EDMONTON — There were no smiles in the audience when Brian Perrillat delivered his predictions for this fall’s calf market.
It wasn’t too long ago when many producers thought selling calves for $2 a pound would be the highlight of their careers. Last year, they soared as high as $3.30, but this fall calves could be sell for $1.80 to $2, if Canfax forecasts are accurate.
“I still think there could be some profitability for the cow-calf sector,” Perillat said.
Canadian cattle feeders however, are drowning in red ink, he told the Alberta Beef Producers’ spring meeting in Edmonton June 14.
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“U.S. feedlots are now in a profitable period, but here, this summer, we are going to be working through high-priced calves purchased earlier. Some guys are losing $700 per head,” he said.
Feedlots bought high-priced calves and sold them for less than they paid for them.
The last two years of unprecedented prices have reversed with measurable losses.
Fed cattle prices are down to $1.50 a pound compared to last year about this time when they were $2.03.
“That was the peak week for fed cattle,” he said.
“We are down $50 (per hundredweight), so we are taking $600 less for fed cattle,” he said.
A 550 pound steer sold for $330 and then dropped to $270 per hundredweight, which translates into $620 less per head.
Prices are expected to fall, depending on the U.S. futures market and how well the Canadian dollar performs.
The calf price would hover around $2.43 per pound if the U.S. fed price is $1.15 per pound and the loonie fell to70 cents.
However, a U.S. fed price of $1.15 and an 85 cent dollar equates to $1.70 a pound for a calf.
And if the dollar stays around 75 cents, a reasonable target for fall prices could be $2.
Tight cattle supplies drove beef to unprecedented highs in 2014-15. More meat is now on the market, so retail prices are falling.
“We are getting small increases in production, and we are seeing a pretty massive reduction in prices,” Perillat said.
As well, the producer’s share of the retail dollar is shrinking.
Canadian producers showed no interest in expanding during that period of profitability, while the Americans are on an upward trajectory after seven years of ex-treme liquidation caused by market conditions and drought. The expansion is really a recovery after years of hardship.
Expansion happens on the female side.
Cow slaughter has increased to 5,000 head per week from 3,000 a week last year. Replacements are not keeping pace.
Canadians should be keeping 600,000 to 700,000 replacement heifers, but only 500,000 were held back, according to the last inventory report.
Exports remain favourable, indicating that international demand for beef remains.
In addition, Canada is starting to export more live cattle to the U.S., but the numbers are behind the long-term average. That could change as more Americans look to fill feedlot pens and increase capacity at slaughter plants.
Almost all cattle stayed in Canada last year, but now there is more interest among Americans to import cattle.
Still, feeder exports are down 40 percent from last year with 125,175 going stateside. Fed exports are 44 percent higher than a year ago, but that is still below the five year average. To date, 136,710 fed cattle have been exported.
