Mixed Outlook for Livestock Producers

Margins for western Canadian cattle producers are likely to remain under pressure but Canadian hog producers should enjoy relatively better times through the end of this year, according to the latest livestock outlook from Farm Credit Canada.

Released Tuesday, the outlook projects the 2021 Alberta price for a fed steer at $155/cwt, up slightly from the year-to-date price of $150 but still below the five-year average of $160. Ontario fed steer prices are projected to average the same, although that is $5 above the provincial average. Meanwhile, the average market hog price for Ontario and Manitoba this year is estimated at $95 and $90/cwt, both $15 above the average.

In its accompanying commentary, FCC said prices for hogs in both Manitoba and Ontario should continue to exceed their five-year averages on the strength of global and domestic demand. “Chinese pork imports have largely driven strong global demand and continued strength in North American hog prices,” it said.

On the other hand, the outlook for cattle in Western Canada is being clouded by drought which has pushed feed prices higher and resulted in increased herd liquidation, which is weighing on prices.

Federally inspected slaughter numbers show the cattle slaughter in the first half of 2021 was 13.5% higher year-over-year and 6.5% higher than in 2019. Losses are more likely as feed costs increase with diminishing feed supplies while cattle prices weaken as more cattle are slaughtered, FCC said, adding that local basis levels are expected to decline given increased culling and early marketing of yearlings.

On the feed side, Alberta hay prices rose 25% between May and June 2021 and average Montana hay prices increased 50% between May and August 2021. Additionally, Lethbridge feed barley prices hit a record $415/tonne or $9/bu for the week ending July 30.

Regardless of the weather, FCC warned the red meat sectors may soon see diminished overall markets as China slows its purchases of red meat. Although North American demand has held up well amid the pandemic, consumption of animal proteins has fallen with declining incomes throughout the rest of the world, it said.