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 higher in east

Western Canadian fed prices traded fully steady but last week was somewhat disappointing given higher prices were noted in both Eastern Canada and the United States.

It marked the fifth week in a row that fed prices averaged in the $133-$134 per hundredweight area. Last week dressed sales ranged from $225-$230 per cwt. delivered. Higher prices were noted for late August/early September delivery versus cattle trading for immediate pick up.

Feedlot losses are still big and selling motivation was limited. Last week some cash cattle were reallocated to meet contract obligations. Some cattle were marketed on the grid while others opted to carry cattle into this week.

After trading at a premium to the U.S. market for the past four weeks, Alberta fed prices moved back to a discount. Alberta fed cash-to-futures basis was reported at -$1.80 compared to the five-year weekly average of +53 cents per cwt.

In Ontario, most of the dressed sales were reported from the mid $240s per cwt. delivered, steady to $5 per cwt. higher than the previous week. The lion’s share of the cattle are to be picked up in one to two weeks.

Western Canada fed prices are at a large enough discount to Eastern Canada that fed cattle from Saskatchewan and possibly Alberta could start going east again. Eastern Canadian steer carcass weights jumped 18 pounds to average 926 lb., which is 16 lb. larger than last year.

Western Canada seems to be ahead of the U.S. in terms of drawing down backlog inventories. Western Canadian fed slaughter has been higher than last year in eight out of the past 10 weeks, whereas U.S. fed slaughter has been below last year for the past two months.

In addition, western Canadian steer carcass weights are below last year, while U.S. carcass weights continue to set new record highs for the summer.

In the U.S., dressed sales in the north ranged from US$162-$163 per cwt. and live sales were reported from $102-$103 per cwt. Dressed sales were $3-$4 per cwt. higher than the previous week, while live sales were $2-$3 per cwt. stronger.

Good cow demand

The market volumes of non-fed animals continue to be quite light in most areas. Good demand supported higher prices again for D2 cows and butcher bulls. D2s averaged C$88.90 per cwt. and D3s averaged $79.21 per cwt. last week. Butcher bulls averaged $120.63.

Cow prices pushed into the mid-90s per cwt. and prices averaged just below a year ago. Smaller local packers supported the cow market last week and there was also some interest for feeder cows noted.

Grass conditions have been good in most of Western Canada this year and although some areas have been hit with heat and dryness, heavier runs of cull cows will still likely be a few weeks away.

Good demand for grinding beef and a modest number of cull cows should support cull cow prices at these levels through August.

Light feeder offering

There was a fairly light run of feeders at auction marts last week. About half of the total weekly sale volumes were sold electronically. Sales moved seasonally with most lighter calf categories under pressure last week. Heavier weight feeder cattle prices were relatively strong.

Calf prices are on either side of steady with a year ago, while the yearling market is mainly below last year. It is interesting to note that 900+ lb. feeder prices were mostly flat when comparing spot market prices and September delivery prices.

In the last couple of years, there was a slight premium for October delivery grass cattle. This year prices are barely steady.

Alberta feeders continue to have a slim premium to the U.S. market and Ontario buyers continue to support the Western Canadian feeder market. Although calf prices have a slight premium to the U.S. market, it has declined significantly from the recent $15 per cwt. premium local prices had previously enjoyed.

Ongoing feedlot losses may limit upside potential in the feeder market. Expectations are for larger grass cattle to come to market this year as well.

With harvest now starting in some areas, it may add some supplies to the local grain market but Canadian feed costs will be primarily driven off the U.S. corn market, which remains relatively weak.

While calf supplies and quality remain highly variable, calf prices will likely continue to be pressured. Feeder prices could continue to see modest seasonal support.

Choice cut-out rises

In U.S. beef trade, Choice cutouts were US$2.86 per cwt. higher last week and Select strengthened by 51 cents per cwt. Even though Choice cut-out values are $12 per cwt. lower than last year, prices are in line with values seen in 2017 and 2018.

Last week cut-out values rode the wave of strong demand for middle cuts as retailers were in the midst of booking their Labour Day long weekend needs.

The Choice cut-out lows are not necessarily past. In four out of the past six years, they have established third quarter lows in September. According to the NPD Group, for the week ending July 26, customer transactions at major U.S. restaurants were down 11 percent compared to last year.

More positive news is being reported on the export front as cheaper cut-out values and weakness in the U.S. dollar have been supportive.

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