Canfax report

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Dressed prices steady

Active cash trade developed last week with dressed prices trending steady with the previous week’s rail average at $238 per hundredweight delivered. Live sales were reported in the low $140s per cwt. and U.S. dressed bids of US$187.50 per cwt. offered a modest premium to the local market.

Fed steers averaged $142.36 per cwt., up 59 cents from the previous week and fed heifers averaged $142.60, up 54 cents.

A significant volume of cattle were traded to the United States last week but limited truck availability during the peak fall calf run discouraged some producers form marketing cattle south.

Last week’s cash to futures basis weakened to -$5.83 per cwt. and seasonally could continue to soften. Canadian fed cattle slaughter for the week ending Oct. 26 surged 10 percent higher than the previous week to 55,111 head and year to date was six percent larger totaling 2,193,395 head.

Canadian steer carcass weights for the same week were one pound larger than year ago. Canadian fed cattle/slaughter cow exports to the U.S. for the week ending Oct. 19 were smaller than the previous week to 9,071 head. Moderate Ontario trade saw dressed prices generally steady with the previous week from $234-$236 per cwt. delivered. Market ready supplies remain backlogged as the prolonged Ryding-Regency shutdown continues and some long fed cattle were marketed to Western Canada this week.

Packers across the country have ample inventory and limited cash market upside is anticipated for this week. A moderate volume of November contract cattle is also available. Good holiday beef demand and great profit margins should continue to support a large kill this week and the cash market is anticipated generally steady. Ontario packers are adding weekend shifts but prices are expected to soften until supplies tighten.

In the U.S., light live trade was reported mostly at US$112 per cwt., $2 per cwt. higher than the previous week in the south. Late last week live bids were reported $4 per cwt. higher than the previous week at $115 per cwt and were being passed. Late week dressed trade in the north developed at $180 per cwt. delivered and was generally $5 per cwt. higher than the previous week.

Big beef cow slaughter volumes are being noted south of the border, with the largest weekly slaughter since 2013. Slaughter volumes in Canada remain moderate for this time of year.

For the week ending Oct. 26, cow slaughter in Western and Eastern Canada was down five percent and 20 percent respectively compared to last year. D2 cows averaged C$85.17 and D3s averaged $75.50 per cwt. Slaughter bulls averaged $101.41.

Butcher cow prices in Western Canada have traded sideways over the past two months, averaging on either side of $85 per cwt. Last week Alberta D2 cow prices were at a $14 per cwt. premium over the U.S. utility cow market, the fourth largest premium this year. In addition, Alberta prices are also sitting at a $25 per cwt. premium to the Ontario market. Even though the Western Canadian cow market has held together quite well, larger supplies are still ahead and second half lows have yet to be established. On a monthly basis, in six out of the past 10 years second half lows have occurred in November.

Auction volumes peak

The four western provinces all saw their largest weekly auction volumes of the year last week. In Alberta, 197,500 head have traded through commercial auction facilities over the past two weeks, 36,500 head more than last year.

Larger volumes and softer Eastern Canadian demand compared to the first half of October have pressured calf and feeder values. Alberta 550-650 lb. calf prices have slipped around $4 per cwt. over the past two weeks but are still trading $5 per cwt. higher than their September lows.

Last week on a cash to cash basis, Alberta calf prices were trading at an $18 per cwt. premium to the U.S. market, the largest premium since October 2017. Not surprising with calf and feeder prices at a premium to the U.S., Canadian feeder exports volumes have slowed. For the week ending Oct. 19, Canadian feeder exports to the U.S. totaled 1,837 head, 50 percent lower than last year and 58 percent lower than the five-year average.

Over the past few weeks there have been a few 800-899 lb. steers offered for January delivery with prices ranging from $186-$192 per cwt. Using monthly price data, the average price decline for a 800-900 lb. steer from the second half of the year highs to January stands at seven percent. Assuming monthly highs have been established during October at $195 per cwt., using an historical decline of seven percent, this would put January 850 lb. feeder prices on track to average in the low $180s per cwt.

Based on the few forward delivery sales for January, the market might be pricing in roughly a two to five percent decline from the second half highs. Calf prices for December delivery are pricing in a slight premium relative to the spot market.

With live cattle futures trading at the highest point since April, this should add some stability to the calf market. Auction volumes have peaked and will moderate into November. In some areas, feedlot space and trucks are still an issue.

U.S. beef price surges

U.S. cutout values surged for the fourth straight week with Choice up US$6.56, to average $232.18 and Select up $7.40 per cwt. to average $206.49.

Canadian cutout values for the week ending Oct. 25 saw AAA steady at $276 per cwt. and AA up $7.23 per cwt. at $252. The AAA/Choice spread weakened from -$9 per cwt. to -$15 per cwt. The AA/Select spread was steady at -$7 per cwt.

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