Cattle numbers and prices

[grassfarmer]

I'm confused. I backgrounded half my calves like many people in the hope of better prices. In late January/ early Feb I spoke to many smart, in the know people, auctioneers, feedlot operators cow calf guys that background calves every year and they were all pessimistic. Prices could only go down - huge backlog of fat cattle ready to slaughter in June with not enough kill capacity here in Canada - fears of last year maybe 40c/lb fats. I rode out the worst of the February lows and sold on what I thought was a rally late in the month. As you know they have risen ever since, today 7 weight steers at 98cents/lb with TEAM, 6 weights to $1.11.
I was at a meeting last week where a beef analyst/ABP director spoke and she was optimistic. Feedlots are only half full!!, feedlots will be able to short packers and raise prices even without the border opening!! Really? how come?
Stats Canada figures in the Alberta Ag price gouging enquiry reveal 4.9 million calves as of Jan.1 - we have capacity to kill 3.5 million a year. So are these figures all garbage? have enough guys backgrounded calves that the feedlots are running out of cattle or were there never that many calves to start with? Drought led to cow culling in 2002 for sure, which would give a smaller calf crop in 2003 but equally we didn't export the 1/2 million(?) calves we did in fall 2002. Where has the feedlots recent increased spending ability come from? I thought 6 weeks from early Feb they were all going to be broke - that's next week.
What is really going on?

[blackjack]

grassfarmer; since I was reading the weekly Canfax report, I decided to look back to Feb 2003. I found it to be interesting in that there was suppose to be 27% fewer cattle on feed Jan 1/03.Between 99 and 02 Alberta's fed slaughter held steady at 2.1 million head/yr of fed cattle. In 02, fed exports from Alta represented 15% of the total fed numbers available with that figure ranging between 13% and 17% over the past four years. Canfax goes on to say if Alta is truly 400,000 - 500,000 head fewer in 03, there is technically still room for Alta plants to cushion some of that deficit by allowing even fewer fed cattle to move south in 03. Last year the cushion was 375,000 head. Exports won,t likely go to zero in 03 as cash trade and forward contracts will keep cattle moving but they could easily be reduced to numbers not witnessed since late 80,s and early 90,s.I GUESS their numbers were wrong!

[blackjack]

grassfarmer; I forgot to mention that prices for fats that week. The avg. price for strs ; 117.52 and hfrs; 118.61.

[cowman]

Grassfarmer: What I've heard is the stronger feeder market is being driven by two buyers...Cargill and Cor Van ray. Heard that from a guy who deals with Ed Miller(Highway 21 feeders). Like I said I only heard this don't know if it is accurate...if true I'd like to know where Cor is getting his money? Also heard a rumor Cor Van Ray has bought some land in Montana to set up a large feedlot...again I have no idea if this is true?

[kato]

Around here, Quebec is on the market too.

One of our local auctioneers has been pushing guys to get rid of their calves while they still can. He says there will be a big glut of calves on the market any day now..sell them before they are worth even less.

This is all fine and dandy if you really thought he had your best interests at heart. NOT. Think a little harder, and see it from his point of view. The boss..Mr. Nillson no less, sees revenue from the auction mart is in the tank. They should be selling a couple of thousand head a week, and they only sell a few hundred. Same boss needs some cheap feeders for other enterprises. What the heck is the auctioneer supposed to say? You are being robbed, keep them at home? Not if he expects to keep his job he doesn't. He is truly stuck between a rock and a hard place. He's actually a pretty good guy, and I don't envy him.

My point is, when taking advice on whether or not to keep or sell your calves, remember the background of everyone who gives you advice, and try and figure out their reasons for such advice. Go to some sales yourself. Make up your own mind, don't let someone else make it up for you.

There were a lot of guys around here who fell into the panic and unloaded their cattle for next to nothing. They are already upset about it. Hopefully they won't ever let it happen again.

Whether there really is a glut of cattle out there, I really don't know. I do know that we have exactly the same number as this time last year. As do our neighbours. Some of those have fed their calves well, and they are big enough to be off the feeder market. They are getting close to finish. The feelots won't be getting them.

[grassfarmer]

Blackjack - your reply looked interesting but I don't understand it - did you mean to have 03 dates all through it with no reference to 04? is it a typo or am I just not understanding it?
Kato, I'm one of these guys that is upset with recent sale prices. I don't consider myself to be a naive marketer but have lost out this time around. I didn't let other people make up my mind for me but I tried to find out as much information / views from as many sources to make the decisions,I though that was part of good management. I wasn't panicking when I sold, merely deciding that on the information available at that time I stood to lose more money by retaining cattle any longer. You normally background and say your neighbours and yourself all have the same numbers of cattle on farm you had last winter. Around here virtually no-one normally backgrounds calves but this winter all my immediate neighbours retained at least half their calves - so circumstances here are different and the potential for glut looked worse - helped on by Statistics Canada figures that now look unreliable.
One thing I've learnt in 10 years experience of trading under BSE's shadow is that normal trading conditions go out the window.
It looks to me like the cow calf guys that were unprepared to change their marketing patterns by selling everything in the fall got very lucky when the 2nd case of BSE arrived. The guys that overwintered their calves made the right choice in my book but were unlucky. You, or anyone like you that still has any or all of last years calves is now in the position I was in prior to Dec. 23, riding a rising market but taking the risk it could crash again - I hope it works out for you. It bothers me to hear what I heard two old guys saying recently - they held onto their calves because they have always got at least X$ for them and they won't sell them for less. With BSE you have no guarantee of getting pre BSE prices however long you keep them. Worst case scenario and no border opening what price will calves and these long yearlings be making next October?

[rsomer]

grassfarmer: you said "It bothers me to hear what I heard two old guys saying recently - they held onto their calves because they have always got at least X$ for them and they won't sell them for less. With BSE you have no guarantee of getting pre BSE prices however long you keep them. Worst case scenario and no border opening what price will calves and these long yearlings be making next October?

The two old guys are wrong, they have not always got X$ for their calves, they just got X$ in the last few years. And we will never see pre BSE prices again. For one thing the dollar is not 63 cents anymore. And no doubt about it the industry has changed because BSE showed us the U.S. border could be closed, NAFTA or not. The worst case scenario is not that the border won’t open by October but that there is no grass this June and the border is not open. That is a scenario we have to keep in mind and that is where the risk is right now in owning backgrounded calves. There is a lot of uncertainty out there right now.

[pandiana]

I agree that luck has a lot to do with it. I backgrounded my steers, but as they were weaned at 700 lbs I didn't want to push them, not knowing how long I would have to keep them. Just as the market appears to be opening, I then think I should have more weight on them to sell them. What to do..

[grassfarmer]

rsomer, Presumably as far as backgrounded cattle go if drought does hit they will be able to move into the half empty feedlots? At what price though? Moisture is my biggest concern without a doubt. We need a really good year for grass to get over the damage of the last couple of summers in my area. Turning calves back out onto grass simply wasn't a consideration in my book.

[blackjack]

grassfarmer; Yes, those were Feb, 2003 quotes. The reason I looked back was to compare 2003 with 2004 numbers of feeders in feedlots. The Alta government has payed out on, more than 300,000 head of fats than expected . Canfax has revised there numbers for cattle on feed for 2003 because somebody obviously miss calculated . grassfarmer; Canfax reports there are 780,597 head in terminal feedlots as of Mar 1 / 04.

[cowman]

How can anyone predict this market? It is like a yo-yo, up today down tommorrow. How did you like the fall market? Up one week down the next and then back up the next week! I think if you hit the right market it had more to do with luck than anything else? Of course you can always count on the tax money coming to town in late November/early December but even that was erratic this year?
By February it was all doom and gloom. What can you do? Maybe the feed just wasn't there to take them through to green grass and all the "experts" are saying the only place this market is going is down! So do you go out and buy expensive feed to feed to cattle that are dropping everyday in value? So you sell and voila up the market goes! How can you know? You can't.
If we don't get some grass this year us guys who are holding them might look like the biggest fools around? If we do get grass and that border cracks open we'll look like geniuses! In reality it is just luck, whether good or bad that determines how we do. I believe the time is coming when we need to have some sort of "Risk management" that will take away these collossal losses. I believe the grain boys are so far ahead of us in this regard that we need to do a lot of catching up if we hope to survive?

[kato]

Grass is not an option for us, we just barely have enough for the cows.

We are planning on finishing our bigger steers, and probably all of the heifers. They should be gone by end of June, or at least most of them. The lighter steers we will sell.

That said, if someone gave us an offer we couldn't refuse, the trucks would be in the yard so fast you wouldn't believe it! LOL

As for how many cattle are out there, I would like to know where they get their numbers, because no one has ever asked us. Just going by what's in the big feedlots is far from accurate this year.

Anyway, Tuesday should be interesting because we are going to test the waters down at the auction mart with a half a dozen of those lighter steers. I'll let you know how it turns out.

[rsomer]

An interesting source of cattle numbers in Alberta can be seen at:

http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/rsb4829?opendocument

Includes summaries of all livestock inspections at markets, feedlots, packing plants etc. Imports and exports and destination too, U.S and other provinces.

2003 numbers tend to be way down from previous years across all categories. Could be from reduced herds due to 2002 drought or else calves are still on original farm and have not been brand inspected yet. For example 1 1/2 million fewer cattle were inspected in Alberta in 2003 than in 2002 and fewer were brand inspected in 2003 than in any of the previous seven years.