Beef Cattle Market Update By Anne Wasko Market Analyst November 2016 Anne Wasko Market Analyst June 2018 @AnneWasko
2018 MARKET HIGHLIGHTS SO FAR April 7 turning out to calving fields
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec #1 Local Basis Record Strong! 15 Alberta Fed Basis Alberta/Nebraska in Cdn$ - Cash to Cash 10 5 YTD +$5 0-5 -10-15 3 yr ave (15-17) 2016 2017 2018
98 00 02 04 06 08 10 12 14 16 Cdn $ per cwt = Record Strong Feeder Basis $5 Alberta Annual Feeder Steer Basis 850 lbs. $0 ($5) ($10) ($15) ($20) ($25) 10 yr ave -13.50 ($30) Source: CanFax
Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec $/cw t #2 Superb Beef Demand $260 $250 $240 $230 $220 $210 $200 $190 $180 $170 US Weekly Choice Cutout Domestic & Export both! Source: USDA 2016 2017 2018
#3 Largest Fed Slaughter in years Q2 largest since 2010 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 Canadian Fed Slaughter by qtr 1 2 3 4 2013 2014 2015 2016 2017 2018 YTD CDN +8% U.S. +3%
Canadian cattle numbers flat, U.S. expansion slowing BEEF SUPPLY UPDATE
70 73 76 79 82 85 88 91 94 97 00 03 06 09 12 15 18 Million Head Canadian beef cows 3.7M (8 years between 3.7 & 4M head) 5.5 5 Canadian Beef Cow Numbers January 1-1970 to 2018 4.5 4 3.5 3 2.5 Source: Statistics Canada Year
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 Thousand Head 70% of the national beef cow herd holding at 2.6M (2.6-2.8 since 2011) 4000 Alberta & Saskatchewan Beef Cows January 1-1970 to 2018 3500 3000 2500 2000 1500 1000 Source: Statistics Canada Year
06 07 08 09 10 11 12 13 14 15 16 17 18 Thousand Head No signal of change on replacement heifers either - yet 600 W Canada Beef Heifers for Replacement on Jan 1 550 500 450 400 350 300 Year Source: Statistics Canada
Thousand Head YTD 2018 Heifer Marketings +8% - need to monitor 1750 Canadian Heifer Marketings 1976 to 2018P 1500 1250 1000 750 500 76 80 84 88 92 96 00 04 08 12 16 Year Source: Statistics Canada, CBGA, AAFC, CanFax
Thousand Head YTD 2018 Cow Marketings up slightly (cow sltr +12% but cow exports -32%) Canadian Slaughter Cow Marketings 1200 1000 Slaughter Exports 800 600 400 200 Biggest cow kill since 2010? 0 81 84 87 90 93 96 99 02 05 08 11 14 17 Source: Statistics Canada, CanFax, AAFC Year
Jan 1 Feb 1 Mar 1 Apr 1 May 1 Jun 1 Jul 1 Aug 1 Sep 1 Oct 1 Nov 1 Dec 1 Thousand Head W Can Cattle on Feed numbers remained above YA until May 1 1050 950 Alberta and Saskatchewan Cattle on Feed 5 yr avg 2016 2017 2018 850 750 650 550
Thousand Head YTD 2018 Feeder exports have already surpassed 2017 s (YTD +60%) 700 600 500 400 300 200 100 Canadian Feeder Cattle Exports 0 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18P Year Source: Statistics Canada
Thousand Head Feeder imports stepped back into the scene in 2017 250 Canadian Feeder Cattle & Calf Imports 200 150 100 50 0 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Year Source: Statistics Canada
80 83 86 89 92 95 98 01 04 07 10 13 16 Million Head U.S. cow herd close to peak at 31.7M 39 37 U.S. Beef Cow Inventory January 1-1980 to 2018 35 33 31 29 27 25 Year Source: USDA, Cattlefax
U.S. expansion has slowed but Jan 1, 2018 will be the 4 th year of growth
Million Head May 1 +5%, 2 nd largest ever (2006 1 st ) 12.0 11.5 11.0 US Monthly Cattle on Feed 5 yr ave 2016 2017 2018 10.5 10.0 9.5 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
90 93 96 99 02 05 08 11 14 17 Billion Pounds U.S. Beef Production on track from record in 2018 at +5% 28 U.S. Beef Production 1990 to 2018P 26 24 22 20 18 Year Source: USDA, Cattlefax
Domestic and export demand have been exceptional DEMAND
90 92 94 96 98 00 02 04 06 08 10 12 14 16 Demand Index (2000=100) Beef demand -5% but still 3 rd strongest historically 130 Canadian Retail Beef Demand Index 120 110 100 90 80 Source: Statistics Canada, CanFax, US Beef Demand Study Group
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec $/kg April s retail beef price +2.5% from YA $21 Canadian Retail Beef Price Excellent featuring too! $20 $19 $18 2015 2016 2017 2018 Source: Statistics Canada
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Cattle Feeders lose leverage into summer nothing new 66% 64% 62% 60% 58% 56% 54% 52% 50% Fed Steer as % of AAA Cut-Out 2015 2016 2017 2018 Source: Statistics Canada
tonnes 2018 YTD beef exports +5% (value +10%) 350000 300000 250000 200000 150000 100000 50000 0 Canadian Beef Exports U.S. Japan Mexico China, HK 2015 2016 2017 2018P 2018P: U.S. +10% Japan +8% China/HK -6% Mexico -12%
88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18P tonnes Ratified CPTPP would mean Canada more competitive in those markets 35000 Beef Exports to Japan 30000 25000 20000 15000 10000 5000 0 Source: Stats Can
tonnes 2018 YTD beef imports +4% Canadian Beef Imports 140 120 100 80 60 2018P: U.S. +1% Aust +23% N.Z. +2% Uruguay +9% 40 20 0 U.S. Aust NZ Uruguay Brazil 2015 2016 2017 2018P
Bil lbs U.S. Beef exports expected to hit a record in 2018 4.0 US Beef Trade 3.5 3.0 2.5 Imports 18p +10% 18p -2% 2.0 1.5 Exports 1.0 0.5 0.0 00 02 04 06 08 10 12 14 16 18F Source: USDA
Billion Pounds 2018F U.S. Pork production +3%, Cdn +1% 28 26 24 22 20 18 16 14 12 10 70 73 76 79 82 85 88 91 94 97 00 03 06 09 12 15 18P Year Source: USDA, Cattlefax U.S. Pork Production - Increasing slaughter capacity - Profitable sectors - Strong exports +4% - Lower weights
Billion Pounds 2018F U.S. Broiler production +2% U.S. Broiler Production Source: USDA, Cattlefax 45 40 35 30 25 20 15 10 5 0 70 73 76 79 82 85 88 91 94 97 00 03 06 09 12 15 18P Year - Profitable as well - Low feed costs - Increasing capacity
Producer margins thinning CATTLE PRICE OUTLOOK
Gross $ per head The ever-evolving feeding margin will keep a lid on feeder prices $350 $300 $250 $200 $150 $100 $50 $0 ($50) ($100) ($150) ($200) ($250) ($300) Annual Feedlot Profit/Loss Western Canada 79 82 85 88 91 94 97 00 03 06 09 12 15 18P Year Source: CanFax Trends
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Thousand Head W Can placements -3% so far this year 350 300 250 200 150 100 50 Alberta and Saskatchewan Placements 2016 2017 2018 0 Source: CanFax COF
# of head Smaller U.S. placements in Mar & Apr 2600000 US Monthly Placements 2400000 2200000 2000000 1800000 1600000 1400000 1200000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 5 yr ave 2016 2017 2018
US $ per cwt Good support at $110 for now do we need to check out $100-105 this fall? $175 $165 $155 $145 $135 $125 $115 $105 $95 Weekly US Fed Steer Price 1 6 11 16 21 26 31 36 41 46 51 Source: Cattlefax 2015 2016 2017 2018 Demand will decide.
Pounds Cattle feeders staying very current given summer price forecast 960 940 920 Canadian Weekly Steer Carcass Weight 900 880 860 840 820 Source: AAFC, CBGA 5 yr avg 2016 2017 2018 1 6 11 16 21 26 31 36 41 46 51 Week
Cdn $ per cwt Premium fed basis for 1 st half of 2018 that s another record! $20 $15 $10 Alberta Fed Steer Basis Alberta/Nebraska (Cash to Cash) $5 $0 ($5) ($10) ($15) ($20) 1 5 9 13 17 21 25 29 33 37 41 45 49 Source: CanFax 3 yr ave 2016 2017 2018
Cdn $ per cwt 2018 Fed cattle prices projected -6% $200 Alberta Fed Steer Prices $180 $160 $140 $120 $100 $80 $60 80 83 86 89 92 95 98 01 04 07 10 13 16 Year
Index Strong tendency for feeders to trade higher into Aug/Sept 106 104 102 100 98 96 94 Seasonal 850 lb. Feeder Price Index J F M A M J J A S O N D 97-17 index 2018 cash 2017 cash $210 $200 $190 $180 $170 $160
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Cdn $ per cwt Does Feeder Basis go Premium the U.S. by August? $8 Alberta 850 lb Feeder Steer Basis $4 $0 ($4) ($8) ($12) ($16) ($20) Source: CanFax 3 yr ave 2016 2017 2018
$/cwt 2018 fall calf price still has plenty of unknowns can $200 be support? 300 250 Alberta Oct/Nov avg 5-600 lb Steer 200 150 100 50 05 06 07 08 09 10 11 12 13 14 15 16 17 18P Year
Index 2017 was contra-seasonal for fall calves only happens 2 out of 10 years 103 101 Seasonal 550 lb. Steer Calf Index (1983-2002) $255 $245 $235 99 97 J F M A M J J A S O N D 83-02 Index 2017 calf $225 $215 $205 $195
Cdn $ per cwt YTD D1,2 cow price -4% (or $4). Nonfed production +13% in Canada $155 Western Canada D1,2 Weekly Cow Price $145 $135 $125 $115 $105 $95 $85 $75 1 6 11 16 21 26 31 36 41 46 51 2015 2016 2017 2018 Source: Canfax
Jan-10 July Jan-11 July Jan-12 July Jan-13 July Jan-14 July Jan-15 July Jan-16 July Jan-17 July Jan-18 July Cdn$/cwt. Local slaughter cow prices $15/cwt OVER the U.S. $20 $15 $10 $5 $0 -$5 -$10 -$15 -$20 -$25 US to Alberta Slaughter Cow Price Spread
Cdn $ per cwt 2018 D1,2 cow prices projected -8% $140 $130 $120 $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 Western Canada D1,2 Cow Prices 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 1618P Year Source: CanFax
What could send things off the track? Weather Drought shifts cattle marketings earlier Feed supply and feed prices = higher inputs Fire / natural disaster FAD Trade NAFTA Retaliation response Economy (consumers) and preferences
2018/19 Market Reminders Price volatility will continue use it to your advantage when planning risk management (but you need a game plan to be proactive rather than reactive) Producer margins will be thinner this is the phase of the cattle cycle when prices are lower plus now we are looking at higher inputs
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