Fed market falls
Hopes that the summer market had bottomed out proved wrong as packers found it easy to pay less for ample market-ready cattle.
A heat wave over much of the United States likely reduced beef demand for a few days.
The cattle futures market continued to fall.
In Canada, the Canfax fed steer weighted average was $144.94 per hundredweight, down $2.87, and heifers were $143.22, down $3.02.
Alberta dressed sales were $240-$245 cwt. delivered, down $5.
Prices were discounted for deferred delivery.
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Alberta fed marketings during the previous two weeks were larger than a year ago, reflecting negative feeding margins and the premium of the cash market over the futures market.
The Alberta cash to futures basis was at a seasonally strong +$2.59 per cwt.
Weekly western Canadian slaughter to July 16 fell five percent to 34,490 head.
Weekly exports to July 9 fell to 3,505 head because of the four day holiday week.
Exports are 159,239 head for the year, up 44 percent.
The market could remain on defence because supplies are adequate, beef demand is slow through summer and carcass weights traditionally begin to rise.
Live cattle in the southern U.S. fell US$2 to $115 last week, while dressed prices in the northern U.S. eroded, winding up $4-$6 lower.
Cow prices rally
Butcher cows rallied C$7-$8 per cwt. over the last three weeks, and slaughter bulls rebounded $5.
Cow slaughter volumes are seasonally large.
A few more cows might be on the market during August, but supplies should be manageable.
D1, D2 cows ranged $92-$105 last week to average $98.69, up $4.09. D3 cows ranged $80-$94.
Rail grade cows ranged $184-$189.
Feedlots squeezed
Pasture conditions have improved since spring.
Things did not look so good in early spring, and many producers said they had cut back stocking rates.
A few grass buyers are now back in the feeder market looking to top up inventories.
There has been particular interest in leaner 700-850 pound steers and heifers.
The few yearlings trading on the cash market appear two to four weeks ahead of schedule and are still being sold/based at similar weights compared to last year.
Feedlots would normally be less willing to bet on the market because of the financial losses of the past few months, but feedlots continue to place cattle even with negative feeding margins.
Placing a 950 lb. steer in a feedlot today would generate a loss of about $90 a head by the time it was finished in December, based on today’s futures market prices and assuming a steady Canadian dollar.
The December futures would have to rally five percent to break even.
Such a rally is not unthinkable. From 2010-14, the rally in the December contract from the second half lows to highs was about eight percent on average.
Of course, currency and basis risk must be considered.
U.S cattle on feed
Early placements in previous months and good pasture conditions are now resulting in fewer than expected cattle going into U.S. feedlots.
The U.S. Department of Agriculture said feedlots in June placed 1.525 million head, up three percent from 1.481 million last year. Analysts on average forecast an increase of 6.4 percent to 1.576 million.
The feedlot cattle supply as of July 1 was 10.356 million head, up one percent from 10.236 million a year ago. Analysts, on average, had forecast an increase of 1.6 percent.
Beef down
U.S. boxed beef prices fell with Choice at US$200.70 per cwt., down $4.30, and Select at $189.82, down $3.24.
Compared to last year, Choice is down $32 per cwt., or 14 percent, and Select is down $38, or 17 percent.
Weekly Canadian cutouts to July 9 saw AAA at C$276.39, down $3.85, and AA at 251.94, down $7.
The AAA-AA spread was historically wide at $32 in late June and has since narrowed to $21 in mid-July.
Red meat prices in Canada were down In June from a year ago with beef down 3.3 percent, pork down 2.3 percent and chicken up .8 percent.
