Beef Market Update: Tight supply, strong basis inspire northward migration of feeder cattle

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Though you may not be able to tell from the last week of quiet trading, it’s been a busy month for the cattle markets.

On January 31, the United States Department of Agriculture released its cattle inventory report for January 1, showing a one percent increase in all cattle and calves in the U.S. compared to the same time in 2017, and a seven percent inventory jump in cattle and calves on feed for the slaughter market. The total cattle and calf inventory, according to the report sits at around 94.4 million head (and 13.1 million head in feedlots for the slaughter market).

Statistics Canada also published their numbers on U.S. feeder cattle movement into Canada.

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“When the dust all settles, just over 106,000 head of feeder cattle and calf imports did come north — over 80% of those into Western Canada,” says Anne Wasko of Gateway Livestock. “And that’s kind of the reason — one of the reasons — why the January 1 on-feed numbers for Saskatchewan and Alberta are up eight percent compared to a year ago.”

For comparison, in 2016, added Wasko, Canada brought in 18,000 head from the U.S.

Perhaps a bit surprising considering high feed prices, the movement, says Wasko, has been inspired by a tight Canadian supply and a strong basis. Instead of cattle flowing towards cheap feed, they’re flowing with their own value.

Still, the market has been fairly calm in recent days.

“This past week has been pretty quiet, pretty slack. From a cash perspective, you know, February is probably the tightest month for 2018 for slaughter numbers, and so the industry is very current,” says Gateway Livestock’s Anne Wasko, adding there was an expectation for prices to be a couple dollars higher this week in trade. “Certainly we’re at the tightest supply for 2018 as we speak today.”

And although there is some worry of drought, and a need for timely moisture, the overall mood in the beef industry — north and south of the border — is positive.

“We’ve generally all had a pretty good year from a profitability perspective, all through the sector.”

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