Klassen: Feeder cattle market edges higher

Western Canadian feeder cattle prices were $2-$3 per hundredweight (cwt) higher on average last week. Auction market volumes have been declining, but steady feedlot demand and the weaker Canadian dollar have supported the feeder market.

Major feedlots are moving through a massive liquidation phase of fall-placed calves and margins have been fairly positive on these cattle. Feedlots are running at lower capacity, which has enhanced buying interest for replacement cattle.

Alberta packers were buying cattle in the range of $114-$116/cwt, slightly higher than a week earlier. Charolais-cross steers weighing 560 pounds sold for $181/cwt in central Alberta. A small group of non-feature age-verified exotic steers weighing 811 lbs. sold for $146/cwt in the same region.

The U.S. Department of Agriculture reported wholesale choice beef prices at $197/cwt, which is the highest level since February. Packing margins have improved and the U.S. weekly slaughter was the highest since December. A stronger U.S. fed cattle market appears to be leading North American feeder prices higher. The deferred live cattle futures are expected to incorporate a risk premium due to the uncertainty in beef production during the fall quarter. October feeder cattle futures are within $2 of contract highs, which suggest the market is factoring in lower supplies.

Southern Alberta barley prices dropped $4, to $142 per tonne, last week. The cost per pound gain has decreased, causing feedlot buyers to increase bids for feeder cattle. Crop conditions look very good across Western Canada and some barley will be harvested in early August. The feedgrain complex has a bearish tone, which will continue to support feeder cattle prices.

— 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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