Beef Market Update: Strong basis prompts cattle feeders to remain current

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A strong basis in Canada and the U.S. is prompting cattle feeders to sell sooner than later, and at lower weights.

“When you pick up cattle prices in the South Plains $3-5 from last week — 121/122 — and the futures dropped as we’ve seen, you continue to get this widening spread,” says Anne Wasko of Gateway Livestock in this latest Beef Market Update.

But a strong basis condition in Western Canada and the U.S. is really not that abnormal for this time of the year, says Wasko, adding there will be convergence at some point, even if it means both cash drops and futures go up.

In Western Canada, only one of sixteen weeks saw fed cattle prices trade below the U.S. But with June live cattle futures around $103, there isn’t much incentive to hold on, says Wasko, which is keeping cattle feeders current. And that’s impacting carcass weights.

“But when you look at carcass weights here in Western Canada, or in Canada for that matter, we’ve seen weights dropping pretty substantially. Our weight last week in Canada was 885lb, dressed. That is 20lb under last year, 12lb under the five-year average.”

USDA Cattle on Feed Report

In the States, inventory for cattle and calves on feed for the slaughter market April 1 was up 7 percent compared to 2017 — the second highest since the USDA began reporting in 1996. March placements totaled 1.92 million, a 9 percent drop below 2017, and marketings of fed cattle totaled 1.84 million — a 4 percent drop below 2017.

Cattle on Feed – April 20, 2018

The numbers weren’t terribly surprising, says Wasko.

“The guess had been 108 percent, so that’s not too far out. Both March placements and March marketings were bang on expectations.”

This week’s Beef Market Update was recorded live on RealAg Radio. Here’s the segment:

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