Klassen: Feeder cattle market garners support

Western Canadian feeder cattle markets were relatively stable over the past week while prices in the major feeding regions were $2 to $5 higher. Alberta fed cattle prices were $2 higher, trading in the range of $170 to $172, which bolstered buying enthusiasm in the heavier weight categories. Feedlot operators in the Lethbridge area were quite aggressive on yearlings, which led the market across the Prairies.

A larger group of medium-flesh larger-frame steers averaging just under 825 lbs. sold for $195 in southern Alberta; similar-weight heifers were quoted at $165. A month from now, these quality groups will be hard to come by and feedlots were anxious to accumulate numbers before the summer doldrums. Markets in central Alberta were trading at a minor discount to the Lethbridge region. Red white-face mixed steers with medium frames averaging just over 800 lbs. traded for $176 south of Edmonton. Manitoba and Saskatchewan markets experienced minimal volumes with variable quality, which made the market hard to define.

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Calf prices held value across the Prairies with steady demand noted from major feedlot operators and the smaller backgrounder operator. Prices are now low enough that feedlots feel they can take on the risk with optimism in the deferred fed cattle positions. Recessionary-type fears that were hindering the beef outlook earlier in winter have evaporated and consumer confidence looks more positive moving forward. Small groups of heifers averaging around 500 lbs. sold for $205-$210 while their brothers of similar weight were quoted in the range of $235-$245.

Heifers for herd replacement were bringing premiums of $10-$15 above the feeder category and demand for cow calf pairs has improved over the past couple weeks. Average-quality cow-calf pairs are trading for $2,000-$2,500. This appears to be fair value, given the present value of future earnings, so the cow-calf operator needs to look at this for longer-term profitability.

I think the feeder market has stabilized for the time being. The fed cattle market may soften in the summer months, but price levels for replacements look profitable into the fourth quarter.

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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