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.

Dressed sales up

The seasonal leverage-shift from packer to cattle feeder is taking place, as can be seen in higher prices and stronger basis levels. Dressed sales were reported from $266-$270 per hundredweight delivered, $6-$9 per cwt. higher than the previous week. Most of the cattle being marketed are still spring-placed feeders, but some early fall placed yearlings are entering the mix.

Calves less than 500 pounds saw mixed pricing with steers realigning $2-$4 per cwt. lower than the previous week while similar weight heifers saw prices firm $1-$5 per cwt. higher. Middleweight 500-700 lb. calves saw prices trend generally steady to $2.50 per cwt. stronger on the heavier end. Feeders from 700-900 lb. to place against the summer fed market slipped $1-$3.75 per cwt. lower.

Weekly Alberta auction volumes were seasonally 28 percent lower than the previous week, and year-to-date volumes were two percent below year ago at 1,624,507 head. The U.S. Department of Agriculture reports that Canadian feeder exports to the United States for the week ending Dec. 7 totalled 1,205 head and year to date were five percent lower than last year at 183,019 head.

Alberta slaughter cows firmed up ahead of Christmas as packers topped up holiday and New Year start-up inventory. D2 slaughter cows averaged $86.43 per cwt., up $2.10 per cwt. from the previous week. Dressed cow bids rallied $3 per cwt. higher. Butcher bull prices trended fully steady, averaging $99.63 per cwt. Western Canadian non-fed slaughter for the week ending Dec. 14 eased modestly lower to 10,257 head and year to date were three percent larger, totalling 401,168 head.

Non-fed supplies are expected to tighten in the New Year because of continuing strong trim demand. This might continue through the first quarter of 2020.

Dressed sales in Ontario were reported from $240-$245 per cwt., steady with the previous week. U.S. fed and cow prices are at a discount to the U.S. markets, and there has been a jump in slaughter cattle exports from Eastern Canada to the U.S. Fed slaughter was up seven percent for the week ending Dec. 14.

Canadian beef exports through October were up 12 percent in volume and 20 percent in value when compared to last year. Canada’s tariff advantage over the U.S. will disappear for 2020, and that might put Canadian beef at a competitive risk in that country.

Feeders and stockers

Feeder cattle prices traded unevenly steady for the week ahead of Christmas. Calves lighter than 500 lb. saw a mixed realigning $2-$4 cwt. lower than the previous week, while similar weight heifers saw prices firmer — $1 to $5 higher.

Attractive fed price insurance for the end of May shored up the yearling market and feeders more than 900 lb. These trended fully steady to $3 per cwt. higher.

Alberta weekly auction volumes, reacting to the seasonal trends, were 28 percent lower than the previous week at 28,769 head, but this was 12 percent higher than a year ago. Overall, volumes were two percent lower than a year ago.

The USDA reported that Canadian exports for the week ending Dec. 7 were 1,205 head and year-to-date volumes were five percent lower at 183,019.

Auction sale trade will pick up again in the second week of the New Year. Improved interest in calf buying is expected as feedlot pen conditions get better and previous acquisitions settle into place. Heavier feeder cattle prices are expected to continue lower through the first quarter, in keeping with seasonal patterns.

USDA cattle on feed

American cattle on feed are reported 2.5 percent higher than a year ago, exceeding market expectations prior to the USDA’s December release. This is the largest inventory on feed since 2011. Only twice, in 2007 and 2011, have inventories been higher than 12 million animals since the current reporting began in 1996.

Beef trade

Middle meat buyer interest has been softening, and the American cutout has trended seasonally lower. Choice to Select price spreads narrowed to US$8 per cwt., the lowest level since April. Choice and Select rib fell hard to $38.20 and $12.21, respectively. Loin, brisket, chuck and short plate prices were all down.

Producer profitability

Canadian calf prices have held up well through 2019 despite the uncertainty of weather, feedgrain costs and basis levels. Feedlots have not fared as well, which limited calf prices as the year wore on.

Higher feed costs made the calf crop about six percent more expensive for producers than the previous year, but despite that, calf prices were about three percent lower this past fall than in 2018. The result was lower cow-calf producer margins, falling from about $245 per cow last year to $165 for 2019. The bottom line was a modelled 32 percent drop in producer profit margins where growers weren’t covered by price insurance.

Cow-calf margins were the second lowest out of the past six years and compare well with 2012-13. Despite this being similar to per-head margins ahead of the big run-up in prices, land and breeding stock have gone up substantially since 2013, resulting in lower actual profitability than that period. This may limit expansion of the cow herd in Canada.

Feedlots are recovering as the new year begins, but 2019 average losses per head were C$100-$150. As well, 2018 losses, although lower at about $35, were a far cry from the $175-$250 profits of 2017. Some feedlots have locked in profits for 2020, which may result in some support for improved calf bids this year.

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