Klassen: Feeder cattle divorce from futures’ direction

(Photo courtesy Canada Beef Inc.)

Compared to last week, western Canadian feeder cattle prices were relatively unchanged. Higher-quality yearlings and calves were steady to $4 higher in Alberta and Saskatchewan; in Manitoba, yearlings traded $2-$4 lower while calves were $3-$5 higher.

Domestic cattle markets appeared to divorce from feeder and live cattle futures. June live cattle futures finished the week down US$3.50; however, Alberta fed cattle prices were up $1-$2 from last week, with active trade at $154.50. Finishing margins are nearing breakeven, which was supportive for the overall feeder complex. Feeder cattle futures were under pressure with stronger corn and wheat markets; however, calves were surprisingly strong. Supplies of backgrounded cattle and calves are starting to decline at this time of year and this may have contributed to the stronger market. Pasture conditions have improved with recent precipitation in Alberta. Feedlots that were waiting for lower values finally stepped forward and the pent-up demand attracted buying enthusiasm. The crowds were small but fierce.

In central Alberta, Simmental-based steers with lower flesh on very light grain ration averaging 880 lbs. were quoted at $184; a larger group of Charolais-blended heifers averaging 830 lbs. were quoted at $173. In the Lethbridge area, larger-frame medium-flesh black steers weighing 865 lbs. were valued at $186. In Manitoba, medium-frame heavier-butter black steers averaging 850 lbs. were reported at $174. North of Saskatoon, a group of larger-frame medium-flesh Limo mixed steers with medium flesh averaging 950 lbs. were valued at $171.

Northwest of Winnipeg, a smaller group of larger-frame thin black steers weighing 585 lbs. dropped the gavel at $232; Simmental-based steers averaging 600 lbs. were valued at $234. In central Alberta, a small group of mixed steers weighing 530 lbs. reached up to $245 and similar-weight heifers were quoted at $212. In southern Alberta, a small group of Charolais-based steers just over 500 lbs. reached up to $255; Hereford-blended heifers averaging 535 lbs. were quoted at $218 in the same region. There is no slippage on these lighter calves.

The feeder market is in a very precarious situation, with feed grain prices ratcheting higher. Barley and wheat are hard to buy. At the same time, feeder cattle supplies are down from last year. If barley and wheat crops get off to a great start, it will be difficult to source larger volumes of quality feeder cattle.

— 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 or via his website at ResilCapital.com.

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Jerry Klassen 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 or via his website at ResilCapital.com.

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