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Will the cattle market thrive in 2018?

The year that just ended saw a more or less steady upward trend

By most accounts 2017 was better than expected for most cattle auction marts across Manitoba. Volumes were up and prices weathered some early challenges, however, it leaves ranchers wondering if that trend will continue into the new year.

“We closed the year with prices that were higher than a year ago,” said Dave Nickel of Gladstone Auction Mart.

Looking back over the year, cattle prices generally crept upwards with the exception of a few spots early in 2017 and in August.

In mid-November of 2016, prices for feeder steers 400-500 lbs. were struggling to hit the $200 mark (per hundredweight). As of December 15 of this year, those same animals were closer to the $230 range.

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Heifers in the 500- to 600-lb. range were averaging close to $155 (per hundredweight) back in November of 2016 while just a week ago they were well over $200.

“Prices generally got better as the year progressed,” said Herb Lock of Farm$ense Marketing. “Highs for the year in the calves and yearlings were probably in the late fall run which was totally unusual but welcome.”

He adds exports were up in 2017, which was a big catalyst for the rise in prices. He says Chinese demand was especially strong throughout the year. The safety measures Canada has put in place to keep its animals healthy were a big drawing card for Asian buyers. Cleanliness, the health aspect of the animals and food security were the main drawing cards, according to Lock.

One of the surprising elements to this year’s market was the fact more cattle came to market than a year ago.

“With the extra cattle, we weren’t anticipating as much strength, so that has translated into pretty good profitability at the feedlot and cow-calf sector,” noted Brian Perrilat, senior analyst with the Canadian Cattlemen’s Association.

Nickel agrees that volumes at his stockyard were noticeably higher.

“We closed the year selling more head than last year or the year before,” he said.

However, Lock says one question facing the industry is how the Canadian herd will respond to the upsurge in prices.

He points out the U.S. herd has been rebuilding for three years and likely has two more ahead of it.

“With us, we’ve been flat for two years,” he said. “So what’s with the cattle industry herd inventories?”

Going forward in 2018, some analysts believe the large volume of cattle in the U.S. will weigh down the futures market. According to the USDA, the total number of cattle being prepared for slaughter at the beginning of December was nearly seven per cent higher than in 2016. The amount of animals being sent to feedlots in November was similarly higher compared to the same point a year ago.

Both cash and futures price could fall as a result which would eventually drag down the Canadian market.

The USDA also made adjustments to its camera grading system in the late fall, which resulted in less carcasses attaining higher grades than previous.

“Suddenly there weren’t as much choice middle meats around in the U.S. as anticipated,” said Perrilat. “That probably did support the market.”

Feed supplies were more than adequate throughout the year, so much so, that U.S. ranchers began sending their animals to Canadian feedlots in the last quarter.

“We’ve also imported almost 80,000 feeder cattle into Canada. So we have more cattle sold this fall, more cattle on feed,” said Lock, noting cattle tend to go where the feed advantage exists.

While some pundits believe the market could tilt downwards in 2018, Lock says there isn’t a clear reason yet to expect that to happen.

“There’s no reason to think this won’t continue,” he said. “Unless something goes wrong.”

photo: File

About the author

Columnist

Dave Sims

Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Dave has a deep background in the radio industry and is a graduate of the University of Winnipeg. He lives in Winnipeg with his wife and two beautiful children. His hobbies include reading, podcasting and following the Atlanta Braves.

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