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Packers’ aggressive pace cuts into supply glut expectations

Bids on heavier-weight feeder cattle remain supported

A glut of beef that was expected to flood grocery stores this summer, and depress prices for Manitoba ranchers, might not be as large as initially expected.

Strong export business in the U.S. and a massive amount of processing by U.S. packers has managed to whittle down the volumes of summer beef out there, according to a market watcher.

“Packers are making a lot of money, and when they’re making money, the more cattle they (process),” said Herb Lock of Farm$ense Marketing. “So they’re very aggressive on the (processing) side, which is exactly what the industry needed.”

At one point there were ideas the volume of cattle on the market this summer would be up 10 per cent, but it’s now likely closer to three per cent, according to Lock.

A recent increase in beef-processing capacity in North America has also bumped up slaughter activity in Canada. Lock estimated Canadian plants are up seven or eight per cent from a year ago.

“The aggressive nature of the packers means there is less cattle ahead,” he said.

Prices for heavier-weight feeder cattle in Manitoba, during the week ended June 1, stayed consistent with bids recorded the previous week. Steers in the 700- to 800-lb. class topped out near the $200/cwt mark at most auction marts, with one outlet reporting top bids of $225.

Around 4,000 head were sold to buyers at the province’s eight major auction marts, up from 3,600 head the previous week.

Prices for lightweight steers were stronger on the whole. Steers in the 400- to 500-lb. class were generally $5/cwt higher than the week before.

Butcher cows were one of the few classes to soften on the week, generally trending $2-$3/cwt lower.

“We are still selling live cattle to the U.S. at a premium for delivered values,” said Lock, adding forward valuations also look much stronger than three weeks ago.

The potential rise of interest rates in Canada is another factor Lock is watching. Recent comments from the Bank of Canada indicate hikes could be on the way this summer, which could hit farmers in the pocketbook.

As well, trade tariffs and the ongoing saga of the North American Free Trade Agreement also could affect the market.

At this point, Lock doesn’t see a lot of farmers worrying about it so far.

“There doesn’t seem to be a lot of angst in the cattle industry about any NAFTA deals changing the beef business,” he said.

About the author

Columnist

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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