It’s not often, and never a good thing, when the basis drops lower than the temperature.
Anne Wasko, with the Gateway Livestock Exchange, says that the chilly basis in Western Canada, currently at about -30 to the U.S. cash market, is certainly reason for cattle feeders to look forward to a calendar flip.
“It is what it is, and at some point it will turn, but it won’t be this week,” she says.
What’s causing the low basis? Nothing new for this fall, that’s for sure. Wasko explains that the same story is playing out: lots of cattle, lots of heavy carcasses, and lots of cows on hooks, too. There’s lots of beef and processors just aren’t getting current, at least in the west.
Wasko says that processors are running well, though perhaps not at full tilt, but when 23 per cent of total slaughter (13,000 animals) are cows, it’s difficult to tidy up the volume. Is there incentive to add processing or focus more on feeders? That’s predicated on supply mix, pre-sales, and margins, Wasko says.
The other big headline of 2022, besides a weak basis, is the drought, both here at home and in parts of the U.S. That lingering drought is pushing more cows to slaughter.
Looking south for prices, Wasko says that U.S. prices did drift lower a little this week, and cut-out did, too. The move is quite seasonal as the “prime rib” buying driver is largely wrapped for the year.
Quickly updating export figures, Wasko says that the StatsCan October data pegs live cattle exports up one per cent in the month, and 19 per cent, year over year.Feeder cattle exports were down 56 per cent (!) in October, while the feeder cattle import pace has increased, flipping the net import/export trend yet again.
Check out the full conversation between Wasko and RealAg Radio host Shaun Haney, below:
Tune in every second Friday for another edition of the Beef Market Update!