Canadian cattle prices stay strong

Canadian cattle prices generally had quite a strong tone so far in 2018. Feeder and calf prices through to August averaged steady to higher than last year, while fed cattle prices have been a bit lower.

There was some caution heading into 2018 as North America may have record beef production this year, and will have record total production of beef, pork and poultry. Domestic and international demand for beef continues to be strong as cattle and beef prices hold up despite the additional production. 

Bright spot

The western Canadian cattle market continues to be a bright spot, often having the highest prices in North America.

The western Canadian cattle market continues to be a bright spot in 2018, often having the highest prices in North America.

Alberta fed cattle and cull cow prices have been above the United States most of the year, and expanded their premium over Ontario. This resulted in increased feeder cattle imports from the U.S. into Alberta, despite Alberta having higher feed costs than the U.S.

It is interesting that both feeder imports and exports are above a year ago as prices vary between regions and animal types. Overall, Canadian feeder exports remain historically low. The U.S. had a major expansion over the last three years, while the Canadian herd has remained flat, which supported local prices. 

Inventory report

Statistics Canada released the July 1 cattle inventory report, and it showed declining cattle numbers. There were declines in both total cattle numbers as well as lower breeding stock inventories. There are 12.4 million head of cattle in Canada, 0.8 per cent below a year ago, and the smallest July 1 inventory since 1988.

Cattle numbers in eastern Canada were generally flat, while numbers declined in the west. Total beef cow inventories were reported at 3.7 million head, down 1.2 per cent but still above the recent 2015 low. Breeding heifers were down 2.6 per cent, which was all due to lower numbers in the west.

Dry conditions in many parts of western Canada over the last couple of years continues to take its toll on Canadian cattle numbers. Cow marketings have been over 10 per cent higher than last year, and given the lower feed stocks and higher feed prices, a higher culling rate through the fall is expected, and therefore a smaller herd and calf crop for 2019.

On the other hand, the U.S. herd expansion has slowed or ended, and given the larger numbers to work through the supply chain, North American beef production will likely expand for at least the next couple of years.

Calf and feeder prices at the end of August were mostly $15 to $20 per hundredweight higher than the same time a year ago, as 550 pound steers were near $225 a hundredweight. These are still historically strong price levels, but some caution is warranted heading into the fall run. Rising feed costs, and the fact feedlots are losing money on their current sales could restrict calf demand.

The fall run is expected to see a higher proportion of calves come to market due to limited feed stocks and high forage prices. Meanwhile, trade uncertainty continues to hang over the market, and adds foreign exchange risk, which can have a significant impact on Canadian producers. 

Bottom line

Canadian cattle prices are strong so far in 2018, with Western Canada often having the highest prices in North America. However, factors like rising feed costs and the subsequent increased cattle to market as a result could restrict calf demand during the fall run.

As the manager and senior analyst at Canfax, Brian Perillat ensures Canfax maintains accurate and relevant market information, as well as provides and oversees market analysis for its members and the industry.