Canfax report

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.

Feds sent south

Active Alberta cash trade was reported last week, and average prices surged over $4 per hundredweight higher than the previous week. Fed steers averaged $147.13 per cwt., and heifers averaged $145.72. Most sales were dressed from $243-$243.50 per cwt. delivered, $3-$3.50 per cwt. higher than the previous week.

Tight market-ready supplies have been reported in the northern United States, and U.S. buyers scooped up a large portion of last week’s cash offering for the following week’s delivery at a significant premium to local bids. The Alberta cash-to-futures basis strengthened last week but seasonally is weaker than the five-year average at -$9.86 per cwt.

Eastern fed prices trended sideways last week at $235-$236 per cwt. delivered. Ample supplies continue to build larger in Ontario, and it is increasingly likely that the Ryding-Regency plant will not open any time soon.

For the week ending Nov. 9, one major Alberta packer was dark on Friday, and western Canadian fed cattle slaughter was reported 12 percent smaller than the previous week at 35,628 head. Year to date, western slaughter was six percent larger, totalling 1,804,975 head. Canadian steer carcass weights for the same week were steady with the previous week at 940 pounds, but were 15 lb. larger than year ago. Canadian fed cattle/slaughter cow exports to the U.S. for the week ending Nov. 2 were smaller than the previous week at 9,660 head.

Feedlot supplies should continue to seasonally tighten, and local fed cattle heading south of the border have enhanced the fed market tone. Local packer inventories, however, remain ample, and a significant leverage shift is not anticipated until December.

In the U.S., light live trade in the south was at US$115 per cwt., steady to $1 per cwt. higher than the previous week. Live trade in the north trended fully steady to $1 per cwt. higher than the previous week at $115-$116 per cwt., and dressed sales were steady at $2.50 per cwt. higher than the previous week.

New low for cows

Seasonal pressure on the non-fed market is being observed because supply is outpacing demand. Trading C$4-$4.75 per cwt. lower last week, butcher cow prices established new annual lows. D2s averaged $80, and D3s averaged $69.21 per cwt. Slaughter bulls were also down, averaging $97.22 per cwt.

Western Canadian cow slaughter for the week ending Nov. 9 totalled 8,038 head, 19 percent lower than last year. Over the past four weeks cow slaughter has averaged 1,175 head smaller than last year.

Speculative buying interest has been noted on the non-fed market because cows are entering feedlots. The price difference between Alberta and Ontario D2 cows is about $24 per cwt. There is also a change as cows from Eastern Canada are being shipped west to be put on feed. Given the strength of the 90 percent trim market in the U.S., this should be price supportive to the North American non-fed market. Non-fed prices are likely nearing a low.

Light feeders strong

In the calf market last week, the most strength was noted on 400-500 lb. animals, while heavier calves weighing 550-750 lb. trended generally sideways. Last week the 850 lb. steer cash to futures basis level weakened from -76 cents to -$2.69 per cwt., the weakest point since late July.

Assuming the purchase of a 650 lb. steer at $205 per cwt. and taking this steer to finish with an out weight of 1,450 lb. for the July fed market with a $1.05 cost of gain, the break-even price on this steer is $150 per cwt. Based off last Friday’s August live cattle contract and using the five-year average fed basis for July of +$2.33 per cwt., these steers are being purchased with a small profit.

Fed basis contracts being offered by western Canadian packers are not sounding that strong into summer. By the time freight and grading are taken into account, the break-even basis on these steers is around zero. In other words, if packers are offering a basis weaker than zero for July, these steers are being purchased offside.

There have been some long-weaned calves (45 days+) on the market and premiums are being paid. These calves are trading at roughly a $3-$5 per cwt. premium over similar weight/quality fresh weaned calves. Calves that have been weaned for less than 30 days are not seeing a premium relative to fresh weaned calves.

Canadian feeder exports to the U.S. totalled 1,704 head, the eighth consecutive week that feeder exports have been below last year.

Barley prices for April to June 2020 delivery have been reported up to $240 per tonne delivered into southern Alberta. Over the past five years the average increase in barley prices from second half of the year lows to first half of the year high stands at 24 percent. From their fall lows, using a price of $205 per tonne, and using a historical increase of 24 percent, this would put second half 2020 barley highs in the mid $250 per tonne area.

In U.S. beef trade, the cut-out value continued to strengthen but at a slower pace than the previous week. Choice and Select were up $2.77 and $2.82 per cwt., respectively, to average $241.06 and $215.84.

Canadian cut-out values for the week ending Nov. 9 saw AAA and AA up $3.53 and $4.49 per cwt., respectively, to $284.81 and $260.42 per cwt. The AAA value is $16 per cwt. higher than last year, while AA is $4 higher.

With large price increases in the U.S., the AAA/Choice spread weakened from -$22 per cwt. to -$28 per cwt., and the AA/Select spread went from -$13 per cwt. to -$18.

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