20 CATTLE COUNTRY February 2017
Mixed signals in cattle markets The cattle markets opened stronger than anticipated in 2017, and poor weather conditions delayed marketing in most areas by over a week. The new price book for cattle in Manitoba has some interesting fundamentals attached! The Live Cattle Futures market still seems to be detached from the cash prices, running about 10 cents behind in the first and early second quarters, and 15 cents behind the current cash for the remainder of the year. This scenario has meant that the heavy feeder cattle over 900 lb that will finish before June are in stronger demand than the middleweights. In the ring the large price slides that we experienced last year have been reduced considerably. Prior to the year-end break in the markets, the average slide was 10 cents, working both ways for lighter and heavier weight differentials off the base weight. So far on the cattle over 900 lb there is very little price slide right up to 1050 lb. If the cattle are lighter, there is no price slide up because the cattle will be ready for slaughter at a later date and will miss the higher priced marketing window. I am not advising you to keep your 750 lb calves and make them 900 lb before you sell them, because they will still go to market at the same time. On the lighter cattle, the spread between the steers and heifers has tightened with the heifers increasing in value. That spread might be short-lived, as I do not expect as many heifers to be purchased for breeding this spring as last year. Disappointing bred heifer prices this fall will cause some grasser operations to reconsider last year’s investments, and they many return back to steers. A lot more Manitoba producers retained ownership of their calves last fall for varying reasons. There is a very
RICK WRIGHT The Bottom Line good chance that those calves will come to market sooner than expected, especially if they were backgrounded at home rather than at a custom feedlot. Despite the abundance of cheaper priced feed, the market prices look to sharply decline as the year progresses. Many producers have expressed concern over the condition of their pens. Lots of snow and very little frost in the ground, combined with high water tables make for the perfect recipe for wet muddy pens in the spring. The majority of the farm origin cattle could well be sold prior to the end of March. The exchange rate and value of the Canadian dollar is working against the feeder calf market as well. With the Canadian dollar sitting at above 75 cents, the demand for Canadian feeder cattle in the United States is diminished. The money experts are predicting that the dollar will stay around the 75 cent mark for the remainder of the year with a projected short term high of 80 cents. The Americans have been more sensitive to the futures and were more disciplined buyers of feeder cattle for the past couple of years compared to their Canadian counterparts. They have the profits to prove it. Unless the futures rally, I don’t expect them to provide much more than a floor price for the feeders this spring. We could see a slight increase in heifer exports, especially on some of the fleshier cattle in the spring. Both the cattle feeders and the packing plants are
showing some positive margins on the inventory that they are marketing right now. Packers are fairly current with their kills, and despite lower meat prices at the wholesale level, they are still making money. With the kill being current, the feedlots have a little more leverage when marketing their finished cattle than they did last summer. Carcass weights have been coming down since the start of the fourth quarter of 2016 - all good news in the short term for the cattle industry. So far this spring there has been very little forward price contracting of feeder cattle. The majority of the larger feedlots think that there will be an abundance of mid-weight feeder cattle available in the first half of 2017. If the supply and demand ratio kicks in, that should reflect in the prices. Most of the bigger feedlots are purchasing on a cash and carry basis and are taking delivery of their purchases within seven to 10 days of buying them. The butcher cow market continues to struggle as the majority of the cows are being killed in Canada. A weaker US price, combined with a strong Canadian dollar, has limited the number of cows going south. Traditionally, there is a large run of cows in January and early February in Canada, and currently the supply is larger than the weekly kill capacity. The herd expansion in the US has come to an end, and there have been larger than normal numbers of cows coming to market in the US since the fall. There could be some improvement in the prices in March, but probably not enough to make it worthwhile keeping your cull cows. If the experts are correct, we could see the highs of the cattle market in the first quarter of 2017. All we need is one good turn to change that, such as the Chinese taking American beef, and that could all change. Until next time, Rick
Risk management programs to continue Manitoba farmers will continue to benefit from comprehensive coverage provided through AgriInsurance and the Western Livestock Price Insurance Program in the upcoming season, Federal Agriculture Minister
Lawrence MacAulay and Manitoba Agriculture Minister Ralph Eichler announced at Ag Days here today. “Governments continue to work together to ensure producers have access to an effective suite
of business risk management programs that offer protection against a broad range of farm business risks,” said MacAulay. “Taking proactive steps to protect the farm against the financial impact of extreme weather and price
fluctuations is a key strategy for success.” The ministers noted total AgriInsurance coverage for 2017 is expected to exceed $2.6 billion on 9.6 million acres in Manitoba, the second-highest level of coverage on record.
www.mbbeef.ca
AgriInsurance coverage is increasing on average by seven per cent, while premium rates are down by an average of four per cent, as compared to last year. “Through AgriInsurance, we continue to offer a comprehensive risk management program for Manitoba’s farmers, which is effective whether they are just starting out or have had years of experience,” said Eichler. “To ensure the long-term growth of our province’s agriculture sector, AgriInsurance is an essential tool, as it provides reliable protection against the unpredictable challenges of weather and other production-related risks.” More than 8,400 farms are enrolled in AgriInsurance. Manitoba has the highest level of AgriInsurance participation in Canada, covering over 90 per cent of annual crop acres. The total governments’ share of AgriInsurance premiums for 2017-2018 is expected to be $136.3 million. Under AgriInsurance, premiums for most programs are shared 40 per cent by participating producers, 36 per cent by the Government of Canada and 24 per cent by the Manitoba government.
Administrative expenses are paid 60 per cent by Canada and 40 per cent by Manitoba. The Western Livestock Price Insurance Program (WLPIP), which was expanded to include Manitoba cattle and hog producers in 2014, provides protection against unexpected price declines. Due to lower cattle prices in 2016, WLPIP paid out $1.7 million to producers, with 73 per cent of insured calves qualifying for a payment. The average payment for each calf that qualified for an indemnity was $94. Under WLPIP, administrative expenses are paid 60 per cent by Canada and 40 per cent by Manitoba. Premiums are paid by participating producers. AgriInsurance and WLPIP are risk management programs supported through Growing Forward 2, the five-year federal-provincial-territorial policy framework, and are administered by the Manitoba Agricultural Services Corporation (MASC). For more information about AgriInsurance, WLPIP or other programs, visit a local MASC office or www.masc. mb.ca. Government of Manitoba Media Release