Klassen: Feeder cattle market experiences mixed tone

(Photo courtesy Canada Beef Inc.)

Western Canadian feeder cattle markets experienced a diverse tone across the Prairies, with notable buying interest surfacing on yearlings. Compared to seven days earlier, prices for yearlings in southern Alberta were $5-$7 higher on average, as feedlots focused on purchasing local cattle.

In southern Alberta, larger-frame lower-flesh black steers weighing 900 lbs. were quoted at $184 while 800-lb. similar-quality steers traded just over $190. Outside the major feeding regions, yearlings were trading steady to $5 lower. Mixed steers weighing 900 lbs. in the Edmonton area traded for $176 and 800-lb. mixed medium-flesh steers were quoted at $180. The live cattle futures were eroded late in the week and feedlots are not counting on a significant recovery in local fed cattle prices. Alberta packer bids were equivalent to $134 on a live basis, which is about $10 below breakeven pen closeouts. The feeder market has no breathing room because feedlot margins continue to run in red ink.

We’re starting to see more calves come on the market, but major operations were on the sidelines for cattle in the lower weight categories. A long drawn-out harvest, along with adverse rains, has also kept the farmer/backgrounding operator away from the market. Calves were steady to $5 lower compared to last week; mixed steers just under 600 lbs. were quoted at $188 in east-central Alberta and Charolais-cross heifers averaging 550 lbs. were quoted at $169 landed in southern Alberta. Auction barns in Saskatchewan and Manitoba carried minimal numbers, making the market hard to define.

Western Feedlots’ announcement that it plans to halt operations set a negative tone across the Prairies. To put this in perspective, a major buyer of feeder cattle is out of the market with capacity of 100,000 head turning 2.0 times per year. It’s inevitable this will result in a lower price structure; secondly, I expect feeder cattle exports to the U.S. to increase in Manitoba and eastern Saskatchewan as the market functions to encourage demand. This is a major change in the fundamental structure, and there is no doubt other operators will be extremely cautious when purchasing replacements.

Jerry Klassen is manager of the Canadian office for Swiss-based grain trader GAP SA Grains and Produits. He is also president and founder of Resilient Capital, which specializes in proprietary commodity futures trading and commodity market analysis. Jerry owns farmland in Manitoba and Saskatchewan but grew up on a mixed farm/feedlot operation in southern Alberta, which keeps him close to the grassroots level of grain and cattle production. Jerry is a graduate of the University of Alberta. He can be reached at 204-504-8339.

 

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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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