Canfax Weekly Article | Report for the week of May 22, 2023

The Western Canadian fed market still has wind in its sails, whereas this has not necessarily been the case for Ontario and the U.S., as both of these markets have either traded steady or lower. Trading $5.50/cwt higher, Western Canadian fed prices averaged over $237/cwt. With higher prices and stronger basis levels, producers did end up selling more cattle than they planned. Dressed sales were reported from $393-398/cwt delivered. Both Alberta fed cash-to-cash and cash-to-futures basis levels are now stronger than the five-year average. Western Canadian fed slaughter for the week ending May 13 totaled just under 39,000 head, 8% lower than last year.

The supply and quality of light calves is seasonally deteriorating, and weekly prices vary accordingly. Grass interest continues for larger calves, and it should be noted that all 500-800 lb feeders are trading at or within $1/cwt of historical record-high prices. Record-high fed cattle prices and profitable feeding margins are also fueling interest for larger calf and yearling bunk replacements. December live cattle futures have rallied around $3/cwt higher over the past three weeks and are providing positive hedging opportunities. Weekly auction volumes were steady with the previous week and were 4% smaller than the same week last year. YTD auction volumes totaled 532,239 head. Canadian feeder exports to the U.S. for the week ending May 6 were the largest seen so far this year at 5,290 head.

Spotty moisture conditions and strong salvage prices continue to flush slaughter cows to auction in a timely manner. D2 slaughter cows eased almost $2/cwt lower to average $147.83/cwt and D3 cows traded sideways at $131.90/cwt. Dressed cow bids rallied to new highs this week, up $5/cwt and ranging from $285-295/cwt delivered. This week’s average D2 cow/Alberta steer price spread continued to narrow to around 74%. Butcher bull prices rallied $2.28/cwt higher to $158.56/cwt. Western Canadian non-fed slaughter for the week ending May 13 was 19% larger than the previous week at 6,489 head and YTD was up 9% to 147,594 head.

Bull:

• Feeders should maintain fed market leverage moving forward.
• Profitable fed market hedging opportunities are currently available.
• Fed carcass weights continue to trend seasonally lighter.

Bear:

• U.S. packers are less profitable and are expected to slow production.
• A U.S. cost of gain advantage due to softer corn could flush more Canadian feeders south.
• The summer precipitation outlook for the prairies is not encouraging.