Canfax report – August 2, 2018

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Published: August 2, 2018

Fed cattle prices flat

Alberta direct cattle prices slid lower last week, and bids softened as the week progressed. Live trade was reported in a tighter trading range last week with prices unevenly $2.50-$5 per hundredweight lower than the previous week.

Dressed sales were generally $5-$6 per cwt. lower, and the majority of last week’s moderate volume trade was reported at $250 per cwt. delivered.

Steer prices trended $3.50 per cwt. lower than the previous week to average $149.83, and heifers were almost $3 per cwt. lower at $148.40.

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Compared with the same week last year, average fed prices were $7 per cwt. stronger. Western Canadian fed slaughter for the week ending July 21 was 10 percent smaller than the previous week at 38,718 head. Year to date, western fed slaughter was eight percent larger, totalling 1,045,872 head.

Western Canadian steer carcass weights for the week ending July 21 were 11 pounds heavier than the previous week and steady with the same week last year at 861 lb. The U.S. Department of Agriculture’s preliminary Canadian export report is once again pending revisions.

In the outlook, a few more formula-priced cattle are expected to be marketed during the first half of August, and the cash market is expected to lose momentum. Summer buying demand has seasonally eased, and pork production will ramp up.

Feedlot inventories are current, and managers have some flexibility to market supplies through August and September. Fed prices next week may continue to soften.

In the United States last week, short-bought packers had secured required inventory, and light trade was anticipated during after hours trading. Stocker calf prices were unevenly US$2 per cwt. either side of steady on varied offering and quality. Large feeders saw good demand, and prices trended steady to higher.

Cow prices rise

D2 cows traded in a range of $85-$103 last week to average $94.75 per cwt. Those are the highest D2 cow prices in the past eight weeks and are sitting $3.55 per cwt., shy of May highs. D3 cows traded at $78-$94 to average $86.50. Slaughter bulls were down $2.77 last week to average $114.73.

Western Canadian cow slaughter volumes totalled slightly more than 5,600 head, the second smallest weekly cow slaughter volume seen this year. Even though cow prices have strengthened, D2 cow prices are seven percent below last year, while fed cattle prices are five percent higher than last year.

Two weeks ago, Alberta D2 cow prices were at a $12 premium to the U.S. utility market. Over the past few weeks there were reports of cows being put on feed. These speculative purchased cows could be targeting the August market.

Numbers have been light, but a few pairs were being split at auction. The market is working through the tightest non-fed supplies of the year, and second half highs are expected to occur in the next 30 days.

Beef trade firms

U.S. cut-out values firmed modestly higher last week with moderate demand observed on a light to moderate offering.

U.S. steer carcass weights for the week ending July 14 were steady with the previous week and two lb. heavier than the same week last year. U.S. slaughter for the week ending July 28 is estimated to be 3.5 percent larger than a year ago at 640,000 head.

Yearling prices up

Yearling prices continued to strengthen at a faster pace relative to calves and lightweight stockers last week.

Trading $6 per cwt. higher, 850 lb. steers established new annual highs. Last week, 850 lb. basis levels were reported at +$3.35 per cwt. compared to -$2.81 during the same week last year.

Stocker steers that were purchased in the spring, backgrounded and grazed over the summer have break-evens in the mid-$180s per cwt. coming off grass for August-September delivery, based at 900 lb. A lot of the 900 lb. steers for late summer delivery are trading in the mid-$190s per cwt. This would suggest profit margins are around $90 per head positive.

Given positive margins for grass operators, more grass yearlings are being forward contracted this year compared to last year. These forward delivery sales are included in the weekly auction volumes and part of the reason why volumes have been running above year ago.

Numbers have been light, but a few exposed heifers have sold on the cash market. Interest from the cow-calf segment has been non-existent and these exposed heifers are going onto feed.

The forward calf market was lightly tested last week. British Columbia steers based at 525 lb. for October delivery traded at $235.50 per cwt. Last year, 500 600 steers in B.C., for the month of October, averaged $225.72 per cwt.

New crop barley bids have strengthened. September-October barley sales into southern Alberta are being reported at $235 per tonne.

 

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