Canadian fed cattle supplies tighten, herd liquidation continues
The fed cattle market leading up to the Labour Day weekend saw some seasonal pressure. Demand softens towards summer’s end and typically longer-fed, heavier cattle are moving through the system. August ended with an average of $231.76/cwt, which is just six per cent behind the 2023 annual high. The last two weeks of August only saw a decrease of $1/cwt, which is a slower decline compared to what can typically be seen this time of year. The end of August 2023 average was $51.33/cwt stronger than the same week in 2022 and over $75/ cwt higher than 2021.
Tighter fed supplies in Canada are evident in total slaughter numbers. Fed steer slaughter to the last week of August was down eight per cent when compared to the same period in 2022. Fed heifer kill is also smaller, down six per cent at 643,138 head. Along with the smaller fed cattle slaughter, the exports of fed steers, heifers and cows to the U.S. to the third week of August were six per cent smaller, totalling just 289,992 head.
Deb’s outlook on fed cattle: Fed cattle supplies will tighten in the coming weeks. However, fall means increased demand as the school year starts. In general, the end of August or early September marks the summer low. Fed cattle prices should level out and strengthen in the coming weeks. Fourth quarter expectations are for a strong market based on good demand for middles coupled with tighter than normal front-end supply.
The fall run started early in 2023. As pasture conditions deteriorated, calves were marketed earlier than normal. Although the calves came early, the drought-forced sales have been met by eager buyers. Lighter-weight calves sold through August saw record-high prices including a new record high for 550-lb. steers at $386.75/cwt during the most recent week. This record high is a 47 per cent or $124.42/ cwt improvement when compared to the same week last year.
Auction market volumes through the summer consistently outpaced recent years. For example, the end of August saw the week-over-week auction market volumes in Alberta 21 per cent larger than in 2022 and 58 per cent larger when compared to the five-year average. The grass cattle market started early in the summer of 2023 and has remained strong.
The 850-lb. feeder steer average at the end of August was $328.42/cwt, which is 37 per cent or $89.23/cwt higher than the same week in 2022. The 850-lb. feeder basis at the end of August was -$8.27/cwt, which is wider than the $0.37/cwt five-year average. However, looking at the basis levels in 2023, the basis narrowed over $17.80/cwt during the previous four weeks.
Feeder cattle exports remain smaller than a year ago. To mid-August, there had been 35 per cent fewer feeder cattle exported than a year ago, totalling 97,121 head.
Canadian cattle herd liquidation continued through 2023. This was confirmed in the July 1, 2023 Statistics Canada cattle and calves inventory report. This liquidation was intensified by the drought conditions seen across much of the Prairies this summer. Many producers were forced to start selling cows due to lack of summer pasture. The Canadian beef cow herd decreased 1.5 per cent from July 1, 2022, to July 1, 2023. Compared with the last July 1 peak in 2017, the beef cow inventory is down four per cent. When compared to the total 10 years ago, the current total is down seven per cent. Beef heifer numbers confirm that there is no growth expected in the Canadian cow herd soon, as beef replacement heifer totals as reported on July 1 are down 3.2 per cent from a year ago and down 12 per cent from 2020.
Deb’s outlook on feeder cattle: Although not all classes of feeder cattle pencil out at current prices, buyers are still aggressively procuring fall feeders as anticipated beef production reduction for 2024 spurs optimism. The fall of 2023 and the smallest calf crop recorded in over 30 years mean competition for calves will remain strong. Recent profitability in the fed market, the lowest barley prices since 2021 and a weaker Canadian dollar all support feeder prices. Overall, look for a strong market with high feeder cattle prices throughout the fall run.
Hot weather and reduced precipitation across the Prairies led to an early start to the fall feeder run, as well as increased slaughter cows on the market at the end of the third quarter. Increased cow numbers at the same time as heavier, longer-fed finished cattle moving through the system have pressured prices in the non-fed market.
The D2 cow price in Western Canada lingered near summer lows, recently dropping nearly $2/cwt to an average of $147.93/cwt as of September 1. That average is $35.15/cwt higher than the same week in 2022 and $57.05/ cwt stronger than the five-year D2 cow average. Cow marketings are large in 2023. Canadian cow slaughter to the third week of August totalled 314,227, which is six per cent above the same time in 2022.
At the same time, bull slaughter in Canada is up 29 per cent, totalling 12,053 head. The bull price is also seasonally weaker, currently $158.50/cwt.
Deb’s outlook on non-fed cattle: In the near term, as herds are brought home from pasture, calves weaned and cattle culled, price pressure will remain in the non-fed market. Lack of winter forage in many areas will deepen the cull, increasing supplies and contributing to the seasonally lower market prices. However, as fed cattle supplies tighten in the fourth quarter and fed prices improve, the non-fed market should follow suit. Expect prices to improve as we move towards the end of 2023.