Canfax report – July 26, 2018

July fed prices healthy

Over the previous three weeks fed prices had been trading in the low to mid $150s per hundredweight. Fed prices last week were sitting $11 per cwt. higher than their June lows.

The last time fed prices averaged over $150 per cwt. for July was 2015. This will be the third strongest price for the month of July in history.

Not only have July prices been impressive, but basis levels have been another positive story for the western Canadian feedlot sector. Basis levels weakened last week but remained historically strong. The cash to cash basis was projected to be positive again last week and Alberta fed prices have been at a premium to the United States for the past four weeks.

Moderate trade developed last week, and a softer tone was noted from Tuesday to Thursday. Packers were buying cattle for the week of Aug. 6-13 delivery. Dressed sales ranged from $255-$260 per cwt. delivered. Some bids were passed because cattle could easily stay on feed.

Based on monthly prices, fed prices have dropped from July to August for four years in a row. Over the next couple of weeks fed prices may move back to the upper $140s per cwt.

Including this year, first half lows have occurred during the month of June in five out of the past 12 years. In years when first half lows occurred in June (2007, 2012, 2016 and 2017), second half lows were always lower than first half lows.

This suggests there is a high probability that June lows of $142.38 per cwt. will be overtaken sometime during the second half of the year.

In the United States last week, light dressed sales in Nebraska were reported at US$180 per cwt., $5-$7 higher than the previous week.

Cow prices strengthen

Slaughter cow prices continued to strengthen on last week’s modest offering. D2 cows traded at $C84-$102 per cwt. to average $91.80. That was $1.50 higher than the previous week. D3 cows firmed over $3 per cwt. higher, trading at $78-$90 to average $84.38.

Dressed cow bids also gained momentum, ranging from $178-$183 per cwt. Butcher bull prices rallied for a third straight week, up $3 to a new annual high of $117.50.

Western Canadian non-fed slaughter for the week ending July 14 surged 26 percent larger to 6,524 head. Year to date, western non-fed slaughter was 11 percent larger, totalling 216,016 head.

Canadian non-fed export data to the U.S. for the week ending July 7 was under revision. Alberta slaughter cow prices are expected to trend generally steady through July and into mid-August.

Heavy feeders trade high

Feeder prices firmed higher last week with good demand observed for feeders over 700 pounds. Large steers over 800 lb. saw prices $10-$13 per cwt. higher than the previous week and similar weight heifers rallied $5.50-$6 per cwt. higher. All feeders over 700 lb. traded at new annual highs last week.

Calf prices continued to struggle with selective buying observed on a limited offering of varied quality. Alberta auction volumes have been larger than the five-year average for the past 13 weeks with a few more feeders being marketed for late August/September delivery.

Sale volumes last week totalled 13,415 head and year to date were down five percent to 648,215 head. The U.S. Department of Agriculture’s preliminary Canadian export report was pending revisions but did indicate feeder exports to the U.S. for the four-day week ending July 7 were 26 percent lower than the previous week at 1,668 head. Year to date feeder exports were estimated to be 68 percent larger, totalling 134,986 head.

Auction volumes typically bottom during the second half of July and build in August with early grass cattle and calf sales. Good demand should continue for feeders and prices are anticipated fully steady to higher. Calf prices should firm modestly through to September until volumes build in the fall.

Cow-calf pairs traded at $1,700-$2,450 last week.

Choice price lower

In beef trade, the U.S. Choice cutout slipped US$2 per cwt. lower last week to $204.49 while Select trended sideways at $196.92. Demand was light to moderate on a moderate to heavy offering.

U.S. steer carcass weights for the week ending July 7 were two lb. larger than the previous week and one lb. heavier than the same week last year. U.S. slaughter for the week ending July 21 is estimated three percent larger than year ago at 635,000 head.

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