As farmers look to sell calves this fall there could be some pressure on prices.
CanFax Manager and Senior Analyst Brian Perillat says there is some concern because the feedlots have not been particularly profitable.
“We are still seeing a few calves trade well over two bucks and historically there are still some pretty good prices, but feedlots have not been profitable for much of this year and it looks like we are going to see a lot more pressure on the fed cattle market going forward.”
Perillat says if feedlots aren’t making money and if their losses grow a little bit, calf prices will come under a little more pressure this fall especially relative to last year.
Watch the dollar:
He says it always important to watch how the Canadian dollar is doing.
“The uncertainty risk and the volatility in these markets, overall we have seen a balancing factor you know calf prices have really ranged from 210 – 230 for the past couple of years and the dollar has been relatively flat throughout all of that time,” Perillat said.
Perillat says if we stay in the 74 – 75 cent – dollar range he doesn’t see much change.
“It’s a factor to watch if it starts cracking over 78 cents or 80 cents that’s going to start hitting our calf prices, but if we do see more softness than again that is positive. I use about a one-cent change in the dollar, If the dollar goes down another penny we could add about five cents to our calf prices.”
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Tyson Packing Plant Fire:
Another factor adding some market volatility is the recent fire at the Tyson packing plant in Kansas.
Perillat says it has caused things to be a little uncertain and volatile adding it is going to stress the markets.
“We rely on the U.S. market very much, they produce ten times the beef, they drive the markets, hopefully our prices don’t go down as much as the U.S.’, but it is pretty hard for us if they are going to see a lot of pressure on their cattle market for us not to go a little bit lower.”
Perillat says if we do go a little lower on our fed market and follow those U.S. trends that’s going to put some pressure on calves this fall.
Perillat says the herd size in the country remains pretty much unchanged.
“In Canada, we just haven’t been able to get the herd going, we continue to shrink slowly,” Perillat.
He says the cattle herd is the smallest it has been since 1991 adding the drought and dryness and lack of feed in the last couple of years has played a role.
“Basically, we are not keeping enough heifers to expand and I don’t see any expansion on the horizon. Hopefully, we can consolidate. We have around 3.7 – 3.8 million cows, but it will be a stretch to make it to 4-million anytime really soon.”
Red Meat Market:
Meantime, Perillat is taking an optimistic outlook for red meats.
“Pork and beef, demand has been incredibly strong both in North America and internationally, we been selling more meat at higher prices, more beef at higher prices and that’s kinda like the best-case scenario.”
Perillat spoke on the cattle markets at the Canadian Beef Industry Conference in Calgary in August.