It is hard to say whether we’ve hit the bottom of this unexpected downturn in cattle prices.
Average fed cattle cash prices in Western Canada rose last week, thanks to tightening supplies.
Generally, market fundamentals here are not bad. But we can’t escape the problem in the United States.
Since the terrorist attacks of Sept. 11, fewer people are travelling and dining at fine restaurants, reducing demand for expensive cuts and dropping the total value of the meat per animal.
Japanese consumers were frightened by the appearance of bovine spongiform encephalopathy, even though it was detected in only one animal. The fall in beef consumption cut Japanese imports, which is the leading export market for the U.S. and second largest for Canada.
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American feeders tried to pressure the market higher by holding back market-ready cattle, but succeeded only in pushing up carcass weights, which have also been increased by a mild autumn.
The problems eventually washed into the feeder market, which until that point had shown surprising resilience despite the heavy culling by drought-hit producers.
But several analysts now say the price of beef has fallen to a point where it is becoming an attractive feature item for supermarkets.
Also, feeder prices have fallen enough that the break evens, that is the cost of fattening an animal compared to the price it will be sold at when fat, are moving feedlots from losses toward profit.
There were signs late last week and early this week that U.S. cash prices were responding positively.
However, we are not out of the woods. The Nov. 1 U.S. Department of Agriculture cattle-on-feed report again showed record on-feed numbers.
And the number of market-ready cattle was 38 percent ahead of last year at the same time and more than double the five-year average.
The number of cattle placed into American feedlots was down from last year. This was the second month in a row for lower placements, signaling fewer fed cattle next year.
However, the drop was not as deep as expected. One reason was dry weather in southern areas that forced producers to sell cattle because pasture can’t support them.
It looks as though a significant drop in American fed cattle supply won’t appear until March or April.
Prices could then rally, especially if people start dining out and travelling again.
