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Packer, feedlot margins put pressure on feeder cattle

Marketings of cattle at Manitoba auction markets were fairly brisk during the week ended March 23, with values for feeder cattle losing some ground while butchers held steady at fairly high levels.

“Demand for the butcher cows and bulls has been constant, if not improving a bit, but the prices for these animals should also be rising further than what they have been,” said Robin Hill, manager of Heartland Livestock Services at Virden.

“Values for the butchers are good, but it needs to be better than good from a producer’s perspective,” he said.

From a feeder point of view, Hill acknowledged there was definitely a weakening of values in that class of cattle over the past week. That trend seems to have started in the heavier-weight animals the week prior, but the downtrend in value was more widespread in the latest week, including some of the lighter grass calves.

The decline in the feeder sector was associated with deteriorating profit margins for packers and feedlots on cattle that were purchased earlier, Hill said. Worries about moisture conditions in Manitoba and other parts of the Prairies may also be linked to the weakening prices. “The decline in feeder values appears to be tied to a little bit of everything.”

While U.S. cattle inventory numbers are the lowest they have been in over 50 years and the cattle numbers in Canada are also on the low side, he acknowledged, it still comes down to what the consumer is willing to pay for the end product.

“Hopefully the Canadian consumer is willing to pay a bit more for those beef products, and then the next guy can get a bit more of a return,” Hill said.

Overall, however, Hill viewed the feeder market as not being all that bad, although it has been better.

The early spring, meanwhile, was being heralded as a mixed blessing for the cattle sector in the province.

“I don’t think that the early spring will have all that much of an impact on the circumstances that cattle producers face,” Hill said, despite the May weather conditions which seem to have moved into March.

There were concerns in some areas of Manitoba regarding the lack of spring run-off and the current dry conditions. He acknowledged some areas could definitely use a good soaking. “Do we need that rain today? No, but we do need something over the next couple of weeks.”

On the other hand, Hill was concerned winter may not be over quite yet.

“The greatest spring”

The warm weather conditions for cow-calf producers have been perfect, he said. “This is the greatest spring one could ever get for spring calving as it is certainly not as cold as it could be for those individuals.”

Given the dry conditions on top of the warmer temperatures, the calves seem to do better as well, he said, noting the more area one has for cows and calves, the better and healthier the animals turn out.

However, cattle producers who rely on alfalfa and grass do not want those plants to start growing yet, and a good soaking rain combined with the warm temperatures would indeed start the process, Hill said.

“If we were to get more rain those crops would start growing and be dead in a month if we got some cold weather,” he said.

Hill also pointed out there was probably a desire to start grazing cattle on pasture, but those animals would likely still be supplemented with feed until the pastures can be sustained.

“There will be cattle out of the corrals early and out on the hills and grass in the next three weeks if there is something to feed on,” he said.

With the drier conditions, he added, the cattle coming to the auction yards have also been on the cleaner side, which in some cases provides better returns.

“Tagged cattle — which is really manure stuck to the animals’ feet, legs and bodies — can and usually do get discounted,” he said.

Sometimes circumstances are circumstances, and those can’t be helped, Hill said, citing periods last year when there was rain every day and animals couldn’t stay clean.

Movement of cattle continued to be good to both eastern and western outlets during the week. There were also some good butcher cattle moving into the U.S.

Hill also wanted producers and the cattle industry to know the Manitoba-Saskatchewan auctioneer championships will be held on May 4 at the Heartland Livestock Services location at Virden. It’s hoped at least 15 auctioneers are willing to take up the challenge on that day.

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Phil Franz-Warkentin - MarketsFarm

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

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