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Klassen: Feeder cattle continue to climb

Western Canadian feeder cattle prices were $5 to $8 per hundredweight (cwt) higher on average, compared to seven days earlier, and are a solid $15/cwt higher relative to average values in December.

Most auction barns are now back to regular sales after the holiday season and larger volumes allowed buyers to fully define the market structure.

Alberta packers continued to buy fed cattle in the range of $133 to $134.50/cwt, while barley prices remain under pressure, dropping to $152 per tonne delivered Lethbridge. Enhanced feeding margins, along with stronger June live cattle futures, allowed buyers more breathing room when buying replacements. Nearby tightness in the fed cattle market appears to be lifting the overall cattle complex in the short term and the beef pipeline remains thin, after the adverse weather across North American major feeding regions earlier in January.

Major features included exotic steers averaging just under 850 pounds selling for $164/cwt in central Alberta. Black Angus-based steers weighing 700 lbs. sold for $183/cwt at the same sale. Late in the week, a smaller group of black heifers weighing 712 lbs. sold for $166/cwt in southern Alberta while black steers weighing 748 lbs. sold for $173/cwt at the same sale.

The U.S. feeder market stabilized last week despite fed cattle in the southern Plains reaching all-time highs of US$144/cwt. Prices are high enough where feedlot operators are pulling in the reins, analyzing the risks when they’re paying $1,400 for an 800-lb. steer. The recent U.S. Department of Agriculture report on corn was considered neutral and the slide in U.S. feed grain prices may be coming to an end. U.S. wholesale beef prices for choice product reached another all-time high of US$224/cwt, up $14 from seven days earlier.

After a significant jump in the feeder market, there is usually a sideways trading pattern until the fundamentals for fed cattle or feed grains change. Looking at past history, the fed cattle prices at extreme highs can be rather short-lived or extremely volatile. This is definitely a sellers’ market for feeder cattle.

— Jerry Klassen is a commodity market analyst in Winnipeg and maintains an interest in the family feedlot in southern Alberta. He writes an in-depth biweekly commentary, Canadian Feedlot and Cattle Market Analysis, for feedlot operators in Canada. He can be reached by email at [email protected] for questions or comments.

About the author

Contributor

Jerry Klassen manages the Canadian office of Swiss-based grain trader GAP  SA Grains and Produits Ltd., and is president and founder of Resilient Capital specializing in proprietary commodity futures trading and market analysis. Jerry consults with feedlots on risk management and writes a weekly cattle market commentary. He can be reached at 204 504 8339.

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