SWIFT CURRENT, Sask. – Cattle producers ended 2010 on a strong price note, but a leading market specialist predicts a volatile year ahead.
However, Anne Dunford, general manager of the Gateway Livestock Exchange, said volatility isn’t necessarily bad.
There is opportunity in unpredictable markets and producers might be able to take advantage of that.
The year began with fat cattle in the mid $70s per hundredweight. By early December they were at $98.
“What an amazing run,” she said. Calf prices also climbed and significant changes in basis levels saw Canadian and American prices more strongly related.
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Basis levels went from $20 to $25 under the U.S. price to above par at times. Generally it sat in the $5 to $8 range, and Dunford said that alone adds $200 per head to yearlings.
Smaller supply also drove price increases.
Cow numbers continued to decline, and she said producers should watch for signals to keep heifers.
Bred heifer prices are higher, but she questioned whether that will be a strong enough signal.
Although the herd is smaller, beef production remained at a solid 3.5 billion pounds. There will be a delay in the smaller cow herd number showing up in the beef supply.
“I’m going to suggest to you that’s the last hurrah,” she told the Foraging into the Future conference in Swift Current.
“We will not be able to keep production this high going forward.”
The smaller cow herd will also put pressure on feedlots over the next couple of years.
“We’re going to be looking at 3.1 million steers and heifers available for slaughter in 2012,” she said, compared to a more traditional number of 3.5 million.
This means 400,000 calves are “missing” and more will disappear as the cycle plays out.
“Which feedlots are going to have 400,000 head less?” she said. “I don’t know who’s going to go without.”
For several years, until 2009, feeder exports in the fall were strong. But in the fall last year feeder exports dropped and in 2010 they fell further.
Dunford said halting exports sounds like a way to keep Canadian feedlots full, but it isn’t that simple.
American feedlots and packers are also short of supply and will bid strongly to attract cattle.
“There’s most certainly going to be a tug,” Dunford said. “It’s good for producers to be in a supply tug of war. I think the cattle will stay here next year, but I think there will be a strong fight.”
She said cow-calf producers will have to decide if excess feedlot capacity means it is a good time to retain ownership.
“Would I just blindly do it, assuming the markets are going to go straight up? Absolutely not,” she said. “There are more opportunities, but it’s not a flat-out given.”
She projected cattle on feed this winter will be down two percent to 950,000 head and feedlot numbers will continue down through the year.
“I think every month as we go through 2011 is going to be smaller than the previous year.”
Her projections for fed cattle prices, based on a par dollar and basis levels of $7 to $9 under the Texas price, show an up-and-down pattern of $91 per cwt. through the first quarter of 2011, $93 in the second quarter, $89 in the third and $95 in the fourth.
Short supply, narrower basis and increased market access are all good indicators that the industry is rebounding, but Dunford said there are no perfect predictions.
