Beef Market Update — Double Whammy from the Dollar as “Normal” Cattle Market Returns in Q1

The first quarter of 2016 is in the books and it’s becoming clear the last two years in the cattle market were likely outliers.

“Unfortunately it’s a reminder of what normal is. 2016 is nothing like 2014 and 2015 which were really bull markets that kept running through most of both years. That’s not the case (in 2016),” notes Anne Wasko of Gateway Livestock to start this latest Beef Market Update.

While US cash prices for fed cattle have been trading in a narrow range of six dollars for the last three months, it’s a different story in Alberta.

“Unlike that six dollar range in the U.S., we’ve had a 13 dollar Canadian range — we’ve traded fed cattle from 164 to 177, but that goes back to the big moves we’ve seen in the Canadian dollar,” she notes, referring to the loonie rising from 68 cents in January to 77 cents recently.

Anne Wasko

Anne Wasko

Cash values for feeder cattle in Canada have also been more volatile than in the U.S., with American prices trading in a 8 dollar range while feeder cattle north of the border have traded in a 36 dollar range since January 1st.

“The icing on the cake for feeder cattle is we’ve had a basis shift. Early this year we had a very narrow, very strong basis on Canadian feeder cattle, we were only four dollars back of US futures. Last week we were 23 dollars back. Unfortunately, that’s what I define as a double whammy,” says Anne. (continues below)

Even with tight supplies in Canada, new export numbers for January show increased year-over-year sales into Canada’s two largest markets — the U.S. and China/Hong Kong. Exports into China and Hong Kong rose by 47 percent January-over-January, she notes: “It’s certainly our number two market now, and in this tight supply environment, that’s one of the good news stories I’m looking at.”

The USDA also had some good news for cattle feeders on Thursday, projecting much higher-than-expected corn acres.

“Weather aside, the expectation is for more acres to go to corn,” she says. “Anytime you’ve got weakness on feed it tends to be pretty supportive to feeder cattle prices.”

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