Cattle Market Situation & Outlookskstockgrowers.com/SG2014/_PDF/AGM/2019/Anne Wasko.pdfCanadian beef cows -1% to start 2019 Between 3.66 & 2.5 4M head for 10 yrs 3 3.5 4 4.5 5 5.5

Cattle Market Situation &

Outlook

Anne Wasko

Market Analyst

June 2019

@AnneWasko

BEEF SUPPLY UPDATE

Canadian beef herd smaller, U.S. expansion slowing

Canadian beef cows -1% to start 2019

Between 3.66 &

4M head for 10 yrs

2.5

3

3.5

4

4.5

5

5.5

80

83

86

89

92

95

98

01

04

07

10

13

16

19

Mil

lion

Head

Year

Canadian Beef Cow Numbers

January 1 - 1980 to 2019

Source: Statistics Canada

AB & SK 2.6-2.9M for 10 years now

1000

1500

2000

2500

3000

3500

4000

80

82

84

86

88

90

92

94

96

98

00

02

04

06

08

10

12

14

16

18

Th

ou

sa

nd

Hea

d

Year

Alberta & Saskatchewan Beef Cows

January 1 - 1980 to 2019


2018 returns

back to a liquidation

year 0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

68 71 74 77 80 83 86 89 92 95 98 01 04 07 10 13 16

Canadian Beef Cow Culling Rate

1968 - 2018

Source: Statistics Canada, CBGA, AAFC, CanFax

15 yr avg = 11.6%

Cow marketings were up 13% LY

YTD 2019 cow kill +6% plus cow exports +4%

4,000

6,000

8,000

10,000

12,000

14,000

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52

# o

f h

ead

Canadian Cow Slaughter

2016 2017 2018 2019

2018 Heifer Marketings +3%

500

750

1000

1250

1500

1750

76 80 84 88 92 96 00 04 08 12 16

Th

ou

sa

nd

Hea

d

Year

Canadian Heifer Marketings

1976 to 2018

Source: Statistics Canada, CBGA, AAFC, CanFax

YTD 2019 heifer

kill +7% plus sltr

hfr exports +77%

2018 Fed Slaughter +5% Q4 largest since 2008. Q1 2019 since 2010.

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

1 2 3 4

Canadian Fed Slaughterby qtr

2014 2015 2016 2017 2018 2019

YTD 2019 fed

sltr +7% plus

fed exports

+54%

Bottomline,

100,000 more

fed cattle

marketed so

far this year

W Can Cattle on Feed May 1 +10%, largest in 9 years

Increased feedlot capacity 100,000+ head

550

650

750

850

950

1050

Jan

1

Feb

1

Mar

1

Ap

r 1

May

1

Jun

1

Jul

1

Au

g 1

Sep

1

Oct

1

Nov

1

Dec

1

Th

ou

san

d H

ead

Alberta and Saskatchewan

Cattle on Feed

5 yr ave 2017 2018 2019

Source: CanFax COF

Feeder imports stepped back into the scene in 2017 & 2018 (180K in ‘18)

0

50

100

150

200

250

84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18

Th

ou

sa

nd

Hea

d

Year

Canadian Feeder Cattle & Calf

Imports


Jan-Apr 2019 +73% at 62.5K

0

5000

10000

15000

20000

25000

30000

35000

40000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

# o

f h

ead

Live Imports from the U.S. (non purebred)

2016 2017 2018 2019

2018 Feeder exports +48% at 195K

0

100

200

300

400

500

600

700

84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18

Th

ou

sa

nd

Hea

d

Year

Canadian Feeder Cattle Exports


Jan-Apr 2019 +17% at 101.7K

(still net exp +40K)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000


# o

f h

ead

Feeder Exports to the U.S.

2016 2017 2018 2019

The effect of feeder imports & fewer feeder exports – now a wash

-200

-100

0

100

200

300

400

500

600

700

84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18

Th

ou

sa

nd

Hea

d

Year

Net trade of Feeder Cattle


U.S. cow herd close

to cycle peak at 31.8M

25

27

29

31

33

35

37

39

80

83

86

89

92

95

98

01

04

07

10

13

16

19

Millio

n H

ea

d

Year

U.S. Beef Cow Inventory

January 1 - 1980 to 2019

Source: USDA, Cattlefax

LW Pasture index 74.4, 5 yr avg 70

The big year over year slaughter gains are behind us but still larger this yr & next

22

23

24

25

26

27

28

29

30

31

00 02 04 06 08 10 12 14 16 18 20P

Source: USDA

US Steer & Heifer Slaughter

+1.2M+300K

+300K

2019 U.S. Beef Production expected +2%, a new record at 27.4B lbs

19

21

23

25

27

29

90

93

96

99

02

05

08

11

14

17

Bil

lion

Po

un

ds

Year

U.S. Beef Production

1990 to 2019P


Record pork production too: +3% in

2019

10

12

14

16

18

20

22

24

26

28

30

70 73 76 79 82 85 88 91 94 97 00 03 06 09 12 15 18P

Bil

lion

Po

un

ds

Year

U.S. Pork Production


African Swine Fever is a big deal% TY & +5% in 2019 • More than half (56%) of the world’s pigs live in

China (Jan 2018 441.6M hogs & 43.6M sows)

• Chinese consumers love pork. They consume 88 lbs/cap (X 1.4B people) – the most anywhere

• In April sow numbers were down 22% (-9.7 million sows). This plus culling has estimates of 150-200M fewer piglets this year.

• This equates to a 12-15MMT shortfall of pork.

• Global pork exports were 8MMT last year

• 2019 Chinese production expected 30% smaller

African Swine Fever is a big deal (cont)% TY & +5% in 2019 • Excessive slaughter last winter was put into

stocks

• Speculation has moved pork into frozen inventory – expecting prices to move higher

• Current hog inventories could be 50% smaller (the culling is real)

• China is 20% of the global protein market

• Virus is out of control with no vaccine

There’s really no way to fill the pork gap

88

1813

0

10

20

30

40

50

60

70

80

90

100

Pork

Pou

ltry

Beef

Lb

s

Chinese per cap meat consumption 2017

China Pork Imports to grow post July 1

DEMANDDomestic and export demand have been exceptional

A strong economy has been good for beef demand in N.A.

Note: Canadian GDP in past year is up 1.1%

Strong U.S. Beef Demand

YTD 2019 +4%

$170

$180

$190

$200

$210

$220

$230

$240

$250

$260

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

$/c

wt

US Weekly Choice Cutout

2016 2017 2018 2019

2019 Cdn Cut-out 9% higher than 2018

YTD Cdn beef prod

+9%

225

235

245

255

265

275

285

295

305

315

325

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

$/c

wt

Canadian Weekly AAA Cutout

2016 2017 2018 2019Source: Canfax

Beef export value +14%

$2.75B, with tonnage +5%

U.S. +5%, Japan +28%, China/HK +2%, Mexico -10%

0

0.5

1

1.5

2

2.5

3

0

100000

200000

300000

400000

500000

600000

90 92 94 96 98 00 02 04 06 08 10 12 14 16 18

bil

$

ton

nes

Canadian Beef Exports

tonnage value

Jan-Apr 2019 exports +20% volume, +33% value

20000000

24000000

28000000

32000000

36000000

40000000

44000000Ja

n

Feb

Mar

Ap

r

May

Ju

n

Ju

l

Au

g

Sep

Oct

Nov

Dec

Canadian Monthly Beef Exportsin kgs

2016 2017 2018 2019Source: Statistics Canada

Jan-Apr beef export stats: U.S. 72% of total, Japan 10% & China/HK 9%

YTD U.S. +14% YTD Japan +78%

YTD China +52%

13000

15000

17000

19000

21000

23000

25000

27000

29000

31000

Jan

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Sep

Oct

Nov

Dec

ton

nes

Monthly Beef Exports to the US

2016 2017 2018 2019


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500


To

nn

es

Canadian Beef Exports to

Japan


500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000


To

nn

es

Canadian Beef Exports to China Region


Q1 Cdn pork export stats:

• Total pork exports represent 70% of production

• Q1 total exports +4% volume, +6% value

• Led by exports to China +47% (+65% in value), representing 1/3 of exports

• Exports to Mexico were up 10% due to Mexican tariffs to U.S. pork (that’s gone now)

• Exports to U.S. are still #2 but down 15% from 2018

• Japan is #3 market, down 1% in Q1

Trade deals have been good for Canadian beef & pork producers

U.S. Beef exports were record large in 2018 (+10%) but 2019P flat

19P n/c

19P n/c

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

00 02 04 06 08 10 12 14 16 18

Bil

lbs

US Beef Trade

Exports

Source: USDA

Imports

Jan-Apr exports

Beef -4.5%

Pork -4.5%

CATTLE PRICE OUTLOOK

Outside factors = volatility, what do exports & demand do?

Corn is worried about late planting

28% run up in 2 weeks

Now waiting for more news

5 yr avg 96%

67%

U.S. Lean Hog futures trying to figure out ASF impact and when

20% run-up in Mar & Apr

but back down again

Cattle are worried about poor exports, record production

Aug LC -15% since mid Apr

U.S. fed price – expecting lows in Sept/Oct

2019 $100-129, avg $116??

$95

$105

$115

$125

$135

$145

$155

1 6 11 16 21 26 31 36 41 46 51

US

$ p

er

cwt

Weekly US Fed Steer Price

2016 2017 2018 2019

Source: Cattlefax

AB fed market had tough start

to 2019, recovered into April,

now on seasonal summer decline

$135

$140

$145

$150

$155

$160

$165

93

95

97

99

101

103

105

J F M A M J J A S O N D

ca

sh

Ind

ex

Seasonal Fed Steer Price Index

98-18

2019

Note: CPIP coverage could have been bought

in Jan for May/June at $162-164. In April, Sept

coverage could have been purchased at $150.

Fed basis remains weak in 2019

($20)

($14)

($8)

($2)

$4

$10

$16

Ja

n

Feb

Mar

Ap

r

May

Ju

n

Ju

l

Au

g

Sep

Oct

Nov

Dec

Cd

n $

pe

r c

wt

AB Fed Steer Basis

Alberta/Nebraska in Cdn$ - Cash to Cash

5 yr avg 2017 2018 2019

YTD -10, LY +5

If U.S. is $116 avg in 2019, 75 cent $ and -4 basis then AB = $151 (2018 was $153)

$60

$80

$100

$120

$140

$160

$180

$200

80 83 86 89 92 95 98 01 04 07 10 13 16 19F

Cd

n $

pe

r c

wt

Year

Alberta Fed Steer Prices

Seasonally cash feeders rally into Aug/Sep

$170

$180

$190

$200

$210

94

97

100

103

106

109

J F A M J J A S O N D

Ind

ex

Seasonal 850 lb. Feeder Price Index

98-18 Seasonal 2019 cash

Note: CPIP coverage for Oct feeders could have been bought in March at

$200 and in Apr at $204. Today is $184.

Cash margins negative but not enough to pressure the buy - YET

$90

$100$110

$120

$130

$140

$150

$160

$170

$180

$190$200

$210

$220

J/1

4 A J OJ/1

5 A J OJ/1

6 A J OJ/1

7 A J OJ/1

8 A J OJ/1

9 A J O

Cd

n $

pe

r c

wt

Break Even vs Market Price

Yearling Steer - 2014 to current

Break-even Cash

Source: CanFax Trends West

Seasonally the calf market declines post June – but 2018 did not

$190

$210

$230

$250

96

97

98

99

100

101

102

103

104


Ind

ex

Seasonal 550 lb. Steer Calf Index

98-18 Seasonal 2018 cash 2019 cash

Note: CPIP coverage for Oct calves could have been bought in March for

$220 and in April $228 (SK $230). Today $206.

Still need to see fall feed prices. Lower U.S. calves will drop the ‘floor’ to $200

Source: Canfax

50

100

150

200

250

30005 06 07 08 09 10 11 12 13 14 15 16 17 18

19P

$/c

wt

Year

Alberta Oct/Nov avg 5-600 lb Steer

Cow market tracking seasonal – 2019 average $5/cwt lower than 2018

Source: Canfax

Non-fed beef

prod +4% in ’19 –

more drought?

$70

$75

$80

$85

$90

$95

$100

85

90

95

100

105

110


$/c

wt

Ind

ex

Seasonal D1,2 Cow Price Index

(1998-2018)

Seasonal 2019

What could send

things off the track?

• Disease risk

– AFS (African Swine Fever)

– PED, TB, ??

• Trade risk

– NAFTA 2.0 (would be nice to move on)

– Tariffs: U.S. / China trade war

– Canada/China issues

• Economic risk

– Economy (trade tiffs, global slowdown)

– Consumer preferences

• Weather risk

Strategy for Success – Have a Game Plan • Price volatility – use it to your advantage when

planning risk management (but you need a plan – know your ‘numbers’ - to be proactive rather than reactive).

– Price insurance, forward selling, hedging, etc.

• Producer margins will be thinner – this is the phase of the cattle cycle when prices could be lower and plus inputs are higher. Need to have a sharp pencil.

HOPE IS NOT A STRATEGY!!

For regular market updates sign into:

.com

And check out the RealAg radio

show on Sirius channel 147 –

RURAL Radio!! 3:30 pm CT

Cattle Market Situation & Outlookskstockgrowers.com/SG2014/_PDF/AGM/2019/Anne Wasko.pdfCanadian beef cows -1% to start 2019 Between 3.66 & 2.5 4M head for 10 yrs 3 3.5 4 4.5 5 5.5

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