The dominant topic in the cattle markets through the summer has been the weather. The drought, and resulting lack of grass, water, feed and record high feed costs have many on edge as they look at marketing strategies for their calves, and possibly even some breeding stock. The wide spread drought across the prairies resulted in scarce forage supplies and some panic buying as many producers try to procure feed. Feed grains have also increased dramatically, with barley into Lethbridge costing over $9/bu. This is well above prices ever seen before with previous record high barley prices under $7/bu before this year. Many feedlots have switched to imported corn or feeding wheat to meet their feed needs. Hopefully this will limit any further upside for the feed grain market. Cull cow slaughter was moderate to start the year, but numbers started to increase in June. Western Canadian cow slaughter in June increased 32% from May and was the largest cow slaughter for the month since 2010. Cull cow prices in June traded over $103/cwt, the highest prices since 2017, but prices quickly deteriorated over $20/cwt to be at the lowest prices in July and August since 2013.
Strong beef demand and anticipated lower numbers of cattle in North America in 2022 has supported the overall market tone, and cattle futures have been reflecting the higher price potential. This supported the grasser market as feedlots target the spring fed market. Calf prices have come under more pressure than the feeder market. As the summer progressed, forward sold calves for the October and November timeframe lost near $20/cwt, with some prices falling below last year.
Cow slaughter is expected to remain elevated and exports to the US could likely increase as well. The Canadian cow herd will shrink this year, and US cow slaughter is also elevated as the US herd is in its third year of contraction. This does bode well for cattle markets not only next year, but possibly for two or three years out, assuming domestic and international demand remains strong. For producers who are able to maintain their cow herd and manage their costs relatively well, it does provide potential opportunities for those who happen to have or are able to procure a reasonable feed supply. There will likely be a large number of calves come to market due to a lack of feed which could depress the market this fall. Heifer prices will likely see a large seasonal discount given the high feed costs, and it will be important for producers to have a sharp pencil when deciding how much of their breeding herd they will maintain whether it be their cow herd or replacement heifers.
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This article was first published in the September 2021 edition of ABP Magazine. Watch for more digital content from the magazine.
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