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 price strengthens

Alberta direct cattle sales saw moderate volume cash trade last week with prices strengthening.

After five weeks of trade in a tight $132-$134 per hundredweight trading range, weighted average steer and heifer prices rallied $2.81 per cwt. and $1.93 per cwt. higher than the previous week.

Dressed sales last week were $3-$4.50 per cwt. higher than two weeks ago from $228-$232 per cwt. delivered. The Alberta cash-to-futures basis weakened from -1.80 two weeks ago to -4 per cwt.

Western Canadian fed slaughter for the week ending Aug. 8 was one percent smaller than the previous week at 44,962 head but for a third week was larger than year ago. Weekly western Canadian fed slaughter has trended larger than the five-year average for the past 12 weeks. Year-to-date western Canadian fed slaughter was down four percent from year ago, totalling 1,183,752 head.

Canadian steer carcass weights were reported to be 10 pounds larger than the previous week at 904 lb., which is three lb. smaller than the same week last year.

For the week ending Aug. 1, United States Department of Agriculture reports Canadian fed cattle/cow exports were 11 percent lower than the previous week at 6,524 head and 34 percent larger than year ago. Fed trade in Ontario continued fully steady with the previous week at $245 per cwt. delivered.

Ample market-ready supplies and larger carcass weights will be antagonistic in the near future and price upside is limited. Over the past 10 years, monthly average steer prices saw a $2.50 per cwt. price decline from August through September and a $4 per cwt. decline during the past five years. Beef demand and value should seasonally begin to soften and fed prices are expected to ease lower with second half lows expected in September.

In the U.S., the fed market has a stronger tone last week. The south gained on the north with live prices up about US$4 per cwt., with a top of $105 per cwt. In the North, dressed trade was up to $168 per cwt., about $4.75 per cwt. above the previous week. There was a stronger tone across the entire complex as the futures moved higher and August live cattle futures hit the highest point since February.

Last week’s kill was estimated at 640,000 head, 13,000 below last year.

Cow prices stalled

Alberta D2 cow prices have traded sideways for the past six weeks, averaging in the upper $80s per cwt. Last week D2s averaged $89.50 and D3s averaged $79.29 per cwt. Slaughter bulls averaged $120.15. Western Canadian weekly slaughter volumes in the past six weeks have ranged from 4,100 to 5,100 head since June.

In terms of cow volumes, August has traditionally been referred to as the calm before the storm. This year is shaping up to be a different story. Non-fed volumes are expected to stay manageable in September and potentially through the fall. Many producers have culled fairly hard over the past couple years and ample feedstocks should encourage producers to keep cows in their herds.

In Ontario, cow prices strengthened $4.25 per cwt. Dry pockets are being reported in parts of Manitoba. If culling occurs in these areas, cow slaughter will likely increase in Ontario and/or Manitoba.

Even with larger cow slaughter volumes in the U.S., cow prices have strengthened. The uptick in beef cow slaughter has been offset by reduced dairy cow slaughter. Alberta D2 cow prices are trading at a $2 per cwt. discount against the U.S. utility cow market.

Grass cattle at premium

Volumes have been light through commercial auction facilities but we are only a couple weeks away from the yearling run getting underway. Despite smaller volumes, there was a good mix of grass cattle and feeders coming out of background lots at auction last week. Grass cattle were trading at a $5-$10 per cwt. premium over cattle that have been dry lotted.

Alberta steers weighing from 700-800 lb. saw the largest week-over-week price increase and set new annual highs. Same weight heifers strengthened $4.50 per cwt. and are trading within 50 cents per cwt. of their high set back in June.

Alberta 850 lb. steer cash-to-futures basis levels strengthened last week, going from -8.64 to -5.31 per cwt., the weakest basis for mid August since 2015.

Last week there was lots of activity noted on electronic markets with yearlings selling for both immediate and forward delivery. Alberta-Saskatchewan steers coming off grass at 950-1,035 lb. for August delivery saw a weighted average price of $175.20 per cwt. based at 998 lb. Yearlings for September delivery saw a weighted average price of $179.43 per cwt. based at 992 lb.

From a feedlot perspective, the break even on these cattle is in the low $150s per cwt. Targeting the January/February fed market, these cattle need about a zero to +$1 per cwt. fed basis to break even.

With softer barley prices and given February and April 2021 live cattle futures are US$5 per cwt. higher than last year, this has been supportive to the yearling market. In four out of the past seven years 900+lb. feeder prices established second half highs in mid-August to mid-September.

Volumes have been light but there are still a few cow-calf pairs trading and in Alberta the average prices are $1,930 per head. Very few if any pairs are being split.

US cutouts rally

In U.S. beef trade, cut-out values saw a nice buying rally last week with Choice firming US$6.25 per cwt. higher than the previous week, to average $210.95. Select was almost $5.50 per cwt. higher, averaging $197.41 per cwt.

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