With seeding nearing completion, NHL playoffs wrapped up and, baseball season in full swing, Canadians are firing up their grills and enjoying their favourite cold beverages.
Warm weather means barbeque season, and thus a seasonal peak in the demand for beef products. Strength in export markets along with lower beef retail prices for consumers that have boosted overall beef demand in Canada means cattle producers are likely to enjoy strong profit margins throughout the summer.
The value of Canadian beef typically peaks in June
Canadian beef are an indication of consumers’ demand and industry’s available supply of beef. It measures the value of the carcass using a weighted average of primal cuts. It typically increases through the spring and peaks in mid-June, in response to high consumer demand for the July long weekend.
The elevated beef cutout value so far in 2017 is the result of tight supplies and strong demand, as prices for Canadian beef remain higher than the 5-year average.
Interestingly, retail prices for beef were 5% lower in April 2017 as compared to April 2016, according to Statistics Canada. This is mostly the result of intense competition among food retailers. In response to the lower average retail price for beef, consumers demand has increased, resulting in stronger prices for Canadian cutout values.
Cutout values dictate movements in cattle prices
Strong retail demand and cutout values usually support the fed cattle market. Fed cattle prices generally reach seasonal highs in late April or early May as packers’ demand for cattle is strong in anticipation of consumer demand for the barbeque season. This year, prices of fed cattle have not been following this trend, remaining strong longer through May and June. The current drivers of fed cattle prices are pretty clear: strong consumer demand, and to a lesser extent the limited supply of cattle. The market could change in the fall as cattle on feed numbers signal the potential for a larger supply of cattle and thus softer prices.
Seasonal trends in cattle slaughters
Cattle slaughters follow a very distinct seasonal pattern, with slaughter levels increasing in March in response to anticipated higher consumer demand in over the summer months. Slaughters tapered off through April and May, and typically increase again in July and September.
Monthly cattle slaughters have trended very close to the 5-year average in 2017. This normal production pattern suggests consumers’ demand for beef in the domestic and export markets is strong.
The grilling season is one of the most important periods for the entire beef supply chain. The domestic and export market trends are all good news for the Canadian cattle industry as it stands to benefit from consumers’ appetite.