SASKATOON — The peak price of the current cattle cycle has “almost certainly” passed but that doesn’t mean prices are going to crash in the next year.
Alberta Agriculture livestock analyst Ron Gietz predicts Canadian cattle prices will fall in 1994, mostly because the per capita supply of beef in the United States is going to increase for the first time since 1985.
Gietz was part of the livestock and feed grains Market Prospects ’94 panel that was broadcast on the Saskatchewan Communications Network and by satellite last week.
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The Americans are making some headway in building their breeding herd, and the number of cattle in feedlots at the end of 1993 was the largest in 20 years. The carcasses those animals are yielding weigh about nine kilograms (20 pounds) more than they did a year ago.
All those factors add up to more beef in the U.S., Gietz said, and that will translate into lower Canadian prices.
In 1993, Canada exported 27 percent of all the beef it produced, and 98 percent of that sold to the United States.
The two markets are intertwined, he said. Canadian prices differ by the basis between U.S. and Canadian cattle and the exchange rate.
Even though American slaughter cattle prices peaked last April at $85 per cwt., Gietz said Canadian prices were higher because a lower Canadian dollar compensated for lower U.S. prices. The result was all classes of Canadian cattle logged all-time high prices in 1993.
Gietz says 1994 prices are going to back off those highs, but not as much in some classes of cattle.
He based these predictions on an average Canada/U.S. exchange rate of $76, adding for every $1 the exchange rate moves — either up or down — fed cattle prices in Canada change by about $1.30.
Slaughter cattle
Alberta direct steer prices should average $93 per cwt. in the first quarter of 1994, $90 per cwt. in the second quarter, $87 in the third quarter and $90 in the last quarter.
Many of the cattle in U.S. feedlots are “front-end cattle” and Gietz said they’re going to be marketed in the first half of the year.
Not as many cattle went into U.S. feedlots during the fall, so Gietz is looking for prices to rebound some by the end of the year.
Short-keep feeders
In no class of cattle was 1993’s tremendous price strength more apparent than in the heavier feeders, Gietz said.
Prices for these cattle should hold together well. He predicts they’ll average about $5 per cwt. less than last year.
In central Saskatchewan, that translates into a price on 850-lb. steers of $107 per cwt. in the first quarter of 1994, $109 in the second, $110 in the third and $107 in the last three months of 1994.
Gietz is also looking for the “excellent demand” to drive the market for 600-700 lb. grass cattle during the first half of 1994. Prices should be fully steady on these cattle until summer.
Feeder calves
The U.S. annual cattle inventory report is due Feb. 4. He said the report is important because it shows how big the U.S. herd is and how successful Americans have been at building up their breeding herd.
Gietz predicts prices for 550 lb. steer calves in the last half of 1994 will average about $120 per cwt., which is five to 10 percent below 1993’s prices.
He warned cow-calf producers watching the program that calf buyers are getting increasingly picky and that’s being reflected in the ranges that are quoted on calves of the same weight.
His advice to these producers is to talk to buyers and find out what kind of cattle they want.
“Attention to detail will pay increasing dividends to producers,” he said.
