging $98.04 per cwt in the first week of December, surpassing the spring high of $95.75. However pressure was noted in the cash market heading toward the final few weeks of 2010. Seasonally this is the time of year when slaughter levels slow as buyers have filled their holiday needs and consumers look to turkey and hams for Christmas. By the second week in December prices had dipped to $96.58 per cwt, still up $22.06 from a year ago and $4.37 better than 2008. The cash to cash basis widened by mid-month to -5.58 per cwt which is still tight compared to the -7.22 posted last year at this time.
The number of cattle on feed in Alberta and Saskatchewan rose through November to 980,279 head on Dec. 1 but were still down three per cent from last year. A late harvest coupled with good fall grazing led to an increase in feeder volumes in auction rings late in the fall run. November placements were up seven per cent but marketings were down 12 per cent, the first year over year decrease since February.
Domestic steer slaughter was up two per cent to the first week of December at 1,455,552 head; heifer slaughter was up seven per cent at 998,654 head. Carcass weights dropped quickly toward year end with steers losing 16 pounds to 859 pounds showing that local feedlots remain current in their marketings. Fed cattle exports were up 21 per cent year over year on November 27 at 579,324 head.
Feeder cattle sales remained strong through the fall and into December. A combination of a delayed fall run, empty pens and a strong fed market as well as premiums in the deferred live cattle contracts supported better prices. By mid-December 550-steers averaged $133.26 per cwt, $28.00 above 2009 and 2008. Heavy 850-steers peaked in early November at $113.30 but were still managing $112.43 per cwt in early December which was more than $22 above year-ago prices. The week ending December 10 the 850-lb. feeder basis was -6.08/cwt, about even with last year but much tighter than the -19.54 recorded in 2008.
NON FED CATTLE
Good demand for trim pumped up non-fed prices as we headed towards the New Year. D1,2 cows in Western Canada picked up slightly in early December to $57.15 per cwt from the $51.82 they brought just three weeks earlier. At that price better cows were running about $22 above last year’s market. The rising demand for trim and grinding cuts also pushed D3s up by $2 per cwt to $51.25, once again narrowing the spread between D1,2 and 3 cows. Butcher bull supplies started dropping in early December pushing prices up $1.61 on the previous week to average $62.14 per cwt and ranging from $53 to $70 on quality. Cow slaughter to date totals 519,107 head, down six per cent on the year while bull slaughter is up 81 per cent at 27,324 head. Non-fed exports to the end of November were up four per cent.
Near-term supplies of fed cattle in Canada are expected to be moderate which is favourable in light of the expected softer seasonal interest in the new year. Beef demand is typically softer in January as consumers deal with Christmas expenses. Fed supplies in Canada are expected to be tight through the first part of the year as summer-placed yearlings remain on feed. Tight supplies, continued good demand, lighter carcass weights and manageable U.S. net supplies, all lead to increased leverage with buyers. In January everything looks to be in place for a good spring rally.
Seasonal tendencies and dwindling supplies should strengthen prices for light-weight calves in the new year. A stronger fed market, smaller calf crop and improvement in the North American economy lend strength to the feeder calf market. Heavy feeders tend to dip in the new year but given the smaller cow herd and the demand seen so far for this calf crop it’s likely that the heavier feeder market will remain favourable as well.
Cull cattle volumes at auction have decreased in recent weeks. The fall low has been set for 2010. Heading into the new year, cull cattle prices will gain support from the continued demand for grinding meat in North America coupled with limited supplies as the North American cow herd has been heavily culled in the past few years.