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High feed prices push more cattle to slaughter

Manitoba cattle auction marts operated in routine holiday mode during the week ended July 20 with feeder cattle seeing steady prices and average volume for this time of year. But, butcher cows on the slaughter market saw above-normal volume, and weaker prices, an industry official said.

Rick Wright, a buyer with Heartland Buying Order Company, said slaughter cow prices eased because of the higher-than-average number of cattle for sale during the week.

Some of the price weakness was also influenced by what happened in U.S. cattle markets during the week, Wright said.

“Drought conditions in the U.S. pushed a lot of cows into the slaughter market,” Wright said. “With a higher supply, the demand wasn’t as strong and that pushed U.S. prices down, which influenced the Canadian market.”

Drought conditions in the U.S. Midwest caused a rally in U.S. corn prices, making it a very expensive feed option for the U.S. livestock sector. The strength in U.S. corn prices spilled over to push Manitoba corn prices higher, making it a very expensive feed option for Manitoba farmers as well.

But, corn isn’t the only feed option that is becoming very expensive for Manitoba producers, Wright said.

“There’s way less acreage of barley that’s been planted here in Canada, so barley prices, with the drier conditions, have also skyrocketed,” he said. “Anything that can be used to feed the cattle is being affected by the weather in the U.S. and that’s pushed the prices considerably higher than what was anticipated two months ago.”

A stronger Canadian dollar, which peaked at US98 cents during the week, also contributed to the weakness in the slaughter cow market because it made the investment more expensive for foreign buyers.

Wright said the high feed prices and the stronger Canadian dollar also had a “very” negative impact on forward contracts that are being offered for cattle. There were significantly less contracts made during the week when compared to a month ago.

“A lot of the producers that did not contract earlier are second guessing themselves now,” Wright said. “But, they don’t like the new price so they still haven’t stepped up to the table.”

Wright said though producers who didn’t contract yet may be wishing they had, they might have made the right decision.

“I don’t know whether it’s right or wrong that they’re not contracting today because there is a lot of volatility left out there,” he said. “This thing could go either way. If we get another two weeks of this extreme hot weather throughout the U.S. Midwest and the grain-growing belts of Canada, it’s going to have a very detrimental effect on the quantity and quality of feed grains.”

Wright said the drought in the U.S. has caused fall prices to drop compared to what was being predicted in the spring. But, he said it’s not a disaster yet and prices will be very close to what producers got for cattle in the fall of 2011.

Many cattle auction marts in Manitoba are closed over the summer and Wright expects August is going to be a very quiet month. He said auction marts in Manitoba probably won’t start seeing an increase in cattle for sale until September 1, 2012.

About the author

Columnist

Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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