Volatile beef market expected to continue

A feedlot owner could be looking at a final selling price ranging from $2,200 to $3,000 per animal during the course of a year

RED DEER — Major price volatility continues in the Canadian beef market.

Prices fluctuate day to day and that can affect the bottom line for cow-calf and feedlot operators, said Brian Perillat, senior analyst for Canfax.

“Even within a few months they can change a lot. Fed cattle prices can fluctuate $700 to $800 throughout the year,” he said at the Alberta Beef Industry Conference held in Red Deer Feb. 21-23.

Ultimately a feedlot owner buying calves and selling finished steers could be looking at a final price ranging from $2,200 to $3,000 per head during the course of a year.

Last year showed the biggest price swings and Perillat ventures 2018 could be similar.

Overall, prices will hold due to good demand from strong exports.

“Last year on the export market, we sold more and we got higher prices for it. That is where the opportunity lies and that is where things look fairly positive,” he said.

An unusual situation in recent times has been the strength in basis levels. Canada has been in a premium position against most American classes of cattle. However, the premium is starting to tighten.

Cull cow prices remain at a premium to the United States when typically, Canada is discounted. Cow prices have been at $10-$20 per hundredweight better than the U.S., but those prices have recently dipped.

There have been major profit swings for yearling steers but the feedlot sector was profitable in 2017 compared to the year before when there was plenty of red ink. Feedlots are still making money for the most part but that could change through the year.

Fed cattle could be stronger this spring with prices in the $170s per cwt. but the market could be riskier going into late summer and could fall back to $130 per cwt.

The cow-calf sector has been profitable but there is little appetite for expansion so the herd inventory is about the same size as it was in the early 1990s.

“We are just keeping enough heifers to replace the culls,” he said.

This past year Canadians have actually imported about 70,000 U.S. calves to fill feedlot pens.

In addition, extremely dry weather conditions have held back growth in the major cattle areas of the Prairies, particularly for parts of Saskatchewan and southern Alberta.

The Canadian herd is around 3.8 million cows but the U.S. has added about 2.5 million cows in the last three years in a major expansion. The U.S. growth may slow if drought persists and cows are sold due to lack of feed and water.

Packing capacity has been strong with about 67,000 head killed per week at federally inspected plants. Canadian fed cattle and cows are staying at home rather than heading south, keeping plants viable.

The newest plant, Harmony Beef near Calgary, has started operations but is only at about half of its daily capacity of 800 head.

Carcass weights hit record levels but are starting to moderate. Much of the added weight was fat with low value. In 2016, the average weight was 915 pounds and last year was about 15 lb. lighter.

Most recently, the Alberta average carcass was 877 lb. but Ontario reported weights at 977 lb.

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