MOOSE JAW, Sask. — Cattle markets are doing better than Anne Wasko forecast last fall, but the analyst says producers shouldn’t get complacent.
“What goes up will also go the other direction,” the president of Cattle Trends Inc. said after a presentation at the Saskatchewan Stock Growers Association annual convention June 12.
Volatility continues to characterize the market, she said, noting the 2016 spring high for U.S. fed cattle was about $1.40 per pound. Prices dropped by 30 percent to the October lows and then rebounded a whopping 50 percent through the first half of 2017.
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Wasko said several factors are at play.
Cattle numbers are strong, she said, but when cattle don’t go on feed because of poor prices or margins, suddenly fewer are available.
“Then when the markets turn positive, profitable, cattle feeders start to move cattle much more aggressively,” she said.
Packers are moving as many head through as they can.
After years of adding tonnage to the market through increased carcass size, dressed weights in Canada were a surprising 60 lb. smaller this spring than a year ago and are currently about 35 lb. lower.
It was a similar story in the United States. Lighter carcasses are price positive.
As well, last year’s low cattle prices finally translated to lower beef prices at the retail level, causing consumer demand.
“Consumers got excited about eating more beef, both in the U.S. and Canada, and we saw that in the consumption data,” Wasko said.
“Our prices since February have come up 30 percent at the wholesale level.”
Consumption is up about one pound per person and steady retail prices have resulted in a demand increase of two percent.
The Canadian herd remains unchanged over the last seven years at 3.83 million head and about 1.5 million head smaller than the post-BSE high.
The two largest provincial herds, in Alberta and Saskatchewan, also remain flat at 2.7 to 2.8 million cows.
Heifer placements are up 11 percent year over year, and steer placements are up seven percent, while cull rates are holding at 11 percent.
Wasko also said Western Canada’s feed costs are such that it was at a feeding disadvantage to the U.S. since March 2014 but is currently enjoying an advantage because of the large supply of feed wheat after last year’s wet, late harvest.
“That in my opinion helped pressure barley prices down at the feed level and that suddenly kind of put the scales back in favour of a cost-of-gain advantage,” she said.
Wasko reminded producers that they are heading toward the fall run low, but she expects the factors that have helped the market through the first half of the year —smaller carcass weights and strong marketings — could soften that low. The seasonal price lows could be pushed back into the fall.
“If we normally drop 15 percent on fed cattle prices between now and late summer, maybe it’s now and well into that third quarter, into that October time frame, possibly,” she said.
Stretching that out buys a little more time with profitability, she added.
