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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.

Fed prices drop

COVID-19 volatility continued to plague markets last week, and average fed prices trended sharply $8-$10 per hundredweight lower. The previous week’s large North American slaughter helped restock the beef pipeline, but plummeting cattle futures and U.S. cut-out values were not supportive. The Good Friday holiday may also have contributed to last week’s sluggish buying interest.

Live steer trade was $6-$8 per cwt. lower than last week’s weighted average at $150 per cwt. Dressed trade was generally $17 per cwt. lower than the previous week with most sales reported at $245-$250 per cwt. delivered.

Western Canadian slaughter for the week ending March 28 was three percent smaller than the previous week at 45,335 head, 23 percent above a year ago and year to date has been eight percent larger at 483,422 head.

Western Canadian steer carcass weights for the same week slid sharply 15 pounds lower than the previous week and 13 lb. lower than last year. The cash-to-futures basis strengthened significantly last week and could encourage U.S. buying interest. Ontario packers are comfortably bought and had little interest in pricing fed cattle last week.

Packers have done an admirable job maintaining large harvests through COVID-19 issues, but reduced kills are anticipated. Inconsistent labour resources, declining food service and restaurant demand and overall reduced consumer spending will all contribute to soften beef demand and reduced kill.

On a positive note, market-ready yearling supplies are dwindling and carcass weights are trending below year ago. Significant volumes of market-ready fed calves are not anticipated until late April. Hopefully by then coronavirus will be in retreat and fed prices can move higher on renewed summer grilling demand.

In the U.S., northern live trade was reported from US$11.25-$112 per cwt., $7-$8 per cwt. lower. Scattered dressed sales were around $9-$14 per cwt. lower than the previous week’s Nebraska rail average at $175-$180 per cwt. lower. Steer carcass weights for the week ending March 21 were three lb. lower than the previous week at 898 lb. but were 32 lb. heaver than year ago.

Cows trade stronger

After trending sideways since the start of the year, non-fed prices made a seasonal push higher. Following a $7 per cwt. jump last week, Alberta D2 cow prices traded slightly stronger last week, establishing new annual highs.

D2s averaged $92.80 per cwt. and D3s averaged $79.83. Butcher bulls averaged $116.50 per cwt.

On a cash-to-cash basis, Alberta cow prices have just recently moved to a discount against the United States. This is the first time since July 2016 that cow prices have been at a discount, which could support U.S. buying interest.

With Alberta butcher bull prices averaging in the $116-$117 per cwt. area, prices are at the highest point since July 2018. Last week’s top end sales for butcher bulls were reported in the upper $140s per cwt. It is impressive to consider that top-end butcher bull prices are right in line with fed cattle prices.

Last week, a JBS plant in Pennsylvania said it would be reducing hours due to COVID-19 issues. According to media sources, normal operating hours will not resume until mid-April. This plant does import Canadian non-fed and fed cattle from Eastern Canada. The situation will have to be closely monitored. It does not bode well for eastern Canadian cow prices.

Feeders down

With live and feeder cattle futures locked limit down on April 1 and April 2, softer western Canadian fed prices and higher barley prices have weighed on the feeder cattle market. Additional pressure was noted toward the end of last week as heavier feeders looked another $5+ per cwt. lower. The way things are going, feeder cattle prices could revisit lows posted two weeks ago.

The bright spot of the market continues to be the calf and lightweight stockers as good interest was noted from eastern Canadian and grass buyers. Alberta calf and feeder prices are trading at a discount to the U.S. market, and U.S. buying interest has picked up.

Weekly Canadian feeder cattle exports to the U.S. totalled 5,341 head compared to 10,544 head last year. A few cattle were offered for May delivery but prices and bids were comparable with the spot cash market.

In Alberta and Saskatchewan, auction volumes including electronics for March were down 35 percent compared to last year. The April 1 cattle on feed report for the two provinces will not be released until April 17, but it would not be surprising to see a rather large year-over-year decline in feedlot placements. The same story is also likely in the U.S. Early estimates for the U.S. indicate March placements could be down 10 to 20 percent. If this holds true, this would be the third month in a row of lower placements and would also put U.S. cattle-on-feed inventories below last year.

If you are selling heavyweight feeders, one marketing strategy would be to use a call option on August or October live cattle futures to benefit if the market does rally.

U.S. Choice drops

In U.S. beef trade, the Choice cut-out value retreated steadily last week on reduced food service and retail beef demand. Choice value on April 2 had tumbled from a multi-year high to modestly $6 per cwt. higher than the same week last year, averaging $232.64 per cwt. Select averaged $222.12.

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