There wasn’t a lot
to talk about in the fed cattle markets last week as early week trade
was at $79 live, $125 dressed, with very light volumes reported. Many
cattle feeders were waiting packers out. Producers’ offers were mostly
$83, against packer offers of $77. Southern plains feeders were
The news about the Canadian border reopening was on everyone’s mind,
particularly what impact it would have on the market. At this point, fed
cattle are trading lower because of fundamental market conditions in the
U.S., not because of pressure from Canadian cattle, analysts said.
Boxed beef ranged lower, with Choice at $128.97 last Thursday. Live
cattle futures were slightly lower, at $78.13 on the August contract.
And, there are still plenty of ready cattle in feedlots, with steer
carcass weights being up another 8 pounds last week at 822 pounds. Beef
demand has been called “tenuous at best,” even though many retailers
have beef features running, which appears to be keeping slaughter volume
Packers were reportedly losing $21 per head last week, but were still
moving large numbers through slaughter plants. For the week ending July
16, 652,000 head were processed and slaughter was running 5,000 head
more last week compared to the week prior. To date, there have been only
a handful of cattle cross the border, and the Canadian cattle on feed
report shows on-feed numbers to be around 800,000 head. Analysts said
that figure is in line with slaughter capacity.
The U.S. July 1 Cattle-on-Feed Report, being released last Friday, was
expected to show on-feed numbers 102 percent of a year ago, placements
at 105.3 percent and marketings at 99.9 percent.
Most analysts referred to pre-BSE trade to establish benchmarks for
There are several items that will effect the flow of cattle from Canada,
analysts said. There is plenty of feed throughout western Canada;
Southern Alberta has had good moisture and good grass; slaughter
capacity is larger, placing greater demand on their fed supplies; and
the Canadian dollar is 20 percent stronger than a year ago and trucking
is in limited supply.
Lethbridge auction operator Bob Balog said, “The only thing we have in
over supply is slaughter cows and bulls. Fed cattle and feeder cattle
are in pretty tight hands.”
He also said he sold some 770-pound steers in last Wednesday’s auction
that brought $120 Canadian—with an 83-cent Canadian dollar, that
converts to $100 per cwt U.S. The feeder markets appeared to have
equalized and the difference is the cost of a truck ride. Balog also
said they had a very active aggressive sale last week, and that buyers
were there that haven’t been at a sale in eight months. He also said
there are lots of feeder cattle already owned by American companies.
Mike Sands, market analyst at Informa Inc. (formally Sparks), said that
it’s not the Canadian border weighing on the market at this point, but
that the “dog days of summer” are here and the fundamentals are dragging
on the market. He is especially concerned about beef demand. Sands
expects to see 150,000 head of fed cattle come down from Canada weekly
for the balance of the year. He said that is not an overwhelming number
compared to past years.
Darrell Mark, extension economist at the University of Nebraska, said
that history shows weekly feeder cattle imports hit a seasonal low
during the summer months and increase into the fall and winter, peaking
in February. The average August to December feeder cattle imports from
2000 to 2001 was about 100,000 head, or about 4,800 head per week. These
numbers, however, are somewhat inflated by the unusually large feeder
cattle imports in 2002, of 557,000 head. That year there was a severe
drought in Canada.
Fed cattle imports are seasonally highest in the third and fourth
quarters. The average August to December fed cattle imports is 340,000
head, or 16,000 head per week. The average 2002-2003 cattle imports from
Canada accounted for about three percent of U.S. commercial cattle
slaughter during those months. As a result, a negative price impact of
roughly $3.50 may be expected based on a current $80 fed cattle market.
But, it isn’t expected to happen because of a different set of market
Mark said that feeder cattle prices are likely to fall more than fed
cattle prices partially because of Canadian market conditions. However,
further impending losses by cattle feeders and the prospects for higher
corn prices will tend to reduce over all prices in the U.S. and Canada.
Feeder cattle sales last week were very light, with many producers
holding calves back. Market weakness occurred mostly due to concern over
the resumption of cross border trade with Canada and hot dry weather
that was favoring buyers.
Northern tier auction reports indicated a slightly weaker market with
moderate to good demand on very light supplies. Although few comparisons
were available, auction yards across the northern states reported an
undertone of steady to slightly lower prices for the few feeder calves
that were marketed.
It appears that a sharp decline in per head profits for cattle feeders
in the southern tier is weighing heavily on auction yards, with moderate
demand and some significantly lower prices reported in key states.
Notable declines were reported in Texas and Oklahoma where cattle
slumped at least slightly across the board, with significant drops of up
to $5 reported in the heavier weight classes. An exception to the trend
occurred in Nebraska where buyers offered firm prices and strong
interest for heavy nine-weight steers. Softer markets were reported in
the remainder of the southern tier with most markets reporting at least
moderate demand and light supply.
A number of producers have already marketed their fall calf crops via
either video auction or direct sales to their advantage. Early last
week, as Canadian cattle were primed to start rolling into northern
states, buyers started to lose interest and direct prices being offered
declined slightly while producers held firm. Overall volume for the week
was half or less than year-ago numbers for most states.
As the week progressed, buyers developed a wait and see attitude while
hoping the border picture would clear up some. A number of analysts
believe that quantities of cattle crossing the border will remain low
for at least a couple of months due to the rigorous requirements with
which producers must comply prior to shipping Canadian cattle over the
As of press time last Thursday, only a handful of trucks had crossed
over the border, creating only a psychological effect on the markets. In
the few northern tier states where enough cattle were sold to make a
comparison, the trend was reported steady to $2 lower, with demand
moderate to good.
Feeder cattle futures contracts through last Thursday had regained about
two-thirds of the losses reported the previous Friday, which was the day
after the Ninth Circuit Court of Appeals had overturned the injunction
banning live Canadian cattle from entering the U.S.
As of midday Thursday, August feeder cattle contracts were at $107.70
per cwt, while September was at $106.10, and October was at $104.65.
The CME feeder cattle index last week was hovering around the $112 per
cwt mark, compared to $113 most of the previous week. — WLJ
Crow Publications - Any reprint of WLJ stories, except for personal use,
without permission, written consent and appropriate attribution
©1996-2005 Crow Publications.
All rights reserved.