Canfax Cattle Market Update

Last year saw major cattle/beef supply chain issues which resulted in very volatile slaughter cattle markets. Although processing levels recovered and exceeded a year ago in the second half of 2020, supply chain issues in the second quarter weighed on the market throughout the rest of the year as it took months to work through the backlog of fed cattle in feedlots. Cull cow prices were also impacted as slaughter plants focused on fed cattle, and reduced their cow kills. Canadian cow prices had been at a premium to the US market over the last few years but moved to a discount for part of 2020 due to local processing capacity constraints. Calf and feeder markets were not hit as hard since optimism remained that the fed market would improve by the time these cattle were finished. In fact, Alberta 550 pound steers in 2020 averaged just slightly higher than they did in 2019. Calf and feeder prices in the fourth quarter did come under pressure and fell below a year ago; hit by three main factors, ongoing feedlot losses, significantly higher feed costs, and a rising Canadian dollar.

Heading into 2021, as the backlog of fed cattle subsides and the market is looking at tighter cattle numbers in North America starting in the second quarter of this year, there is optimism for stronger markets ahead. Despite the struggles in the food industry, beef demand has remained strong as consumers continued to consume a consistent level of beef despite record high retail beef prices in 2020. Barring any supply chain issues this year, primary producers should be able to capture a larger proportion of the retail dollar. In addition, the beef trade balance is expected to improve with ongoing strong export opportunities and likely a reduction in beef imports. Per capita beef and pork supplies in North America are expected to decline in 2021, which should also be price supportive. The market tone looks to improve this year, but feed grain prices and the Canadian dollar will be key factors to watch in 2021 for calf and feeder prices.

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Brian Perillat has been the Manager at Canfax for over 10 years. Brian grew up on a mixed farming operation near Duck Lake, Saskatchewan and continues to be involved with the family farm. Prior to his position at Canfax, Brian worked as a livestock production economist with Alberta Agriculture, and spent over four years working with MNP as a Farm Management Consultant.