WHITEWOOD, Sask. — Everybody in the cattle sector has had a turn at good prices now that packers are enjoying strong margins, said a cattle market analyst.
But that will likely do little to ease producer feelings, he added.
“They (producers) have taken the brunt of this market correction,” said Canfax analyst Brian Perillat after addressing the Saskatchewan Cattlemen’s Association district meeting here Oct. 26.
“After enjoying big profits, and expecting reasonable profits, to suddenly potentially be losing a little bit of money, that’s pretty hard to swallow.”
Read Also
Beef check-off collection system aligns across the country
A single and aligned check-off collection system based on where producers live makes the system equal said Chad Ross, Saskatchewan Cattle Association chair.
Packers are slaughtering large numbers compared to recent years, he said. A year ago, the two largest plants were operating at 70 to 75 percent of capacity and the industry was concerned that one or both wouldn’t survive.
Now, slaughter is at a five-year high, plants are running at their 63,000-head weekly capacity and another plant could be coming on stream at Balzac, Alta.
“We are seeing the demand for fed cattle pick up,” Perillat said.
Fed prices went up a bit in October and if the Canadian dollar continues to show weakness, that could be positive for calf prices. Calves were up five to 10 cents a pound leading up to the meeting.
But Perillat said bigger improvement is needed. The feedlot sector that did so well during the run of exceptional prices has been hurting for the last year with losses of at least $600 per head.
“A lot of the money they made through the run, they’ve lost it all,” he said. “With this correction in calf prices, feedlots are starting to be able to buy cattle that have much lower break-evens, but they’re still sort of gambling. The market’s pointed lower than some of these break-events, so they’re taking a bit of a chance, but not nearly the risk they were facing a year ago, so it’s starting to re-align.”
Asked if packers were worried about supply after the closure of Western Feedlots, Perillat said there seems to be enough other capacity. And, after the closure, some feedlots began importing calves from the United States.
“That’s the exact opposite of what we thought would happen.”
Perillat said that indicates the Canadian industry is competitive enough to import, due to the feed cost advantage and current basis levels.
Basis is even to the U.S. now and that supports prices.
He said feedlots are trying to manage their margins and if American calves are cheaper, they will bring them in.
Meanwhile, cow-calf producers are disappointed that prices have dropped so much.
“We didn’t think $3.30 was sustainable but we didn’t think we’d drop in half this fast,” Perillat said.
He describes recent price in-creases as bounces, rather than trends, and said the markets are so volatile that producers need to watch.
“In this kind of market, take that,” he said of a 20-cent price climb, for example. “Don’t fight it. Maybe $1.60 didn’t look good but $1.75 is a good sell opportunity.”
