Most indicators point to favourable market

Market Update: Numbers for the first quarter show good demand, strong prices

 

Jerry Klassen, Market Update, Grainews

February 6, 2019

 

Alberta packers were buying fed cattle at $268 on dressed basis in mid-January, which is up $10 from last month. Fed cattle values on a live basis were quoted at $163 in Alberta and US$124 in the U.S. Southern Plains. The market appears to be percolating higher due to tighter than expected market ready supplies.

 

Wholesale beef prices have been trading in a sideways range due to a seasonal slowdown in consumptive demand. Packing margins have come under pressure but the weekly slaughter pace continues to exceed year-ago levels. The Canadian dollar has strengthened since the December lows, which has tempered the upside for fed and feeder cattle prices.

 

The feeder market remains firm, especially for 800-pound-plus cattle. Feedlot margins are slightly in positive territory for the first quarter of 2019, which has been supportive for the replacement market. Calves have been quite variable across the Prairies so far in 2019. There appears to be limited supplies in central and southern Alberta; therefore, feedlots in the Lethbridge area are sourcing from farther distances.

 

We’ll see a fair amount of fall-placed yearlings marketed over the next month and feedlots will be anxious to reload given the favourable margin structure. In mid January, 850-pound steers were readily selling around $185 in central Alberta while 650-pound steers were quoted from $205 to $210.

 

During the final quarter of 2018, the U.S. slaughter came in above expectations. Favourable packing margins due to strong wholesale and retail prices encouraged the higher slaughter pace. In addition to the positive economics in the packing sector, feedlot performance was exceptional in Canada and the U.S. as rates of gain were near record.

 

Cattle were pulled forward in the U.S. and slaughtered sooner than anticipated. Carcass weights were coming in below year-ago levels. In Western Canada, the slaughter also exceeded expectations although market-ready supplies were above year-ago levels. Basis levels for fed cattle were historically weak during December as Alberta prices were at a discount to the U.S. market. We didn’t see a sharp increase in fed cattle exports although the market was encouraging movement south of the border.

 

Good start for feedlots ...

 

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https://www.grainews.ca/2019/02/06/most-indicators-point-to-favourable-market/