Southern Alberta feedlot -- LNN

By Alice McFarlane

Canadian Cattlemen's Virtual Meeting

Cattle markets experience slight recovery after taking pandemic hit

Oct 13, 2020 | 3:07 PM

CALGARY, AB. — It has been a challenging year for western Canadian feedlots.

Canfax manager and senior analyst Brian Perillat spoke during an online town hall organized by the Canadian Cattlemen’s Association

Cattle slaughter numbers declined substantially as hundreds of employees at two large Alberta processing facilities tested positive for COVID-19.

Fed cattle prices dropped to their lowest point in eight years. There has been some recovery, but Canfax reports feedlots remain below the break-even point.

On the positive side, higher slaughter numbers are now starting to eat into the backlog of feeder cattle. Brian Perillat spoke last week during an on-line town hall, organized by the Canadian Cattleman’s Association.

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“Processing levels are pretty much back to pre-Covid levels and basically throwing in Saturday shifts, we’re actually able to increase our fed slaughter. The cow market is hanging in there, but doesn’t have the premium it has to the U.S. – we’re, maybe seen a few cows shuffle south, and certainly packers here focussing on these fed cattle numbers. If you remember, we were talking at one point, roughly 130,000 cattle back-logged through the summer. Here we’ve processed over 32,000 head more than a year ago.”

There are still quite a few feeder cattle waiting in line for processing.

“Whether you call it a back-log or not, there’s still about 80 to 90 thousand head of cattle, somewhat, not accounted for through this. Carcass weights in Canada have started to grow and move above a year ago, so maybe it’s not an extreme case right now, but at the beginning of the month, we saw steer carcass weights jump quite a bit above a year ago, and it’s something we have to monitor as we still have some cattle here to work through the rest of the third quarter and into the start of the fourth quarter.”

Perillat says that fed cattle prices are better than the spring but, feedlots aren’t making money right now.

“We hit some of the lowest prices since 2012-2013 – here we’ve been well below a year ago all summer and continue to at a weakens due to large cattle supplies on the market. It’s not uncommon that we’re in the low 30’s, again, packets are planning that they’ve got ample inventories in front of them, with not a lot of up-sight here, in probably the short term, over the next month or so would be kinda our estimate. Hopefully we can some kind of seasonal rallies – you can see into the fourth quarter, but that may be limited somewhat.”

Another negative factor over the summer was the rising Canadian dollar, but it has been showing some weakness, which is helping the market. As for feed barley?

“We’re back into that $2.30 range, in the New year, priced into $2.40 – so that’s a dollar a bushel kind of a climb. You know, when you talk about a dollar a bushel, that can have almost 20-cent impact on cattle prices, depending on where these costs fall. So, U.S. corn is being imported again and could provide a ceiling on barley but, on the other hand, as corn prices rise, so does barley,”

Perillat adds that prices have been able to hold their own so far, but it’s hard to say what will happen further into the fall run.

“Again, there is certainly some caution flags in the calf market as we head into the fall run, but again, five weight calves are still $2.10 all the way to $2.30, $2.40 on a short five weight calf, so again, with all the uncertainty going on and certainly the challenges through year – reasonably good prices from what some of the market signals show us and heading into November, we’ll just see how the volumes come in and how the futures react to the placements coming up.”

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