Canfax report

Prices drop again

Alberta direct cattle sales saw light to moderate volume trade last week, and weighted average prices slipped $5 and $4 per hundredweight lower than the previous week for steers and heifers, respectively. Steers averaged $143.65 and heifers $141.73 per cwt. With a short trading week due to the Good Friday holiday, buying interest was lacklustre.

Cattle futures firmed higher last week, but U.S. cut-out values slid $10 per cwt. lower on reduced food service demand during COVID-19 isolation. A handful of live trade was reported $6 per cwt. lower at $144 per cwt. f.o.b. the lot. Dressed sales were generally $6-$8 per cwt. lower than the previous week with trade reported from $238-$243 per cwt. delivered.

Western Canadian fed slaughter for the week ending April 4 was eight percent lower than the previous week at 41,855 head and year to date was eight percent larger at 525,277 head. Following a significant previous week decline, Canadian steer carcass weights rebounded 10 pounds larger but compared with the same week last year are nine lb. lower.

The U.S. Department of Agriculture reports that Canadian-fed cattle-cow exports to the United States for the week ending March 28 were 10 percent larger than the previous week at 12,258 head and year to date totalled seven percent larger at 133,351 head. Last week’s cash to cash basis strengthened to around -$3.70 per cwt. but remains seasonally weak.

Reduced shifts and temporary plant closures in the U.S. during the pandemic will slow chain speed and significantly reduce production. The Canadian packing sector is following suit to counter reduced beef demand, and reduced weekly slaughter will be noted this week.

Dwindling market ready supplies will continue supportive but feedlot managers will relinquish leverage if reduced slaughter continues and fed supplies trend less current.

The U.S. market reported a softer tone last week. Processing plant slowdowns and closures significantly dropped the U.S. cattle slaughter, and fed prices were down $5-$7 per cwt. on a live basis across the U.S.

As of April 9, dressed trade in the north was too light to establish a trend. Weekly slaughter as of that day was 50,000 below the previous week. U.S cow prices were also under pressure with the slower packing capacity and additional dairy cows on the market.

Non-fed pressure

The non-fed market was under pressure last week as harvest rates slowed. The western Canadian cow kill was 5,966 last week, down 29 percent from the previous week and by far the smallest kill of the year.

Beef cow volumes continue to be modest through auction marts, but there has been a surge in dairy cows given the troubles in the milk processing industry. D2 cow prices were down by more than $5 per cwt., averaging $87.63, and have moved back below last year after spending most of the year above a year ago. D3s averaged $76.92.

Rail prices were down about $15 per cwt. week over week. After seeing some U.S. interest on the cow market, U.S. prices dropped significantly and that has reduced competition. The eastern Canadian cow market is also seeing a flush of dairy cows and has been hit with the idling of the JBS slaughter plant in Souderton, Pennsylvania, which was a major cow buyer.

While demand for lean trim remains strong, the cow market could struggle to hold steady this week given precarious market conditions.

Roller-coaster futures

Feeder prices saw some pressure last week and it was mixed for calves. The futures markets had some big up days last week, and that seemed to support calf and feeder prices at the time. Volumes at auction continue to be modest.

Canfax weekly average calf and feeder prices are calculated from Thursday to Wednesday, and part of the reason for some of the larger week over week declines are a result of the weak market last Thursday and Friday, April 2-3.

On the strongest markets early last week, calf prices had recovered and were fully steady with early the previous week. The volatility is certainly playing into the feeder and calf prices over the course of the week.

Despite stronger futures and the drop in feeder prices, feedlots continue to speculate and buy feeder cattle at a loss. This is a limiting factor for feeder cattle demand. Ontario interest was noted on the market last week, and some of the strongest calf prices were in Manitoba.

Fed prices continue to soften, and feedlot losses have been growing. With the futures market continuing to be under pressure, the feeder market will likely struggle. The Canadian dollar has increased three cents from its low and barley prices continue to creep up, which will further dampen feeder demand. The spread between heavy feeders and grass cattle will likely continue to widen this week.

Cutouts dive

In U.S. beef trade, cut-out values slid more than US$10 per cwt. lower on overall sluggish demand. Choice averaged $222.34 per cwt. and Select averaged $211.77. This year’s Choice cut-out annual high occurred following the retail beef-buying blitz in late March. On April 8, after market close, the Choice value was 14 percent ($35 per cwt.) lower than the recent annual high.

Cut-out values should seasonally be seeing improved demand and prices typically should be strengthening, but the highs are behind us. Reduced slaughter is expected to continue through most of the pandemic, which could support boxed beef prices.

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