If cattle feed prices stay high, Canada could see a shift to more grass-fed cattle as producers look for cheaper ways to add weight to their cattle.
“I see a lot of cattle on grass for longer periods. I see Manitoba and Saskatchewan increasing their share of the Canadian market and Alberta continuing to reduce its herd numbers,” said Alberta livestock market analyst Anne Dunford speaking to cattle feeders attending the Saskatchewan Cattle Feeders’ Association in Saskatoon March 26.
“If you think feeder cattle have some hope for higher prices, then you haven’t been paying attention,” she told them.
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The Canadian Cattlemen’s Association estimates that when barley sells for $2 per bushel it costs $54 to create 100 pounds of feeder calf. At $3 per bushel it costs $68 per cwt. of gain, while at $4 it costs $85 per cwt.
Lethbridge barley is now about $3-$3.50 per bu.
If barley reaches $4 per bushel in 2007, the grain will represent 100 percent of the cost of a yearling calf acquired by a feedlot for $85 per cwt. and 90 percent of the price of a steer calf.
“That tells you guys how much you’ll have to pay for calves if your barley price hits four bucks,” Dunford said.
Margins in the cattle feeding business are based on the cost of the calf, the cost to feed it and the price of the fed animal when sold to the packer. When feed costs rise, margins can be preserved by paying less for calves or getting more for the fed animal.
It is unlikely that fed cattle prices will rise in 2007. Dunford sees American fed cattle averaging $84 to $85 US per cwt., $1 to $2 lower than in 2006.
There are a record number of cattle on feed in the
U.S. It is projected that U.S. beef production will rise by more than two billion pounds between now and 2009.
With few options up the processing chain, attention turned downstream to the cost of calves and feeders and prices fell all last fall as feed prices rose.
Dunford expects U.S. 800 pound feeders to average $10 per cwt. lower at $95 per cwt. and 550 lb. calves to fall by $15 cwt. to $110.
How that affects the Canadian market depends on the Canada-U.S. basis. After a brief period in the summer last year when the basis was close to zero, it has widened to about $14-$15 under.
In the five years before BSE, the basis was closer to $5 under.
