Beef markets are struggling for reasons beyond the usual annual low, as they search for information on when Tyson’s Kansas plant will be back up and running.
South of the border, markets have continued lower for the last six weeks, with cut-outs backing off (but still way over a year ago), due to perceived disruption on supplies, says Gateway Livestock’s Anne Wasko.
“[We] continue to see price pressure on local western Canadian and eastern Canadian markets as well,” says Wasko. “So here in Western Canada we saw our fat cattle prices drop $3 to $4 last week over the previous week. That brings our Alberta fed steer average down into that 136.5 area – that’s well off break-evens if you weren’t hedged, or insured, or forward contracted.”
As tough as it sounds, Wasko says, we are still trading above the U.S., with a positive $5 basis.
But, there’s a timeline for changes in the U.S., with Tyson looking to rebuild and be back up-and-running by January. In the meantime, logistics are a little complicated, with cattle being shipped to other plants, where they are running extra shifts, and Saturday kill shifts.
“Everybody’s wondering how long can that last – how long can we keep running six day kills, making up for this additional slaughter, moving cattle around – transportation costs money…,” says Wasko.
With the caveat that nothing is for sure, Wasko says it looks like live cattle futures signalled a bottom last week in the U.S. They were down into the 94 cent area, but crawled back to 98 cents.
“It doesn’t necessarily mean the cash is going to follow suit…but at least the market’s feeling better about maybe it’s gone as low as it needs to go given this news around the fire.”
Looking to lean hog futures, hints of China making amends with some Canadian agricultural products have had a positive impact.
“The market liked that kind of talk,” says Wasko, “so you just saw the December lean hog futures go from 58 to 68 U.S. through the week.”
Wasko says the underlying direction from the increase is also impacted by the movement in Chinese hog prices, due to African Swine Fever. (Story continues below audio)
Feeder cattle sales volumes are starting to pick up.
“The price levels are averaging anywhere from $10 to $13 a hundred lower than say the same sale a year ago,” says Wasko, adding the market is setting itself up with that in mind, looking to lower finished cattle prices in 2020.
“For the first time in a long time, we’ve got equivalent barley price getting a whole bunch closer to that U.S. corn price,” says Wasko, who adds we may not see the movement of U.S. corn north this year.
It looks good for feedlots’ cost of gain, with bumper barley crops in areas, and prices in Western Canada coming down as harvest progresses. Additionally, recently closed feedlots have been purchased, and their re-opening, says Wasko, will add another support to calf prices.
For cow-calf operations, feed availability is a little more variable, with many areas short on feed, and others reliant on failed annual crops for green-feed.