Cattle prices seen as strong for year to come

CNS Canada –– Canada’s cattle industry should continue to see high prices for animals at auctions over the next year or so while operators try to rebuild their herds, industry participants predict.

“Typical risks for cattle prices are the Canadian dollar and feed costs for cow-calf producers and feeders,” said Brian Perillat, a manager and senior analyst with Canfax.

Feed grain prices have generally come down over the past three to four years while the Canadian dollar has plummeted over the past several months. Both factors have helped lift cattle prices to record levels over the past year.

Anne Wasko, an Alberta market analyst with Gateway Livestock Marketing, expected cow kill numbers to be down in the next few months as producers hold back some cattle for replacement purposes.

“We’re certainly going to be looking at a squeeze on fed cattle slaughter in 2015 in Canada,” she said, adding heifers will also likely be held back in some cases for herd retention.

Perillat agreed that will support prices moving forward.

“When you’re in a situation of tight beef supplies and you start taking heifers and cows off that market, that further supports prices and shorts the beef supply, possibly into 2016,” he said.

Wasko expected beef prices to remain strong into 2016 due to the strong North American demand for beef and the reduced herd numbers.

“The economics behind the current price level certain has some (producers) holding back heifers for replacement, that’s the feeling I’m starting to get,” she said.

Perillat agreed, saying the Canadian herd is at its lowest level in 20 years.

“We’re testing demand all of the time, consumer demand and resilience, as pork and poultry continue to grow supplies that could cap our prices,” he said.

Allan Munroe of Killarney Auction Mart in Manitoba said he recently talked with a producer who wasn’t sure whether to cash out a yearling or put it on grass.

Many growers, he expected, will decide to keep their young animals for long-term gain.

“Grain (prices) are holding, the dollar is holding; there’s a feeling (the market) will stay high and we don’t make cattle overnight, not like pigs,” he said.

Price insurance may be something producers will want to look at when gauging those dilemmas, Munroe said.

— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.