Beef trade watches corn delays

MOOSE JAW, Sask. — Cattle prices are trending lower as the market watches poor corn planting conditions in the United States and uncertain trade agreements.

As of June 9, only 83 percent of the American corn crop had been planted, well behind the usual pace of 99 percent.

Anne Wasko, president of Cattle Trends Inc., said that leads to questions of how many acres will yield corn, what those yields will be, what will happen to the stocks-to-use ratio and the effect on corn prices.

“The bottom line is as corn goes up, feeder cattle are going to come down,” she told the Saskatchewan Stock Growers Association annual convention.

Last week, the U.S. Department of Agriculture scaled back its corn seeded acres by three million acres and cut its yield forecasts. Analysts expect further acreage cuts in future reports.

Wasko said there is still time to plant if the weather changes.

If that happened it could change market conditions, which have been extremely volatile.

She said the new North American trade deal, talks between the U.S. and China, and issues between China and Canada are creating uncertainty in the market.

“Expect lots of price volatility,” she said.

Producers who didn’t take cattle price insurance earlier this spring may have some regret, depending on how the summer and fall play out, she said.

In January, for example, coverage on finished cattle was between $160 and $170 per hundredweight; prices today are down in the $140s cwt., she said.

Feeder cattle are running at seasonal prices but lower than they were.

“Markets move fast and this is a good reminder,” she said of recent declines.

Feedlot margins are negative and she said they may become worse through the summer.

Flat calf prices through 2018 have moved slightly higher but she expects lower prices heading into the fall run. Price insurance coverage in March was about $220 and dropped off since then.

“I do think the trend is lower in terms of where the calf price is,” she said, adding that those will be impacted by winter feed prices and feed supply.

The cull cow market is tracking similar to last year.

Wasko said one other factor that could throw off the cattle market is African swine fever.

While the disease devastating China’s pork industry represents opportunities for North American producers, it won’t be positive if it makes its way to this continent.

Beef demand remains strong even though supply is up. Wasko said 2018 was a liquidation year with a cow cull rate of 13.8 percent or two percent above the long-term average.

Heifer marketing and slaughter were both up last year and exports were up 77 percent. She said those will be up again this year.

At the same time, more cattle are being processed in Canada. Fed slaughter was up five percent in 2018 and year-to-date is up seven percent. Fed cattle exports are up 54 percent.

“We’ve already marketed 100,000 head more fed cattle in 2019 than we did at this time in 2018,” she said.

The cow herd is smaller but more imports have made the difference.

Profitability on the feedlot side will be hit and miss. Many people bought price insurance and had basis contracts to minimize the losses.

“Unhedged cattle will probably take some pretty big hits,” said Brian Perillat, senior market analyst with Canfax.

This could transition into a softer fall calf market if feedlots are losing $200-$300 a head on fat cattle later this summer.

Cow prices had a good run but this past week dipped partly due to dryness induced marketings. These cows may go on feed or be moved to green pastures but many will end up at the auction market and get slaughtered right away. The rail price earlier this spring was at $180 per cwt. but has slipped to 160 per cwt. as demand for cows wanes. Year-to-date cow slaughter is up six percent.

“With the dryness out there we are certainly not going to see any expansion, ” said Perillat at the Alberta Beef Producers spring meeting.

Canada has about 3.7 million beef cows.

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