This cattle market information is selected from the weekly report from Canfax, a division of the Canadian Cattlemen’s Association. More market information, analysis and statistics are available by becoming a Canfax subscriber by calling 403-275-5110 or at www.canfax.ca.
Fed prices soften
Alberta direct cattle sales saw moderate volume trade last week, and prices continued to seasonally soften on lacklustre February demand. Weighted average steer prices were generally $3.50 per hundredweight lower than the previous week at $151.33 per cwt., and average heifer prices were $150.82.
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Light live trade was reported at $148.75 per cwt., which was $5.31 per cwt. lower than the previous week. The majority of dressed sales were from $252-$254 per cwt. delivered, $4.11 per cwt. lower than the previous week.
Cattle marketed last week were being scheduled for the first and second week of March delivery, and feedlots continued to actively manage weights.
U.S. buyers kicked tires again last week, and bids were supportive. Not all feedlots were motivated sellers last week, and a significant portion of the fed offering will be carried over into this week.
Western Canadian fed slaughter for the week ending Feb. 2 was down one percent from the previous week at 32,537 head and year to date was up 10 percent to 159,486 head.
Canadian fed cattle-slaughter cow exports to the United States for the week ending Jan. 26 were down significantly from the previous week to 8,004 head. Canadian steer carcass weights for the week ending Feb. 2 eased two pounds lower than the previous week to 935 lb. and were 37 lb. heavier than the historic five-year average. Alberta steer carcass weights trended one lb. larger than the previous week.
Sluggish beef movement may continue to slow chain speed through the first half of this month, but market-ready supplies moving forward are expected to tighten on both sides of the border.
Last week’s cash to futures basis was weakest since February 2016, and the cash basis similarly has weakened.
Combined with the softer Canadian dollar and poor weather and feeding performance in the U.S., Canadian fed cattle should look very attractive to U.S. buyers.
In the U.S., supportive cattle futures rallied higher last week and the fed market tone was bullish. Last Friday, light live trade was reported US$1 per cwt. higher than the previous week at $125 per cwt. in the north.
High cow volume
D2 cows traded at C$75-$88 per cwt. last week to average $82. D3 cows ranged from $64-$79 to average $72.83 per cwt. Slaughter bulls averaged $91.43, down $3.65 per cwt.
The volume of cows entering the slaughter mix in Western Canada continues to be very large and much bigger than expected. Most of the cows being marketed are coming out of feedlots.
A larger percentage of these cows were bought in late fall and early winter and have been on feed for 45 to 90 days. Weakness in the Alberta cow market and a sizable jump in the U.S. utility cow price saw the Alberta premium go from +$15 per cwt. to +$3 per cwt. two weeks ago.
The Canadian bull market continues to be hugely export driven. In terms of total marketings, 68 percent of Canadian bulls have been exported to the U.S. Feedlot inventories of cows should be declining quickly, and volumes through commercial auction facilities have been light.
Seasonally there is still more upside to the cow market. First half of the year highs are still ahead.
Cold affects auctions
With record-breaking temperatures across parts of the Prairies, some auction sales were cancelled while other commercial auction facilities that did run saw light volumes and softer prices. With the recent pullback on the fed market, a lot of the fed cattle being marketed right now are seeing losses of around $200 per head.
Feedlots are now faced with the challenge of restocking pens, and a lot of the feeders being purchased are being bought $100 per head offside. In other words, feedlots are selling a loser and buying another money loser. This does pose some risk moving forward.
January highs of $188.19 per cwt. remain firmly intact because 800-900 lb. steer prices have dropped $7 per cwt. In four of the past six years, 800-900 lb. feeders have established first quarter highs during January. Over those four years, the average decline from their January high to first quarter low stands at 10 percent. Using this historical decline, this would suggest 850 lb. steers have price risk to the $170 per cwt. area.
In three out of the past four years that January highs occurred, first quarter lows occurred in March, while in 2017 lows occurred during the end of February. On a cash to cash basis, Alberta 850 lb. steer prices are still at a $5 per cwt. premium to the U.S. market.
Heavier weight feeders do face a price risk heading into spring, but a 10 percent decline from the first quarter high to low is not necessarily being priced into the market because forward delivery sales for March and April delivery remain comparable with the cash market. Basis levels are stronger than the five-year historic average.
Choice, AAA firm up
In beef trade, the U.S. Choice cutout firmed US$1.32 per cwt. higher than the previous week to average $216.71, while Select eased $1.35 lower to average $211.53.
Boxed beef movement was down 13 percent from the previous week and is expected to remain sluggish this week. Market ready fed cattle supplies should seasonally begin to tighten in the north, and fed prices are expected to firm higher.
Canadian cut-out values for the week ending Feb. 1 saw AAA and AA firming over C$2.50 per cwt. higher than the previous week.
