Feedlots aren’t going to be feeling generous this fall when producers
take their calves to market.
CanFax market analyst Anne Dunford told the Canadian Cattlemen’s
Association annual convention on Aug. 8 that cattle feeders have
suffered for more than a year, which will show up in the prices they
are willing to pay during the fall calf run.
“The severity of the losses is extremely significant,” Dunford said.
“Even without (the impact of the drought) we were looking at most
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certainly difficult feeder cattle prices this fall.”
Dunford said there are relatively few yearlings on farms this summer,
so their prices should be the strongest. However, they will be strictly
controlled by the high cost of feed in Western Canada.
“I don’t think you can expect anything better than the $105 to $110
basis Western Canada we’re currently seeing on … (850 pound calves),”
Dunford said.
More price pressure will come on 550 lb. calves, which are more
plentiful, she said. High barley prices in Alberta have meant a wide
Canada-U.S. basis. Last August, Alberta feeder cattle were selling
about $3 above U.S. prices, but this year that has dramatically
reversed to as much as $16 below U.S. prices, reflecting the high price
of feed. But Dunford said that price differential can only go so far.
“It’s a big enough market and there’s some good support there and if
prices do run into some jeopardy we will see the U.S. floor kick in and
stabilize prices.”
Cheaper feed in the United States is allowing American feedlots to
bring in Canadian cattle.
“We have seen and will continue to see some of these lighter calves
head to the U.S. market,” Dunford said in an interview.
The prairie cattle herd has seen some dramatic changes this summer, as
producers have reacted to the drought gripping much of Alberta and
Saskatchewan.
Cow slaughter has surged this summer. In Alberta 16 percent more cows
were slaughtered this June than June 2001, and July saw a 32 percent
increase on the year before. In Saskatchewan, June cow slaughter was
not significantly different, but leapt by 47 percent in July.
The number of cattle placed into feedlots in Alberta and Saskatchewan
also surged, with producers selling about three times the number of
under-600 lb. calves in July than they did the same time last year, and
almost double the number of 600 to 699 lb. calves.
About 47 percent more 700 to 799 lb. cattle were placed on feed in
July.
Canadian feedlots have faced a string of problems since last fall. High
barley prices increased feeding costs, slaughter prices slumped after
Sept. 11, and a host of other market problems bit into demand.
She said feedlots have to start making money if calf prices are to get
better.
Though the cattle feeding industry is wrapped in doom and gloom this
year, Dunford said she sees better times in 2003. There is no sign of
an increase in the U.S. or Canadian cow herds. Fed cattle prices should
recover, which will allow feedlots to begin making profits again and
begin recovering from the losses of 2001-02. If that happens, cow-calf
producers will eventually benefit.
“The money has to come from the feedlot side and start to generate down
the chain into the cow-calf sector,” Dunford said.
“If we can get past some of (the current market problems) the supply
situation most certainly is going to support higher prices for feeder
cattle early next year.”
The biggest hurdle will have been leaped if the drought ends and decent
barley crops return to Western Canada, she added.
