U.S. weather will be the biggest factor affecting Canadian calf prices this fall.
Sandy Russell, a livestock economist with Saskatchewan Agriculture, told Prairie Farm Rehabilitation Administration employees attending a Saskatoon livestock conference last week that the current trend is for prices to continue improving slightly from the October price of $108.66 per hundredweight for 750 pound feeders.
However, she said this will happen only if North American corn and barley plantings remain at record or near record levels and the weather doesn’t interfere with yields.
As much as 25 centimetres of rain in the Midwest two weeks ago delayed corn seeding, leaving it lagging the five year average by 10 percent.
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Darrell Mark of the University of Nebraska said the coming two weeks should give cattle producers an indication of what fall calf prices will do based on seeded corn acreage.
“Cattle feeding is a margin business and feed cost is passed on to the cow- calf producer,” he said.
The U.S. Department of Agriculture reported that 53 percent of the corn crop was in the ground May 6.
“Sounds pretty good, but that means there is still 40 million acres left to seed. The weather is a big player and it’s only May,” Mark said.
U.S. agricultural economists estimate that fall calf prices will remain strong if corn plantings are above 85 million acres.
Should grain producers shift acres to soybeans because of later seeding dates or other short season grains because of spring flooding, then fall calf prices could take a tumble as corn begins to rise.
Mark said once corn is seeded, the new hybrids yield well even if drought or disease occurs.
Corn prices slid nearly 30 cents per bushel last week despite the excessive moisture in the U.S. corn belt.
“Either the market is failing to take into account the wet weather or it has confidence in grain growers’ ability to deliver on their 12 to 13 billion bu. (corn yield based on their stated planting intentions of 90 million acres),” he said.
Mark said a recent study shows low cost, feed efficient distillers grain is saving Kansas and Nebraska cattle feeders $17 to $44 Cdn per head.
“Those feeders will be able to pay more for calves this fall. They will be bidding higher on their ability to pay and that too will support fall calf prices,” he said.
Russell said the $13 basis on prairie feeder cattle could shift due to a rise in the Canadian dollar, putting negative pressure on the market.
She said the factors that drive cattle market prices are all subject to change this year and most of that change would be bad news for fall prices.
It won’t be the first time that U.S. weather has affected cattle prices this year.
Spring fed cattle prices were held higher by winter blizzards and below normal temperatures that reduced daily gains and caused animal deaths in Colorado and Wyoming.
Russell said these problems delayed marketing and compounded other producer problems in the American cattle belt.
“The drought has kept American producers from expanding their herds,” she said.
“This should be ending with improved pasture conditions. Producers down there have a lot of cash on hand (following the turn of the last cattle cycle). They will likely be moving into herd expansion after a bit of a delay.”
Mark said the expected increase in the cow herd hasn’t happened yet. High corn prices and lingering fears of summer drought, despite much improved western pasture conditions this spring, are likely culprits for the lack of herd expansion.
As a result, the spring calf crop is flat compared to the last few seasons, which were down from what would have been expected after several years of profit taking in the cow-calf sector.
As well, supplies of fall calves in American markets will likely be tight again this year.
