Tight supplies push fed cattle cash prices higher

The Markets with Deb McMillin, from the February 2020 issue of Canadian Cattlemen

Fed Cattle

The fed cattle cash market had a great start in 2020. Tight market-ready supplies helped push prices higher and led to current feedlots as cattle were pulled ahead to sell into the stronger market.

The fed steer price averaged $163.64/cwt the second week of the year, an improvement of $9/cwt from the beginning of December. It was also $2.95/cwt higher than the start of 2019.

Differences noted at the start of this year include the tight front-end supply, reduced carcass weights, current feedlots and strong fed basis.

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Slices of thick cut steaks

The reduced steer carcass weight is an indication of the market being current. At 906 lbs., the start of the year’s average carcass weight had decreased 25 lbs. since the beginning of December and is currently 22 lbs. lighter than the same week in 2019.

Fed slaughter numbers were higher in 2019 for both steers and heifers. Steer slaughter to the end of the year totalled 1,712,761 head, seven per cent higher than in 2018. Heifer slaughter was up three per cent to a total of 913,450 head.

Live exports were also higher, with the fed exports including cows up 26 per cent, totalling 481,037 head. The December Alberta and Saskatchewan cattle-on-feed report showed a nine per cent increase in the number of cattle on feed as of December 1 when compared to a year earlier.

Later fall run movement coupled with lower feeder exports and higher imports led to a 31 per cent increase in placements in November, with 347,830 head placed on feed during the month.

Deb’s outlook for fed cattle: In the near term, tight supplies and a current feeding sector are setting the tone for stronger first-quarter prices. The bulk of the cattle on feed in Alberta and Saskatchewan will not be marketed in the first half of the year. Supplies through the spring should be manageable while grilling season approaches and domestic demand lifts. Export demand in all markets, but particularly Asian markets, has been strong and is expected remain solid in 2020. The fed basis starting 2020 is strong, which will limit live export. Overall, expect prices to improve through the start of 2020 as we look for the seasonal spring high.

Feeder Cattle

Feeder cattle prices were off to a good start in the new year, with all steer weight classes higher than the end of 2019. Compared to early last year, the feeder prices started out somewhat mixed, with more demand for lighter 550-lb. steers pushing prices higher. Meanwhile, lower numbers of heavier steers saw prices slightly below a year ago.

At mid-January, the 550-lb. steer price averaged $224.75/cwt, $6/cwt higher than the beginning of December and $6.15/cwt above the start of 2019. The 850-lb. feeder steer price hovered between $186/cwt and $189/cwt in December. In mid-January the average was $187.25/cwt.

The 850-lb. feeder basis has widened with the start of the new year, currently -4.90/cwt. This is weaker than the premium basis positions seen in December, but still narrower than the start of 2019, when the basis average was -5.63/cwt.

While feeder exports in 2019 totalled 185,072 head (down five per cent when compared to last year), feeder imports in 2019 were much higher. The end-of-year data was not yet in at the time of writing, but October and November were the two largest feeder import months on record in Canada. If the import trend continued into December, import totals in 2019 could reach record highs.

Deb’s outlook for feeder cattle: Extreme cold across the Prairies mid-January will slow volumes of calves moving in the system. Light-weight feeder calves should remain strong as very current feedlots look for replacement cattle to fill the bunk as well as start to look towards grass cattle requirements in the coming months. The number of heavier cattle available in Canada is limited this time of year, and through January shorter-keep cattle may see some upside early in the year. First-quarter price and margin improvement in the fed market should support feeder cattle prices. Lighter-weight and grasser-type cattle will be sought after in the coming months. Factors to watch for will be cost of gain as current feed barley prices continue to be well above year-ago levels, as well as the Canadian dollar trend, and feeder cattle net trade numbers.

Non-fed Cattle

Cull cow prices have improved, which has in turn brought more cows to market both from producers who had held on to inventory in anticipation of price improvement as well as from speculators who purchased cows to feed during the fall lows.

D1,2 cow price at the start of the year popped up to $88/cwt, an improvement of $8.25/cwt from the fall run low and $5.33/cwt higher than the start of 2019.

Annual cow slaughter numbers totalled 507,299 head, virtually unchanged from a year ago. Butcher bull prices the second week of January averaged $102.21/cwt, compared to a year ago when the price was just $96.56/cwt.

Bull exports for slaughter to the end of December totalled 47,424 head, a six per cent increase over last year. Domestic bull slaughter in 2019 was down eight per cent and totalled 15,993 head.

Deb’s outlook for non-fed cattle: Trim and grinding meat demand was strong throughout 2019 and is expected to remain solid. Seasonally, cull cattle prices improve through the start of the year, moving along with fed prices. As well, non-fed supplies are tight in Canada and demand starts to build moving into the spring barbeque season.

About the author

Contributor

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

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