- U.S. cattle imports fill void in Canada’s feeder supply
The Western Producer reported Canadian imports of live cattle are 277,290 head so far this year, 1.9 percent higher than last year’s total as American cattle continue to fill western Canadian feedlots and support processors at record pace.
Jason Wood, Alberta’s livestock market analyst, said there has been no growth in the Canadian beef cow herd in the past several years and American cattle naturally fill the void.
Wood said typically Alberta receives about 54 percent of the total imports but this year that is up to 62 percent having already imported 9.9 percent over last year thanks to 41,200 new and additional spaces, and the feeding advantage that Canada had for a large part of the year when corn was more expensive than barley.
However, that has reversed and corn now has the advantage as processing plants are operating near capacity to meet strong demand, which in turn drives demand for fed cattle.
Wood said the utilization rate this year at western Canadian federally inspected plants is 97.7 percent, which is much higher than the five-year average of 86 percent.
For the week ending Oct. 9 alone, western Canadian slaughter was two million head, up 11.7 percent over last year, nearly five percent above 2019, and 14 percent higher than the five-year average.
Year-to-date and total Canadian production are also up 12 percent and 10.8 percent from 2020 respectively, both more than 14 percent higher than their five-year averages.
In a published report, Wood said increased production has pushed Alberta beef exports to just over 250,000 tons worth nearly $2.2 billion – up 38.4 percent by value and 25.5 percent by volume compared to the January to August period last year, and compared to 2019, the numbers are 37.6 percent and 15.8 percent higher.
That said, beef imports are down nationally to 123,787 tons – a drop of 19.2 percent from 2020 and 13.2 percent lower than the five-year average, but Wood expressed that increased beef exports and lower imports are a good sign of strong demand for beef and overall support for the sector, and that continued strong demand supports further imports of live cattle.
- Breaking through the $130 milestone in last week’s cattle market
According to DTN, the last time the cash cattle market traded at or above $130 was back in June 2017. So, for the last four years, feedlots have slowly grown accustomed to believing that $130 was unattainable. Unattainable because the market’s fundamentals didn’t support that price threshold… because packers didn’t need cattle… because there was a backlog of cattle… and eventually, because who believes that fat cattle will trade above $130? Over time, it’s not a matter of what’s factual or true, what an asset is truly worth or what’s it’s perceived to be worth, but it’s what we feed ourselves mentally that eventually becomes true.
And that’s why last week’s victory of successfully trading cash cattle for $130 is such a milestone. There were analysts who didn’t believe the market would trade at number simply because of the psychological barriers that the market had built.
Last week’s cash cattle trade saw a few pens of cattle move on Tuesday, but it wasn’t until Friday that the standoff between packers and feedlots shook out. Last week, Southern live cattle traded for $126 to $130, mostly at $128 to $130, which is $2 to $5 higher than the previous week. Northern dressed cattle traded from $200 to $206, mostly at $202 to $204, which is $2 to $4 higher than the week before.
Last week’s negotiated cash cattle trade totaled 96,867 head – 90% (87,369 head) of which were scheduled for the nearby delivery, while the remaining 10% (9,498 head) were scheduled for deferred delivery in the following 15 to 30 days.
Heading into this week’s trade, it’s fair to believe that the cash cattle market stands a strong chance at demanding higher prices once again. How packers committed the cattle they bought last week is extremely telling, and so long as boxed beef prices stay rewarding, then packers should want to keep processing speeds elevated, which means that feedlots stand a chance to gain more leverage this week. Because the mental obstacle of $130 has been overcome, and because the market’s technical and fundamental windshield supports this rally — cattlemen are finding themselves taking over the driver’s seat of the market.
- Feedlot Ponzi scheme sends South Dakota man to prison
Drovers reported that a South Dakota feedlot operator who pleaded guilty to operating a Ponzi cattle scheme was sentenced to nearly eight years in federal prison on Thursday.
Robert Blom of Corsica entered a guilty plea in August to what prosecutors said was a scheme to resell the same cattle to multiple investors, making a profit of about $24 million from 2014 to 2019.
After a federal indictment in March 2020 detailed about $10 million in funds related to his feedlot business, prosecutors said he altered purchasing documents leading investors to believe his feedlot was more successful than it actually was. He also sold the same groups of cattle to multiple buyers and used the money to pay back previous investors.
A civil foreclosure case against Blom remains ongoing, with more than 70 parties claiming they are owed money.
Blom was sentenced to 91 months in prison Thursday on charges of wire fraud and money laundering, while 30 other counts were dropped as part of a plea bargain.
Judge Karen Schreier said that Blom should have known what he was doing was wrong, after facing charges in 1997 for getting a bank loan after lying about cattle that he didn’t own.
Blom received probation at the time but asked the judge last week for mercy as his defense attorney painted a picture of a stressed-out farmer who was only trying to save his family farm.
- Tariff agreement with EU reopens doors for U.S. ag exports
According to the Western Ag Reporter an agreement was recently made to end a Section 232 tariff dispute between the United States and the European Union, which American Farm Bureau Federation President Zippy Duvall calls “welcome news for America’s farmers.”
While the dispute centered around steel and aluminum, farmers were swept up in the turmoil as the EU clamped down on U.S. agricultural exports.
Duvall commented on the need for stable and predictable trade agreements to grow exports, particularly as America’s farmers recover from the impacts of the pandemic.