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 ease

Alberta direct cattle sales saw moderate volume trade last week with average prices easing around $1.50 per hundredweight lower. Fed steers averaged $134.56, and fed heifers averaged $133.29 per cwt.

Live cattle futures converged sharply lower last week and long positions were aggressively sold off ahead of the October contract expiration. The resulting favourable basis encouraged U.S. hedgers to market cash cattle early last week at lower money.

The fed basis north of the border was not as favourable, and Alberta feeders were less motivated sellers. The bulk of weekly Alberta trade was reported dressed from $225-$227 per cwt. delivered and scheduled for delivery two to six weeks out.

For the week ending Oct. 17, western Canadian fed slaughter was steady with the previous week at 43,486 head and year to date was down two percent at 1,643,473 head. Western Canadian steer carcass weights for the same week eased six pounds lower than the previous week but were significantly 39 lb. heavier than the same week last year.

The U.S. Department of Agriculture reports that Canadian fed cattle/cow exports for the week ending Oct. 10 were nine percent larger than the previous week and were eight percent lower than the same week last year, totalling 9,762 head.

A moderate volume of Ontario trade developed during the first half of last week, and most sales were reported at $230-$232 per cwt. delivered.

Renewed holiday buying interest is anticipated this week, and the boxed beef value should seasonally gain momentum. Manageable front-end fed supplies are anticipated, and the cash market could firm higher on both sides of the border. Feedlots are expected to gain market leverage moving through November.

In the United States, a favourable basis blushed out moderate early week trade with live prices in the south $2-$3 per cwt. lower than the previous week at US $105-$106 per cwt. Live sales in the north were generally $2.50-$3.50 per cwt. lower than the previous week from $104-$105 per cwt.

Northern dressed sales were around $3-$4 per cwt. lower last week with the bulk of sales at $165-$166 per cwt. delivered. The USDA reports that U.S. beef exports to Canada for August were seven percent larger than year ago, and imports of Canadian beef were up five percent. Feeder and stocker prices continued to deteriorate last week with prices trending $2-$8 per cwt. lower.

Cow prices decline

Butcher cow prices through commercial auction facilities were reported C$4-$5 per cwt. lower while rail sales were down $10 per cwt. D2 cows averaged $76.75, and D3s averaged $66.25. Butcher cow prices have dropped 15 percent from their high in July.

Over the past five years, the average decline from second half of the year highs to second half lows is 21 percent. Using an historical decline, this would put D2 cow prices on track to bottom in the low $70s per cwt. Given ample fed cattle supplies and struggling U.S. trim prices, Western Canadian cow prices could hit $70 per cwt. and possibly lower in November.

For the week ending Oct. 17, western Canadian cow slaughter totalled 5,484 head. Cow slaughter usually tends to spike up moving into November. Over the last three years cow slaughter for November averaged 9,700 head on a weekly basis. Since July, cow slaughter has consistently been below last year, and there is a good chance it will stay below year ago levels for the rest of the year.

If slaughter volumes fail to pick up from where they are now, non-fed supplies could start to back up and some cow-calf producers could look at carrying cattle into the new year.

Barley price dampens feeders

Both spot and forward barley prices continue to edge higher. Last week sales for January to May 2021 were reported from $270-$285 per tonne delivered into southern Alberta. Higher barley prices and spring-summer 2021 live cattle down 300-400 points weighed on calf and feeder prices.

The calf run is shifting into full gear with all provinces seeing their biggest volumes of the year. For the first three weeks of October, Alberta and Saskatchewan auction volumes are down 34,500 head compared to last year. Trading $5 per cwt. lower last week, Alberta 500-600 lb. steer calves were trading at the lowest point since September 2017. Ontario calf and feeder prices were also under pressure, but prices for the most part were higher than last year.

From a finishing perspective, buying a 550 lb. steer at $207 per cwt., targeting the July fed cattle market with an out-weight of 1,400 lb. and using a $1.20 cost of gain has a $154 per cwt. breakeven. Going against the August live cattle futures contract, the breakeven cash-to-futures basis is +$18 per cwt. and the five-year (2016-20) average fed basis for July is +$2.59 per cwt. Assuming the Canadian packer is offering a +$2.50 per cwt. basis for July and using a 76 cent dollar, the feedlot would need the August LC to rally to US$116 per cwt. just to break even.

From a price perspective, the five-year average fed price for July is $144 per cwt., and the 10-year average is $140 per cwt. Feedlots continue to speculate on the market, gambling on higher futures, a softer Canadian dollar, strong basis levels and maybe lower feed grain prices.

Eastern Canadian buying interest continues to be a factor on the western Canadian market with good interest noted on the steer calves. U.S. feeder cattle imports for August totalled 18,156 head, five percent larger than last year. Year-to-date U.S. imports are up 16 percent.

U.S. cutouts lower

In U.S. beef trade, cut-out values softened last week, but the beef complex overall showed signs of stability. Choice averaged US$208.86 and Select averaged $191.08 per cwt. U.S. fresh 90 percent trim continues to weaken, trading $5.80 per cwt. lower than the previous week on lacklustre demand.

Last week’s cattle slaughter was estimated to be two percent smaller than the previous week at 643,000 head. Cooler weather should enhance demand for primal chuck and rounds.

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