Strong fundamentals for beef market

The early calf gets the price could be the story for this year’s fall cattle run.

While prices were around $2.15 a pound for a 550 lb. steer through mid-October, pricing began to slip in the latter half of the month.

“Things are really just getting going with the peak of the fall run happening from mid October to mid November,” Anne Wasko, marketing analyst with Gateway Livestock Marketing Inc. in Taber, Alberta told Country Life in BC. “But I don’t have very good news right now. Prices have slipped $15 a hundredweight on a 550 lb steer calf. That translates to about $85 coming off the price of those calves in the last few days.”

Wasko says there are two big drivers influencing calf prices right now: what feedlots are paying for feed and the futures market.

Barley costs have jumped 25% over the past month in Lethbridge, or by a dollar a bushel, Wasko notes. The price of corn has gone up as well.

The increases mean it will cost feedlots more to feed calves this winter and they pass that cost onto the calf producer.

“We have seen barley exports to China rise significantly and that is driving up the price,” adds Brian Perillat, manager and senior analyst at Canfax. “I use the rule of thumb that if the price of barley goes up 50 cents a bushel you can peel about 10 cents a pound off the price of your calves.”

The live cattle futures market in Chicago has also taken a downturn, with the December live cattle contract dropping $8.00 in the week ended October 21.

Wasko says a number of factors are shaking the futures market.

“The Americans have record large numbers of cattle on feed, the increase in coronavirus cases may lead to more impacts in processing and, of course, there is the US election,” she explains.

Nevertheless, some really good fundamentals underpin the market.

Processing plants are going full out, domestic demand for beef is strong and Canada had its best month ever for beef exports in August.

“What I have learned over the years is to look beyond the bad news of a particular week even though this is pretty ugly stuff right now,” Wasko says. “We might find that in six weeks things have changed.”