MARKETS
THE WESTERN PRODUCER | WWW.PRODUCER.COM | JUNE 30, 2011
7
CATTLE | SUPPLY
Futures predict strong cattle prices in early 2012 BY BARB GLEN LETHBRIDGE BUREAU
Cattle futures surged last week on news of fewer than expected cattle in American feedlots, but Canadian market analysts don’t see a supply problem developing soon. Brian Perillat, manager and senior analyst at Canfax, said the U.S. cattleon-feed report, a healthy export picture and strong packer margins drove the recent rally, but he doubts that February and December prices will average about $1.20 as the current futures market suggests. “If you look really far out, these futures prices seem phenomenally high,” Perillat said. “Maybe under good conditions, we may hit that as a peak. We saw that in the spring. But to say we’re going to average that over
an entire quarter, we’ve never seen that.” The futures rally seemed to feed off supply concerns when the United States reported a four percent increase in cattle on feed, compared to the expected 5.4 percent increase. Also, the number of cattle put on feed in May fell 11 percent from last year to 1.81 million. That indicated reduced supplies in the third and fourth quarters, and futures prices rose about 4.5 percent in the following three days. But Perillat believes the high prices will help reduce the supply problem. “Supplies are not going to be as tight as they would expect just because there’s a lot of cattle out there that could get pulled forward and move into these spots that are offering such high price premiums,”
said Perillat. “We’re looking at pretty big supplies come this summer, especially in the U.S.” Despite the smallest U.S. calf crop in about 50 years, more cattle are going to market because of better prices and southern U.S. drought “The drought in the U.S. and Mexico brought a whole bunch more cattle onto feed as well, so that actually did pull cattle forward, and those are the cattle that are going to be hitting us in the third quarter.” Perillat said recent cattle markets are incredibly volatile. The responses of commodity fund managers to livestock reports make the market harder to predict, he added. Also, consumers have less disposable income when fuel prices rise, which lowers meat purchases. access=subscriber section=markets,livestock,none section=markets,livestock,news
TRADE | MEXICO
Mexico weed policy shuts out canaryseed
“Will consumers pay up to make t h e s e h i g h p r i c e s s u s t a i na b l e throughout the whole beef supply chain for the packers and the wholesalers to actually achieve the prices they need, at the retail level, to sustain $1.20 fats or whatever we’re looking at into the fourth quarter?” he said. Healthy beef exports this year are also fuelling the market, as are strong U.S. packer margins. Futures markets will watch corn price’s effect on feeder margins.
Barley is often the feed of choice in Canada, but barley production has dropped in recent years. However, wet weather and a late seeding start may have encouraged more barley plantings, and there could also be a good supply of feed wheat. “Price wise, we are at a fairly big advantage over the U.S.,” said Perillat. “Our feed costs are a lot lower than the U.S. Our spread between Canada and the U.S. gives us a lot bigger advantage than we’ve had probably in the last few years.”
The Cover Crop That Pays “I tried them all. This is the one you want.” Steve Groff
BY SEAN PRATT SASKATOON NEWSROOM
The bird cage door has once again slammed shut on canaryseed sales to Mexico. Canadian and Mexican plant protection officials have failed to extend an interim agreement regarding quarantine weeds that expired June 21. “For nearly a year government officials have been negotiating a solution, and the expiry of the agreement is a failure to ensure that trade can continue,” said Gordon Bacon, chief executive officer of the Canadian Special Crops Association. Canadian farmers and processors and Mexican processors and customers will suffer, he said. “A missed deadline means missed sales.” Kevin Hursh, executive director of the Canaryseed Development Commission of Saskatchewan, said the trade impasse will likely result in more downward pressure on already lackluster canaryseed prices. “The price is maybe not going to crash and burn at this development, but it certainly isn’t at all supportive of prices given the supply and demand situation,” he said. New crop canaryseed prices of 25 to
Mexico is Canada’s biggest canary seed customer. | FILE PHOTO 26 cents per pound are already too low, he added, considering the Canadian Wheat Board’s Pool Return Outlook for new crop durum is more than $10 per bushel on farm. “Compared to where everything else is at, canaryseed should be 30 cents-plus to be competitive,” said Hursh. Mexico is Canada’s largest canaryseed customer, typically accounting for 25 percent of total exports. The market was jeopardized last summer when Mexico began enforcing a zero tolerance policy for quarantine weed seeds such as wild buckwheat, stinkweed and cow cockle. Trade ceased until officials in
both countries agreed to a temporar y workaround in which any shipment from Canada that didn’t meet requirements could be recleaned in Mexico and moved to destination. Sales soon resumed, and Mexico imported 20,785 tonnes of Canadian canaryseed through the first seven months of the 2010-11 campaign, representing 25 percent of the total export program for that period. Hursh said trade will halt again unless a new agreement can be reached because exporters will have a tough time meeting Mexico’s strict zero tolerance rules. Canaryseed demand is static from year to year so it is doubtful another country will pick up the slack in Mexican demand. Hursh said it is disappointing that so little progress has been made after a year of negotiations. “I think it’s to the stage where we probably need some fairly high political intervention to say, ‘why are you treating canaryseed different than all the other grains you import into Mexico?’ ” Bacon said the failure of negotiations highlights the need for a science-based approach to assessing and managing risk. access=subscriber section=markets,none,none section=markets,crops,news
CONTINUED FROM PREVIOUS PAGE
SUBSCRIBER BENEFITS | DAILY INFORMATION
of things with canola that you can’t with barley or oats,” said Jack Shymko, an Ituna, Sask., farmer and oat industry leader. “I really think guys did everything they could to get canola in. Even if your canola freezes a little bit and you get a number three, it’s still between $11 and $12 a bushel.” MacKinnon said farmers hate seeing fields stand empty, so they might try something. “If they can get out there at all, they might throw some grain in the ground just to have something growing that’s a competitor to weeds and will burn up the moisture,” he said. Most farmers will just do weed control this summer. “There’s going to be a lot of chem fallow,” said MacKinnon.
USDA report on Producer.com
FOR POOL RETURN OUTLOOK, SEE PAGE 63.
MARKET WATCH
D’ARCE MCMILLAN
B
y the time you get this paper, the U.S. Department of Agriculture’s June 30 acreage and stocks reports will be out and will have supported or weakened grain prices, depending on how the market reacts to the numbers. Check our daily coverage of major Canadian and U.S. reports on our
web and mobile sites and e-mail services. Also, we write a crop market report that appears after the market close in the daily news part of Producer.com and on Producermobile.com, our site that is optimized for use with smart phones. This report is also usually featured in our Producer Daily e-mail. You can sign up for it at Producer.com. The web and mobile sites also feature a blog by markets reporter, Ed White, delivering analysis and often a smile about market developments. We’ll have coverage of the USDA reports in the next Western Producer, but remember, as a subscriber you can get a jump on market news and much more at Producer.com. access=subscriber section=markets,none,none section=markets,news,none
Farmer, cover crop innovator Holtwood, PA
Breaks up compaction, improves drainage, air movement Excellent forage quality with 20-43% protein and high grazing production (5,000 lbs/acre) Significant trace minerals University tested, proven over 10 years
The only cover crop Soaks up N like radish a sponge, even proven to from manure, increase releases in yields... spring
ThE original and only Amazing taproot drills deep where steel can’t reach Plant at least 30 days before average killing frost date
YIELDS UP! Corn +11% Beans +10%
Winter Wheat +5-12 bu/acre
It’s the taproot! By The Cover Crop Seed Company
1-800-767-9441 TillageRadish.com