Canfax report

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 drop

Last week was the first time this year that fed cattle prices have been below year-ago levels. From their January highs, fed prices have already dropped 10 percent. Even though the first quarter of this year is not complete, 2020 is now tied with 2006 for being the largest first quarter price drop in 15 years.

However, average prices for fed steers and heifers were unchanged from the previous week, at $147.57 and $146.52 per hundredweight, respectively.

With lower fed prices and negative feeding margins, many producers are only selling what they need to in order to keep weights under control. Some February cash cattle are being pushed into March in hopes of a spring price rally.

Light to moderate trade took place last week with dressed sales ranging from $246-$248 per cwt. delivered, $7 lower than the bids and sales seen the previous week. All three western Canadian packers bought cattle last week. Two packers were buying cattle for the middle of March delivery while the other was buying for the first half of April delivery. There have also been a few reports that packers are behind schedule lifting cattle by one to two weeks.

The Alberta fed cash-to-futures basis was reported at -$4.36 per cwt., in line with the five-year weekly average of -$4.51 per cwt. Last week, sales in Ontario ranged from $245-$251 per cwt. delivered, which was $3-$6 per cwt. lower than the previous week.

In the outlook, fed cattle supplies are being worked through in a timely manner. Year-to-date, Canadian fed slaughter is three percent larger than last year, while the U.S. Department of Agriculture says imports of Canadian fed cattle are up 5.5 percent from last year. Alberta fed basis levels historically strengthen from February to March. Global markets remain on edge as coronavirus continues to spread, and volatility will remain high.

In the United States, trade was scattered last week. Dressed sales in the north ranged from US$183-$187 per cwt., which was $3-$7 lower than the previous week. Live sales were reported at mostly $115 per cwt., which was $5 softer.

For the week ending Feb. 15, U.S. fed slaughter totalled 488,783 head. For the middle of February, it was the largest slaughter since 2011.

Bull price jumps

The non-fed market is one of the few bright spots in the current cattle complex. Cull cows and bulls are seeing good demand on limited supplies, which supported steady to higher prices last week.

D2 cows averaged C$87.17 per cwt. and D3s averaged $75.50. The slaughter bull average jumped by $4.74 last week to average $104.80 per cwt.

Cull cow volumes through auction were light last week, and fed cow supplies coming out of feedlots should also be seasonally declining. Cow slaughter has peaked and will seasonally move lower through spring.

Year-to-date, western Canadian cow slaughter has moderated relative to a year ago. It is down 11 percent from last year but is still 3.8 percent above the five-year average. Eastern Canadian cow slaughter is 18 percent below last year, but this is generally offset by the increase in cull cow exports from the region.

Cull bull prices jumped higher last week, possibly seeing additional support from the weaker Canadian dollar. Lean trim prices have fallen dramatically from the highs of a few weeks ago but are still well above last year.

Coronavirus affects feeder price

There was a negative tone last week in the feeder market, mainly as a result of outside factors related to coronavirus and the fallout in equity markets. The market softened as the week progressed with several lots on electronic sales being passed by the end of the week.

Auction volumes were moderate last week. They increased from the holiday-shortened week but were 19 percent below the same week a year ago. Prices varied between cattle types with lighter cattle seeing more support relative to the heavier feeders.

Recent feeding losses and the tumbling futures had feedlots pulling in bids on cattle destined for the summer or fall fed market, while cattle destined for grass continued to see relatively good demand. Ontario demand for feeders has also softened.

Grass weight cattle were generally $5-$20 per cwt. above a year ago, while heavyweight steers were $1-$5 per cwt. above a year ago. Heavyweight feeding heifers were from $1 per cwt. lower to $1 per cwt. higher than last year. Steers weighing 800-900 pounds hit a new low for the year but with the sell-off in the futures, basis levels counter-seasonally strengthened to be the second strongest of the year.

On the cash market, feeder prices were at a slight premium to the U.S., but there is no strong incentive at these basis levels to affect the movement of feeder cattle north or south.

The markets are very much at the mercy of external market factors, and volatility will likely remain in the near term. Most of the pressure is in nearby markets, which will likely result in the heavier type feeders seeing more price pressure relative to grass cattle.

Select cutouts sink

In U.S. beef trade, Select cut-out values eased US$1.91 per cwt. and established new annual lows last week at $199.69, while Choice cut-out values strengthened by $1.04 per cwt. to average $205.54. Historically, beef cut-out values rally from the middle of February to the end of February, but that hasn’t been the case this year.

Year-over-year increases in beef production and the spread of coronavirus have affected export demand. Beef cut-out values are trading six percent lower than last year, which should encourage strong beef features in retail and food service.

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