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Slow U.S. corn planting a drag on cattle prices

Trade worries contribute to ongoing market volatility

Recent strength in grain markets has inversely weighed on cattle prices, although activity at Manitoba’s auction yards is slowing down for the season.

A number of auctions were closed for the week, and many will soon shut down for the summer or run at reduced capacity. Prices for what was still moving have weakened over the past month, taking some direction from recent declines in U.S. cattle futures.

“These markets have been so erratic,” said analyst Anne Wasko of Gateway Livestock in Alberta. The biggest factor in recent weeks has been the poor planting pace for corn in the U.S., she said.

“As corn prices move higher, feeder cattle prices are adjusting lower,” she said.

Cash markets for fat cattle are also lower, with expectations that prices will remain weaker into the third quarter, as that’s when the biggest supplies from the U.S. are positioned.

In addition to the weather, trade issues continue to weigh on all the markets, said Wasko. While beef isn’t in the spotlight to the same extent as pork, the underlying concerns are weighing on all markets.

Strong growth in U.S. gross domestic product over the past year has been good for beef demand, but that could change due to trade worries. “That’s just not good for beef demand in the long run,” said Wasko.

While wet Midwestern weather was driving U.S. corn prices recently, a lack of moisture in Western Canada is raising concerns over crop and pasture conditions.

“If this was year one it might be a different story, but this is year three for a lot of areas,” Wasko said of the Prairies’ dryness.

In addition to any direct influence they have on price, drought conditions may see cattle coming to auction sooner. Animals could also be turned out into hayland, reducing hay production and exacerbating feed tightness.

Canadian cattle-on-feed numbers have already been at inflated levels for some time, but with more cattle coming in and feed costs high, it doesn’t bode well for feeder cattle prices. Wasko expected volatility would be the order of the day going forward.

While there is much uncertainty in the cattle sector, she said solid exports were a good-news story, with the U.S., Japan and China/Hong Kong all showing great demand through the first quarter.

“These markets have been on fire for us,” she said, adding that Canada’s current diplomatic dispute with China does leave some uncertainty on that front.

About the author

Columnist

Phil Franz-Warkentin writes for MarketsFarm specializing in grain and commodity market reporting.

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