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The Markets – for May. 16, 2011

Fed cattle

In the past month fed cattle prices reached the highest level since 2003 in response to extremely high live cattle futures, tight front-end supplies and good demand for beef heading into barbeque season. Alberta fed steers averaged $115.56 at the start of April, up $22.85 from last April and 19 per cent from the start of the year. By mid-April steers had lost $4.57, to $110.99 per cwt.

The fed cash to cash basis narrowed again to -2.34 at the start of April and widened to -6.01 by mid month as Alberta fed steers lost ground to U.S. prices. That marked the first time in 2011 that the fed basis was wider than last year. Year to date the 2011 fed basis is -3.68 per cwt compared to -9.16 in 2010 and -11.35 in 2009. U.S. exports of fed cattle were down 36 per cent in the first quarter at 124,529 head and domestic steer slaughter slipped nine per cent to 562,107 head.

The Alberta and Saskatchewan April 1 inventory of cattle on feed at 997,901 head was down four per cent from 2010. March marketings were down 26 per cent at 125,842 head, the smallest they’ve been since the report first started in 2000. This confirms the current tight front-end supply situation in Canada. March placements were also down, by 13 per cent at 195,719 head. Lower placements have been posted every month through the entire first quarter of 2011.

Feeder cattle

Heavier feeder cattle prices maintained their steady trading range with 850-weight Alberta steers going for $119 to $121 since the first week of February. The mid-March to mid-April average of $121.05 is $25.82 per cwt higher than the same weeks in 2010. The 850-pound feeder basis was -6.64 per cwt in the first quarter of 2011 compared to -10.40 in 2010 and -19.54 in 2009 and is narrower than in the pre-BSE years. By mid-April it was holding at -6.59 per cwt.

Lightweight 550-grasser calves eased back slightly to $152.62 in mid April, after rallying to $158.20 in March. This is still an improvement over last year by $33.74. Smaller numbers of available cattle as well as muddy pen conditions in areas where winter storms rolled through maintained some pressure on this market. 2011 has also brought with it some renewed interest in replacement females. Rising markets generally trigger some interest in herd expansion. This trend was confirmed by the April 1 Canfax cattle on feed report that showed a 28 per cent reduction in females placed on feed in March. Feeder cattle exports in the first three months of the year were down 46 per cent from a year ago.

Non-Fed Cattle

The decline in slaughter cow numbers limits the grinding and trim meats available to meet the current strong demand. As a result cow prices are the highest they’ve been since the summer of 2001. Canadian cow slaughter totalled 132,361 head in the first three months of the year, down 15 per cent nationally from last year and 21 per cent in the west. D1,2 prices averaged $80.45 per cwt in mid-April which is $24.54 better than the same week in 2010 and a 39 per cent improvement since the start of the year.

Increased prices continue to bring more bulls to market as producers encouraged by the good salvage values are choosing to replace a number of older herd bulls. Bull slaughter was up 15 per cent in the first quarter, more than double the slaughter in 2009. Butcher bull prices in mid-April ranged from $75 to $98 per cwt.

Exports of cull cattle to the U.S. in the first quarter were down 29 per cent at 53,627 head due to the smaller available supplies and the high Canadian dollar.

Deb’s Outlook

Fed Cattle

We are closing in on a time of seasonal spring highs, however one could argue the highs for this season have already been passed onto consumers who are facing higher gas prices and have fewer dollars to spend. The Canadian dollar at levels not seen since 2007 still weighs on the market. However, Canadian cutout prices continue to climb, spurred on by buyers looking to fill spring needs from small supplies of market ready cattle.

Feeder Cattle

While stormy conditions have slowed the market in recent weeks the heavy wet snow will continue to spark interest in grass cattle while we wait for pastures to start turning green. The seasonal trend for both light and heavy feeders is for price improvement through the second and third quarter. The basis generally improves in the same period. Risk factors ahead in an already strong market are live cattle futures moving forward as well as seeding intentions, planting conditions and early crop reports.

Non-Fed Cattle

Seasonally prices generally increase with the arrival of barbeque season in the second quarter of the year. Falling cow numbers are being supplemented with increased supplies from the fed cattle market to fill some of the demand for lean ground beef while pushing retail costs higher. This combination of seasonal demand and lower numbers will support steady to stronger cow and bull prices in the coming months.

DebbieMcMillinisamarketanalystwhoranchesatHanna,Alta.

About the author

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

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