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Canada Fed & Feeder Update

Mike

Well-known member
Canada Cattle Update: Fed & Feeder Basis Update



The fed cattle price spread with the US has narrowed considerably over the past several weeks. After running through most of January and February well off the “historic plus $2” level we did see March narrow the gap a bit while April was -$7.70 compared to $7.99 under in the 5 years previous to BSE. What happened in January and February? The spread between Alberta cash and Nebraska cash ranged from $13.50-17/cwt (average $14.60/cwt) or $7.40-11.90 ($9.11/cwt average) wider than pre-BSE. We can account for $1.50-2/cwt of that in additional export costs but have trouble explaining where the missing $7/cwt (or nearly $100/head) went.



The spread did narrow about $3/cwt to average $11.78/cwt in March. Before BSE the five year average was $5.85/cwt. so now rather than $9/cwt wider than normal, March was $6 wider (of which $2 can be called post July 05 export costs). This still adds up to $55/head missing that’s tough to explain. In April, as mentioned above, that gap shrunk to zero. In May, the cash spread in Alberta was only $2.44 under compared to the pre-BSE level of $8.58 under or $6/cwt narrower/stronger than typical.



graph


Traditionally (pre-BSE) the Alberta 850 feeder basis narrows by $9/cwt from March to August. Put another way, the Alberta feeder price gains on the US feeder futures during this period by $9/cwt or $76.50/head. So far this year the basis has already gained (narrowed) $10/cwt in 6 short weeks. In March the basis hit its widest point at $21/cwt under and by May it was -$11. The narrowest basis usually occurs in early August with the 5 year pre-BSE average of -$3/cwt. If this were to be achieved, it means another $8/cwt for feeder prices to move assuming a flat futures trend. This would seem like a stretch today given negative feeding margins but stranger things have happened.
 

Jason

Well-known member
Doesn't look like what feeders here are seeing. They have said with the dollar and costs for export included there is still a 5 cent bonus to jump through the hoops.
 

Econ101

Well-known member
Jason said:
Doesn't look like what feeders here are seeing. They have said with the dollar and costs for export included there is still a 5 cent bonus to jump through the hoops.

And this is one of the problems with producers dealing with money that is denominated in currencies other than their own. International macroeconomics as well as changes in industry specific policy can have hugte affects on producer's bottom line.
 

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