Your Reading List

THE MARKETS – for May. 3, 2010

MARKET SUMMARY

Fed Cattle

Fed cattle prices have risen 21 per cent since the start of 2010. In the past four weeks prices jumped $11 per cwt to average $95.75, finally pushing into a profitable level. This recent rally is the result of seasonally higher cutout values, a rising U. S. cash market and strength in the live cattle futures. So far the fed market has ignored the stronger dollar which has narrowed the basis. The average fed basis in the first week of April was -5.32/cwt, which was $3.87 narrower than a month ago and $1.37 better than the same week last year.

Domestic slaughter numbers are mixed to date. Steer slaughter is up one per cent over 2009 at 346,339 head while heifer slaughter declined two per cent to 269,082. Fed beef production in Canada is up three per cent on the year at 518 million pounds. Much of the additional production is from larger carcass weights. Year-to-date steer carcasses are averaging 869 pounds, 35 pounds more than last year at this time. In mid-April steers were still running at 864 pounds.

Even the soaring Canadian dollar wasn’t enough to dampen slaughter cattle exports to the U.S. Shipments were running eight per cent ahead of last year in the first quarter.

Feeder Cattle

High feeder futures made way for buyers to lock in profits on grass cattle. This helped hold feeder cattle prices in light of a strong Canadian dollar. The 550-pound feeder steers traded consistently between $117 and $119 over the past month. The $119.58 average for 550-weight steers in central Alberta at the start of April was better than $2 above the last week of March but nearly $2.50 under last year.

To our press date 850-pound feeder steer prices in Alberta had risen six per cent since the start of the year but the futures were up even more, resulting in a wider basis. The current 850 basis is -18.07 per cwt to the U. S., which reflects the trends of the past few years rather than the pre-BSE basis we were seeing earlier in the year. At the start of April 850 steers averaged $94.25, a full $5.53 under the same week last year.

Exports of feeder cattle to the U.S. continue to run behind last year. To the end of March feeder exports were down 69 per cent at 41,328 head through the first quarter.

Non-Fed Cattle

Cull cow prices have increased steadily since the start of 2010. In the past month western Canadian D1,2 cow prices ranged between $51.86 and $53.62. In the first week of April they averaged $53.04/cwt, up $10.58/ cwt from the start of the year but still $2.62 under last year. D3 cow prices have also improved, to $49 at the start of April. In the U.S. cow prices were on the verge of breaking historical highs due to limited supplies of lean trim from imports and domestic slaughter.

Current Canadian cow slaughter at 155,383 head, was running eight per cent behind last year while butcher bull slaughter was running 79 per cent ahead of last year at 4,834 head. Live cow exports are up 30 per cent year to date, bull shipments are down four per cent.

Butcher bulls averaged $62.61 in March, up just slightly from last year, then climbed to $64.15 during the first full week in April.

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

Deb’s Outlook

Fed Cattle

Supplies of fed cattle in the near term will start to increase as more calves become market ready and are added to the slaughter mix. Another negative factor in the Canadian fed cattle market is the Canadian dollar, recently touching parity with the U.S. dollar after reaching a 21-month high. The dollar remains one of the largest challenges for Canadian cattle producers. Positives in the fed cattle market consist of a smaller supply of competing proteins and smaller beef production in North America. Also a seasonal increase in grill cuts should help fed prices reach a high in the near term. Looking further out fed prices will come under pressure as supplies increase into the summer months. However, fewer cattle on feed in 2010 coupled with an anticipated rebound in consumer consumption should limit some of the downward pressure.

Feeder Cattle

Buyers are eagerly watching spring moisture levels as the grass is starting to green up. Lightweight feeder cattle are in demand for the grass market and high feeder futures have put hedgeable profit in their future. The seasonal trend for 850-pound feeder steers is to see a dip in spring and then climb higher towards late summer. Basis levels tend to narrow as well heading towards summer. It’s to be hoped basis will tighten back up to the trend seen earlier in 2010. As with all classes of cattle, the dollar is a limiting factor in feeder cattle pricing.

Non-Fed Cattle

Non-fed trade should hold steady to higher due to increased demand and limited supplies. Demand both domestically and in the U.S. should remain strong as summer approaches. Fewer non-NAFTA imports to date in 2010 continue to support prices. Seasonally cow price highs are achieved in the late spring or early summer. If we receive adequate moisture cows will stay out on grass and supply will remain tight until later in the summer.

About the author

Contributor

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

Comments

explore

Stories from our other publications