This cattle market information is selected from the weekly report from Canfax, a division of the Canadian Cattlemen’s Association. More market information, analysis and statistics are available by becoming a Canfax subscriber by calling 403-275-5110 or at www.canfax.ca.
Fed cattle lower
The Canfax weighted average fed steer price was $160.79 per hundredweight, down $9.95. Overall trade was light and almost no heifers traded.
Chicago cattle futures fell below technical support and traded sharply lower, setting a bearish tone for the cash market.
Spooked American feedlots sold mostly at prices $3-$5 lower live and $5-$7 per cwt. lower rail grade. Cash prices were still at a premium to the nearby futures.
Packers had more market power with lots of forward-contracted cattle to draw on.
Beef demand often starts to retreat after the July holidays and as the hotter weather arrives.
The Alberta cash-to-futures basis firmed a little to -$4.14, but that was weaker than the five-year average for June.
Weekly western Canadian slaughter was down eight percent at 38,643 head. Slaughter is up seven percent for the year.
On average, the decline from the seasonal spring high to the summer low is 16.3 percent. However, the decline from the early May high is already at 16 percent so the percentage decline this year will likely be larger.
Carcass weights, which have been lower this year, are now starting to creep up and the number of market-ready cattle should rise.
D1, D2 cows ranged $105-$118 per cwt. to average $111.30, down 33 cents. D3 cows ranged $90-$105 to average $98.13. Rail grade cows ranged $207-$212.
Most cows are going to slaughter, but speculators are buying a few to feed until the seasonally strong August market.
Slaughter bulls remained mostly steady at $129.31, up 22 cents from the previous week.
Non-fed volumes are expected to tighten, which should keep prices firm into the second half of June.
Feeders steady to lower
Some of the feeders on offer in Alberta were light to mid-weight stockers, and prices were supported by good demand from those who want to put the cattle on grass.
There were only a few cattle 800 pounds and heavier, and the small lots and variable quality led to lower average prices.
A few yearlings were priced for late summer-early fall delivery at prices $4 to $5 lower on the week.
To assess market risk, here is an analysis of buying a 1,000 lb. steer for September delivery at $185 per cwt. targeting the January fed market.
Assuming an all-in cost of gain of 95 cents per lb. and a finished weight of 1,500 lb., you would need a $155 per cwt. fed price to break even.
Using today’s January futures price and an average cash-to-futures basis for January of -$7.72 puts projected fed cattle at the mid $140s, a money losing level.
To break even, the purchase price would have to be closer to $170, or the January futures price would have to rally about seven percent.
Canadian cattle on feed
There were 881,445 head in Alberta and Saskatchewan feedlots in June, up five percent from the same time last year.
The strong fed market in May caused feedlots to push cattle onto the market. Marketings were 138,111 head, up 15 percent from the same month last year.
Strong prices also encouraged placements of 121,548 head, the most since 2009 and an increase of 65 percent over the very slow placements in May last year.
A lot of the placements were lighter than usual and so yearling supplies in August and September could be tight.
U.S. beef steady
U.S. Choice cutouts to June 15 were US$249.74 per cwt., down 65 cents, and Select was $220.53, up 52 cents.
Beef held up well considering the drop in fed cattle, but prices usually fall in second half of June.
Canadian AAA cutouts to June 10 were C$315.99, up $1.61. AA was $277.92, down $1.80.
AAA slipped in May and rebounded in June while AA has been falling since mid-May.
The AAA-Choice spread is at -$22 per cwt. compared to -13 cents last year.