Cattle Bids Turning Up

[errolanderson]

Appears to be solid wholesale beef
demand heading into the Labour Day long
weekend.

Also, Alberta fat cattle basis levels
are starting to narrow (about $9 under
Chicago live) right now. Fed bids lifted
about 2 cents/lb last week.

With U.S. drought, cattle supplies look
to be quite snug heading in 1st quarter
2013.

Feeder cattle starting to rebound as the
corn rally fades. Cattle prices have to
surge substantially to compensate for
these hot barley prices.

[charliep]

Errol,

One of my sources of angst has been how the cow herd adapts to poor pasture conditions and winter hay/silage. A friend reminded about how adaptable the west side of the prairies was in 2002 in stretching forage supplies and using written off crop (including canola) to pull the industry through a disasterous situation. Similar things are happening in the US in the current drought. An advantage in Alberta will be plentiful forage (others will correct me if they disagree) and reasonable feed grain supplies. The new open market will create different dynamics and flows in the market place with the need to book supplies/physical product as important as managing price risk/margin.

Leave the cattle side alone for others discussion but will be following livestock flows/production decisions and impact on feed consumption. They will be a major part of the crop rationing process in the US.

[grassfarmer]

Was in southern Montana over the weekend, feed is
short but guys in these areas are used to drought. My
impression is the big scale, serious outfits will make
it through ok as they generally aren't overstocked.
Hay around $200/ton in those parts but heard it as
high as $250 in areas south and east that are less
used to serious drought. Been getting rains in places
like Missouri that will help their feed/pasture
situation. Corn crop is shot lots of places but they
have crop insurance checks coming.

[charliep]

grassfarmer

What are hay prices like here? Quality? Lots of rain.

[grassfarmer]

Don't know charlie as I'm not buying but I would
guess good hay could be bought for 3c/lb. Lots of
hay got/getting wet but lots put up in good shape
during that hot week in July. Seems like big yields
anywhere I've seen. Don't understand why guys make
and sell hay for 3c/lb I'm sure they can't do it and
replace the nutrients expended profitably.

[errolanderson]

Starting to get some fairly bullish
cattle forecasts for the new year. For
feedlots to dig out of the current poor
profit picture, cash cattle bids will
need to surge over the next few months
or our cattle industry will suffer
further and contract.

But feed barley bids also appear quite
bullet-proof likely into the new year.
Believe feedlot Calgary south are
bidding around $250/MT right now, an
amazing price for this time of year.
Believe, the new open market and of
course drought will expand feed export
movement to the U.S. Lots of demand and
competition for Cdn feedgrains seen.
Corn prices (IMO) are due for a post-
weather market setback, but Cdn feed
grain values may not give much even as
our harvest approaches.

Then stir in the consumer factor . . .
is the current debt/credit environment
and slowing economies enough to dig into
the hotel/restaurant deep enough to
affect cuts and prices?

Not smart enough to figure this out. But
just see these factors tugging at each
other over the next few months.

This will make for an interesting cattle
market as North American fed supplies
tighten ahead.

PS: Cattle on Feed on Friday aft.

[HappyFarmer]

Hay values in Canada are being bid @anywhere
from 70 to 80 dollars a short FOB sask. Stop and
think for a minute and think about that Charlie,
why would they be paying those kinds of levels if
there was a abundance of feed down in the us?
Lots of demand from the us and think you are
wrong in saying the us will be able to adapt in the
same way the praries did in 02. Lots of winter rye,
trit, peas being seed in areas that have picked up
some moisture recently but from the people I am
dealing with they are still short of feed. In a lot of
cases the corn was so bad it wasn't even worth
trying to salvage

And Errol, this place is just fine to discuss this.
Thanks for bringing it up.

[charliep]

HappyFarmer

Any feedback from your US contacts on how they will
deal with the feed situation/early calls on how the
livestock industry will adjust? Heavy cull on cows?
Replacement heifers (sell cows/keep heifers or let
everything go)? Lighter slaughter weights? Anything
else? All things point to a continues shrink of the US
cattle industry. Shrink of the poultry and hog side
but their numbers can come back faster.

Consumer demand in the face of the current economy
and higher prices? Export volumes - US meat exports
have been a driver of things in the past year but will
this continue with higher meat prices? Higher meat
prices in China/S.E. Asian - import meat to control
inflation? Import expensive meat or expensive feed
grains/soymeal/canola meal to feed domestic
livestock?

Same boat as Errol. Lots of questions. Not many
answers. Don't have to wait long before more
becomes known.

[oneoff]

driving grain prices would be a farmers refusal to sell every kernel at what the market says its currently worth.

Its a novel thought that one can keeps some of the surplus hay for future years; and there's such a thing as a rainy day fund; and a few bins of extra grain will keep for years if in good condition; and its suprising how comforting it is to have those strategic reserves (both public and private) when bad luck, or poor,inadequate or no planning; or factors beyond control broadside any sector.
That is another way of part dealing with twists of fate in a real world.

[ASRG]

Feeding cows $200-250/ton hay doesn't make sense. A cow generally needs 30-35 lbs a day. If ranchers are feeding 200 days a year (places in the drought areas might be higher) they would be better to sell their cows and buy back in when conditions improve?

Here is the problem with that: Most ranchers are old. Once they "escape" from owning cows it is unlikely they would want to get back into the game?

This isn't necessarily a bad thing? It wouldn't hurt a bit to reduce the national cow herd by 20-30%? People are eating less meat over health concerns and costs. We don't need all those cows.

[charliep]

Just so we understand that this is a continuation of the trend that has been in place for 10 years with the cow herd down 20 plus percent already.

In some areas (not in all), four legged critters are better ways to harvest crop (maybe even perennial that doesn't require tillage every year) than a quarter million dollar each tractor, one pass seeder and combine. They may fart but they are many ways pretty environmentally friendly and use our resource (land) pretty efficiently if a farmer manages that resource well.

Way off topic. Same pain for the livestock side as they adapt to the new feed world (price and quantity). Longer term an optimist given the reduction in supplies will eventually hit home and grain will increase ($8/bu will be a signal to grow more if mother nature cooperates). Hogs and poultry can biologically respond faster to price improvement. How will the consumer respond given their realities and the choices at the meat counter?

[charliep]

oops. Grain prices will decrease as production increases next in response to higher prices.

[charliep]

A math guy so like to do the numbers for a Montana (numbers are different in Alberta). Will use the bottom end of your estimates. $200/ton is 10 cents/lb. 30 pounds/day equals a cost of $3/day or over 200 days $600 to winter a cow. A 600 pound calf means the first $1 a pound paid 14 months from now goes to wintering the cow. Way too simple (will be criticized) but simple math for me.

[GreenValley]

ASRG, make sense to buy hay at expensive
bill cuz buy back cows may not next year
but 3 or 4 years away so it is cheaper
if want run business or sell at all and
not bother to buy cows in 3 to 4 years
away and enjoy the vacation. Also 10
years away somewhat arrive will be baby
boomer year, what cattle will be look
like. I am one of baby boomer.

[GreenValley]

Charlie, in Montana they has grass left
over to feed in winter so I believe 200
days is too much perhaps 100 days more
or less. Where most time no snow there
so can graze grass what left in winter.
In drought year like this year is other
question, maybe increase pasture acre vs
cow ratio so has left over pasture for
winter.