Klassen: Feeder cattle prices consolidate

Feeder steers ranging from 700 to 750 pounds brought back $133 per hundredweight (cwt) in central Alberta last week while lighter eight-weight cattle sold for $126/cwt. The feeder market appears to be consolidating at the higher levels, with feedyard managers extremely cautious after last week’s U.S. Department of Agriculture report.

U.S. corn stocks as of March 1 were 6.52 billion bushels, down 1.2 billion bushels from last year. Despite the potential record plantings of 92.2 million acres, it looks like the corn fundamentals will be historically tight for two years in a row.

Barley prices in Southern Alberta have been hovering in the range of $190 to $195 but we could see prices rally $40-$50 per tonne if Western Canada has a normal-quality wheat crop in 2011. Barley acres are expected to be down 10-15 per cent in comparison to last year, resulting in extremely tight stocks, similar to the corn situation.

Strength in slaughter cattle prices has offset the gains in the feedgrain complex; however, it is difficult to forecast how high fed cattle prices can move from current levels.

U.S. feeder cattle prices were $5 to $8 higher last week, with lighter stocker cattle jumping as much as $10/cwt. We now find prices in Oklahoma for steers just over 700 pounds at $142/cwt while these same cattle in southern Manitoba are trading near $130/cwt.

Earlier in winter, I mentioned that U.S. feeder prices will enter a vacuum of demand during  spring. Winter wheat conditions were extremely poor last fall in central and southern Kansas, northern Texas and parts of Oklahoma causing feeder cattle to enter feedlots earlier than normal. We now find available supplies in the major feeding regions of the US  down sharply from last year. Oklahoma feeder cattle prices are expected to move to a premium over Manitoba and Southeast Saskatchewan values causing feeder cattle exports to increase during April.

— 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] or at 204-287-8268 for questions or comments.

About the author

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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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