Calf market update and calculating breakeven prices

Aug 25, 2021

Alberta feeder cattle prices trend in line with seasonal expectations and have remained above the 5-year average throughout most of 2021.

‘Calf prices typically follow a seasonal decline into the fall as the volume marketed increases,’ says Jason Wood, livestock market analyst with Alberta Agriculture and Forestry. ‘Alberta steer calves have declined 7% in the last 7 weeks, averaging $220.83/cwt the second week of August, which is over $4/cwt higher than the same week a year ago.’

The Alberta steer calf market has ranged between $219/cwt and $237/cwt this year. Year-to-date, 500 to 600 lb steer calves are averaging $229.48/cwt, up 2% from 2020, 3.4% above 2019 and 1.9% above the 5-year average. Forward/electronic sales of 500 to 600 lb steer calves, for October/November delivery, averaged just under $215/cwt the second week of August.

‘Low yields, high feed costs and an above average volume of feeder cattle at auction are expected to pressure calf prices into the fall’ explains Wood.

Figure 1. Alberta 550 lb Steer Calf ($/cwt)

Alberta 550 lb Steer Calf ($/cwt)
Southern Alberta barley prices averaged $392/tonne in July, compared to $246/tonne a year ago. For the second week of August, southern Alberta barley ranged from $415 to $425/tonne. New crop barley bookings, delivered southern Alberta have recently been reported at $325 to $345/tonne, appearing to be capped by purchases of US corn. Buyers in southern Alberta have been actively booking US #2 corn with recent sales reported between $350 and $370/tonne for new crop delivery.

‘The cost of feed affects a feedlot’s willingness to pay or purchasing power for feeder cattle,’ says Wood. ‘The decline in southern Alberta feed barley costs of $47/tonne between July ($392/tonne) and current new crop reported sales ($345/tonne) should be a net gain for calf prices. However, other factors such as the number of calves on offer and forward fed cattle prices will also affect prices. Deferred live cattle futures have been moving higher but a change in this trend could lead to additional downward pressure for feeder cattle.’

A look at breakeven pricing

How does the current to new crop price decrease of $47/tonne for feed barley affect the feeding period and the price a feedlot is willing or able to pay for a 550 lb steer calf?

Using the average volume of barley required to finish a steer calf to a fed weight of 1,325 lbs, the $47/tonne decrease in barley lowers the cost of gain by about $13/cwt. The lower cost of gain of $13/cwt implies that a higher price can be offered on a steer calf. In this case, a buyer’s ability to bid increases by about $19/cwt on a 550 lb feeder steer calf. All calculations assume a constant breakeven sale price for the fed (slaughter) steer.

‘But this estimate does not take into account that feedlot margins are currently below breakeven,’ says Wood. ‘Therefore, what is a feedlot’s breakeven purchase price for a steer calf?’

Pricing against the April 2022 live cattle futures contract, a July barley price of $392/tonne, an 80-cent dollar and accounting for other finishing costs, the estimated breakeven purchase price on a steer calf works out to $207/cwt. August barley prices are averaging higher than in July.

Using the same variables above, but changing the average southern Alberta feed barley price to $420/bushel as reported for the second week of August, returns a breakeven steer calf purchase price of $196/cwt.

Using a new crop barley price of $345/tonne, a steer calf placed on feed this fall and finished against the June 2022 live cattle futures has an estimated breakeven purchase price of $211/cwt.

‘These examples indicate there is little upside in the calf market this fall. Strengthening live cattle futures, weaker Canadian dollar, stronger basis levels or lower feeding costs would support stronger calf prices. However, current feed and market conditions suggest there is likely more downside risk on calf prices as we head into the fall run,’ says Wood.

Source : alberta

Video: The 15-Year Bet Behind Every New Variety!

Canada is trying to decide how much agricultural research capacity it can afford to lose. Brian Rossnagel believes the better question is whether the country can afford to rebuild it.

The longtime barley and oat breeder makes the case with a simple fact about his profession: the consequences of today’s decisions may not become visible for 10 or 15 years.

“Pick the right parents. That’s the biggest thing,” Rossnagel says. “If you pick the wrong parents, you’re not going to get anywhere—and you don’t know that until 10 years, 15 years later.”

That warning carries particular weight as Agriculture and Agri-Food Canada moves to reduce spending and streamline parts of its science operations. The department’s 2026–27 plan anticipates the loss of approximately 665 positions by 2028–29 and says some research will be reduced where capacity exists in academia or industry. AAFC says the changes will make its science operations more cost-effective over the long term.

For Canada’s seed industry, Rossnagel’s career illustrates what is at stake.

This fall, the retired University of Saskatchewan breeder will be inducted into the Canadian Agricultural Hall of Fame. During his 35-year career at the Crop Development Centre, he helped develop more than 100 barley and oat varieties, including CDC Austenson—one of Western Canada’s most widely grown feed barleys. His induction recognizes not only those varieties, but the collaboration and research system that made them possible.

Rossnagel is quick to emphasize that none of it was the work of one person.

“The first thing I thought about was all the other people who contributed to whatever success I and my program had over the years,” he says. “We know that it’s not an individual who does this. It’s a group—a team.”

That team extends well beyond the breeder whose name appears beside a variety. It includes technicians, pathologists, quality specialists, statisticians, regional testing sites, seed growers and industry partners. It also includes the breeders who came before and those who will carry the germplasm forward.

CDC Fraser barley, for example, moved through three breeding careers. Its parents came from Brian Harvey’s program. Rossnagel advanced the material after Harvey retired, and Aaron Beattie later guided it through registration and release.

That kind of handoff is normal in plant breeding. The person who makes the original cross may never see the resulting variety reach farmers.

It also explains why lost research capacity cannot simply be switched back on when budgets improve.

“If you shut it off, it’s very, very difficult—and particularly costly—to start it up again,” Rossnagel says. “If you have to start from scratch, it’s going to be at least 10 years before anybody notices whether you’re getting anything done or not.”

The concern is not simply how many experimental lines Canada can process. Modern equipment, statistical tools and genetic technologies allow today’s breeding programs to evaluate tens of thousands of lines—far more than Rossnagel could handle when he entered the field in the early 1970s.

But efficiency and automation do not generate every idea.

“If you pare back down, and instead of having six or seven individual scientists concentrating on wheat breeding, you go down and say three people could handle all this, well, that’s half the ideas gone,” he says. “Particularly if you happen to lose the three people who had the really neat and innovative ideas, boy, that’s a problem.”

It is a timely distinction for Canadian agriculture. Consolidating programs may preserve the volume of material moving through a system, at least initially. It may not preserve the diversity of thinking, regional knowledge or willingness to pursue unconventional crosses.

That regional knowledge matters because Canadian agriculture is not one uniform production environment. A variety suited to southern Alberta may face different disease, moisture and maturity pressures than one grown in Manitoba, Ontario or Atlantic Canada.

“Agriculture is applied biology,” Rossnagel says. “Biology, all around the Earth, moves from the poles to the equator. It does not move from Newfoundland to B.C. like politics do.”