2017 Cattle Cattle Market Market Forecast Overview & Trends Anne Wasko Market Analyst June 2017 By Anne Wasko Market Analyst November 2016 @AnneWasko @AnneWasko
Utterly amazing! 2017 SO FAR
Jan- 16 Mar May Jul Sep Nov Jan- 17 Mar May Jul Sep Nov US$ per cwt From One Extreme to the Other! $150 US Weekly Fed Steer Price $140 $130 $120-30% +50% $110 $100 $90
J/91 J/93 J/95 J/97 J/99 J/01 J/03 J/05 J/07 J/09 J/11 J/13 J/15 J/17 $ per head And Speaking of Extremes $700 $600 $500 $400 $300 $200 $100 $0 ($100) ($200) ($300) ($400) ($500) ($600) Feedlot - Profit/Loss Margin Yearling Steer - 1991 to current Source: CanFax
Pounds Steer weights -35 lbs from yr ago 960 Canadian Weekly Steer Carcass Weight 940 920 900 880 860 840 820 Source: AAFC, CBGA 5 yr avg 2015 2016 2017 1 6 11 16 21 26 31 36 41 46 51 Week
A 10 lb weight decline is significant 840 820 800 780 760 740 U.S. Cold Carcass Weights 824 825 815 804 776 771 773 779 786 792 768 768 762 758 750 739 738 739 720 700 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17P
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Percent Excellent packer margins = moving more cattle & beef Gross Packer Margins (Fed Steer as % of Cutout) 0.63 Narrow Margins 0.58 Wide Margins 0.53 2014 2015 2016 2017
Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec $/cw t Good beef demand. Whsl price 30% higher since Feb. $270 $260 $250 $240 $230 $220 $210 $200 $190 $180 $170 US Weekly Choice Cutout Source: USDA 2015 2016 2017
Leverage can be just as important as supply BEEF SUPPLY UPDATE
80 83 86 89 92 95 98 01 04 07 10 13 16 Million Head Over 2 million head of beef cows added since 2014 39 37 U.S. Beef Cow Inventory January 1-1980 to 2018P 35 33 31 29 27 25 Year Source: USDA, Cattlefax
78 81 84 87 90 93 96 99 02 05 08 11 14 17 Million Head Although U.S. expansion has slowed 2018 will be the 4 th year of growth U.S. Beef Replacement Heifers January 1-1978 to 2018P 6.5 6 5.5 5 4.5 Year Source: USDA, Cattlefax
More Cattle Coming It s when they re placed & how we get thru them that matters US Steer & Heifer Slaughter 31 30 29 28 27 26 25 24 23 22 850K 00 02 04 06 08 10 12 14 16 18P Source: USDA
J/14 A J O J/15 A J O J/16 A J O J/17 A J O $ per head Cattle feeders are willing to place cattle when profitable not so much when they re losing $700 $600 $500 $400 $300 $200 $100 $0 ($100) ($200) ($300) ($400) ($500) ($600) Feedlot - Profit/Loss Margin Yearling Steer - Jan 2014 to current Source: CanFax
90 93 96 99 02 05 08 11 14 17p Billion Pounds U.S. Beef Production +4% (sltr is +6%) 28 U.S. Beef Production 1990 to 2018P 26 24 22 20 18 Year Source: USDA, Cattlefax
70 73 76 79 82 85 88 91 94 97 00 03 06 09 12 15 Million Head Canadian beef cows unchanged again 5.5 Canadian Beef Cow Numbers January 1-1970 to 2017 5 4.5-1.5M 4 3.5 3.83M 3 2.5 Source: Statistics Canada Year
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Thousand Head AB & SK beef cows 2.7-2.8M also for 7 years! 4000 Alberta & Saskatchewan Beef Cows January 1-1970 to 2017 3500 3000 2500 2000 1500 1000 Source: Statistics Canada Year
Heifer placements in feedlots +11% YTD str placements +7% AB/SK Heifers as % of Total Placements 45% 40% 35% 42% 43% 41% 39% 40% 40% 36% 38% 36% 34% 39% 35% 30% 25% 20% 06 07 08 09 10 11 12 13 14 15 16 17P Source: Canfax
Beef culling rate holding +/- 11% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Canadian Beef Cow Culling Rate 1968-2016 15 yr avg = 11% 68 71 74 77 80 83 86 89 92 95 98 01 04 07 10 13 16 Source: Statistics Canada, CBGA, AAFC, CanFax
Thousand Head Fed Marketings 2017P flat 3750 Canadian Fed Marketings 1976-2017P 3500 3250 3000 2750 2500 2250 2000 76 80 84 88 92 96 00 04 08 12 16 Year Source: Statistics Canada, CBGA, AAFC, CanFax
Choice demand has been exceptional DEMAND
Primal Rib Primal Loin Primal Chuck Primal Round Primal Brisket Short Plate Primal Flank Change in Choice Cutout Value & Contribution by Primal Jun 5/17 to Jun 6/16 ($/cwt) $9 $(2) $7 $5 $2 $3 $1 Choice Cutout $24 $(5) $- $5 $10 $15 $20 $25 $30
$/cw t. Market is sending a clear message about Choice (AAA) beef this spring 35 US Choice/Select Spread 30 25 2014 2015 2016 2017 20 15 10 5 0
Retailers hanging their hat on CDN AAA beef!
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec $/kg Today s retail prices 6% lower than YA consumers see better deals today $21 Canadian Retail Beef Price $20 $19 $18 $17 $16 $15 $14 2014 2015 2016 2017 Source: Statistics Canada
90 92 94 96 98 00 02 04 06 08 10 12 14 16 Demand Index (2000=100) Beef consumption up 1 lb + steady retail prices in 2016 = stronger demand (+2%) 130 Canadian Retail Beef Demand Index 120 110 100 90 80 Source: Statistics Canada, CanFax, US Beef Demand Study Group
tonnes 2017 YTD exports unchanged overall 2016 was best year since 2010 300000 250000 Canadian Beef Exports -8% 200000 150000 100000 50000 0 +21% +22% +4% U.S. Japan Mexico China, HK 2014 2015 2016 2017P =95%
tonnes 2017 YTD imports -13% (Aussie factor) Canadian Beef Imports 140 120 +2% 100 80 60 40 20-57% -10% -43% 0 U.S. Aust NZ Uruguay Brazil 2014 2015 2016 2017P
Bil lbs Impressive 2017 YTD for US exports: beef +20%, pork +15%, broiler +5% 4.0 US Beef Trade 3.5 3.0 2.5 2.0 1.5 Exports 1.0 0.5 0.0 00 02 04 06 08 10 12 14 16 Source: USDA
Large global stocks remain but GRAIN SITUATION
US $/bu New crop prices heading towards $4? 5.50 Weekly Omaha Corn Price 5.00 4.50 4.00 3.50 3.00 2.50 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 Source: Cattle-fax 2014 2015 2016 2017 2016 corn yield a record 175.3 bu/acre, 2017 trendline 170 bu
80/81 82/83 84/85 86/87 88/89 90/91 92/93 94/95 96/97 98/99 00/01 02/03 04/05 06/07 08/09 10/11 12/13 14/15 16/17F Billion Bushels A 14B bu crop would be 1B+ smaller than last year 16 US Corn Production 14 12 10 8 6 4 2 0 Crop Year
Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Feeding advantage W Canada it s been awhile 160% 150% 140% 130% 120% 110% 100% 90% 80% 70% 60% ALBERTA FEEDING ADVANTAGE Omaha corn vs Lethbridge barley advantage disadvantage Source: Canfax & Cattle-fax
Better than we thought but don t get complacent CATTLE PRICE OUTLOOK
US $ per cwt Seasonally fed markets trend lower into Q3 this year could be more gradual due to leverage $185 $175 $165 $155 $145 $135 $125 $115 $105 $95 Weekly US Fed Steer Price -15% 1 6 11 16 21 26 31 36 41 46 51 2014 2015 2016 2017 Source: Cattlefax
U.S. feedlots have placed 580,000 head more (8%) already this year US Placements 2500000 2300000 2100000 1900000 1700000 1500000 1300000 1100000 900000 700000 500000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2015 2016 2017
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Thousand Head W Can placements +8% YTD (41,000) 350 300 250 200 150 100 50 Alberta and Saskatchewan Placements 2015 2016 2017 0 Source: CanFax COF
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Fed Basis has weakened from the strong levels earlier this year 15.00 Alberta Fed Basis Alberta/Nebraska in Cdn$ - Cash to Cash 10.00 5.00 0.00-5.00-10.00-15.00 AB Fall low: US$120 /.745 8 = $153-20.00 3 yr ave (13-15) 2015 2016 2017
Cattle s/b profitable under that scenario $220 $210 $200 $190 $180 $170 $160 $150 $140 $130 $120 $110 $100 $90 J/11 AJ J/12 AJ J/13 AJ J/14 AJ J/15 AJ J/16 AJ J/17 AJ O O O O O O O Cdn $ per cwt Projected Break Even (out month) Yearling Steer - Jan 2011 to Oct 2017 Source: CanFax Trends West
Cdn $ - US terms Cdn $ holding in trading range (73.50-78) $1.00 Weekly Canadian Dollar $0.95 $0.90 $0.85 $0.80 $0.75 $0.70 $0.65 1 6 11 16 21 26 31 36 41 46 51 Source: Bank of Canada 2014 2015 2016 2017
Index Will the discount futures stifle this seasonal? Seasonal 850 lb. Feeder Price Index 96-16 Index 2017 cash 106 104 102 100 98 96 94 J F M A M J J A S O N D $235 $225 $215 $205 $195 $185 $175 $165 $155
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Cdn $ per cwt Feeder basis $150/head stronger than 3 year average $8 $4 $0 ($4) ($8) ($12) ($16) ($20) ($24) ($28) ($32) Alberta 850 lb Feeder Steer Basis 3 yr ave 2015 2016 2017 Source: CanFax
Index 20 yr Seasonal says calves back to $215-220 in Q4 Seasonal 550 lb. Steer Calf Index 103 96-16 index 2017 cash 102 $250 101 100 99 98 97 96 $230 $210 $190 J F M A M J J A S O N D Remember: $10-20/cwt swings are often seen during a month
Index $/cwt Cows were seasonal in 2016, again this year? 110 Seasonal D1,2 Cow Price Index (1996-2016) $115 105 100 95 90 $110 $105 $100 $95 $90 $85 85 J F M A M J J A S O N D Seasonal 2017 $80
Top 2 Global Beef Exporters facing uncertainties what does that mean for the rest of us? Global Beef & Veal Exporters - 2017P '000 MT 0 500 1000 1500 2000 2500 Brazil India Australia US NZ Canada Paraguay Uruguay EU Mexico Argentina 550 445 395 385 350 275 235 1193 1325 1950 1925 Source: FAS/USDA
Positive impacts of a China/U.S. beef deal just need details now Global Beef Importers - 2017P '000 tonnes 0 200 400 600 800 1000 1200 1400 China/HK US 1216 1300 Japan 730 Russia S Korea 520 585 EU Egypt Canada Chile Malaysia 375 340 265 255 245 Source: USDA
Bottom line Larger beef, pork and poultry supplies in N.A. are a fact how we get thru them is the question in terms of price impact Demand is difficult to forecast (state of the economy, consumer preferences, trade issues) Protecting equity important everyone has a different view on how to do this Volatility for all commodities remains high outside influences are a fact of life now
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