Not only has the American injunction against live Canadian cattle imports pushed prices back to where they were before the court action, it’s made them worse.
Analysts and producers are hoping the cattle set-aside program will mitigate some of the damage.
“It was a very frustrating week last week,” said Canfax market analyst Anne Dunford about April 9-15, when the Canadian fed cattle price fell, pushing the Canada-U.S. basis to double the level of just a few months ago.
“We’re all sitting aside saying, ‘now what? Does this (set-aside) program have the ability to change that, or is this what we’re going to have for the rest of the summer?’ “
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During the autumn and early winter, the Alberta cattle price basis to the U.S. market was 20-25 cents per pound under the American price. That narrowed to 17 cents or less per lb. in February and early March, when most people expected the border to reopen. But when a Montana court slapped an injunction on Canadian cattle imports, the basis widened again.
It’s now sitting at about 40 cents per lb., Dunford said.
The recent price drop developed because of typical seasonal production patterns and optimistic expectations a few months ago.
Every year, the largest number of cattle are ready for market in spring and summer. This was not a big problem so long as the border was open.
Canada does not have enough kill capacity for all of its fed cattle, so access to the U.S. market is crucial to sop up the yearly overflow. Too many cattle with too little kill capacity equals poorer prices.
Canadian producers and feedlot operators also put more cattle on feed last autumn and winter in the run-up to the expected opening of the border in March than they would have done if they expected the border to remain closed. Now those cattle are ready for slaughter or will be soon and the border is still closed.
The wide basis has denied Canadian producers the lucrative prices that American producers have
enjoyed.
“It’s widened drastically,” Dunford said.
The fed cattle set-aside program was launched to mitigate the problems of cattle backing up behind the Canadian border, and Dunford said it needs to work now.
Under the program, cattle feeders make bids based on feed costs to take cattle out of the marketing chain for a specified time. weekly auctions select the winning bids.
As more interest in the fed cattle set-aside program develops, the daily average feed cost fell to $1.19 per day last week. There were 106 bidders participating.
Alberta prices April 14 were steers $124.45-$126.45 per hundredweight rail grade with no heifer trade confirmed. Several lots of cattle were passed.
The week before, rail grade steers were $137.50-$130 per cwt.
