Klassen: Feeder cattle prices edge higher

Western Canadian feeder cattle prices were $2-$3 per hundredweight (cwt) higher last week as feedlot margins remain in positive territory. Alberta packers were buying fed cattle in the range of $120-$121/cwt which was similar to prices seven days earlier and it appears that market is adjusting to lower feedlot inventories in the wake of stronger wholesale values.

Wholesale choice beef made an all-time record high above $205/cwt. This is a very strong signal that consumer demand is stepping forward at the higher levels which bodes well heading into the summer. Backgrounding operations that were holding back on sales due to lower prices earlier in spring were liquidating larger volumes this week, which tempered strength on heavier replacements. Buying interest for grassers lifted the market for lighter weights, with excellent pasture conditions noted across Western Canada.

Featured sales included a small group of red Angus-cross steers weighing just over 600 pounds, selling for $153/cwt landed in southern Alberta. Larger-framed Charolais cross steers weighing 700 lbs. with medium flesh sold for $146 in the same region. A solid group of black steers weighing 850 lbs. traded for $146 in the Calgary region. Thin green Charolais heifers averaging 600 lbs. were quoted at $130 landed in the Lethbridge area.

In the short term, the feeder market needs further strength in slaughter values to move higher. While wholesale beef prices are due for a setback, consumer demand feels solid now that summer weather has arrived. It appears the average American consumer is becoming comfortable with current retail beef prices. Look for feeder cattle prices to hold value into the summer.

The U.S. Department of Agriculture report on Friday forecasted a 2013-14 U.S. corn carryout over two billion bushels. Feedgrain supplies will remain snug until new -rop; however, burdensome supplies next fall will strengthen feeder cattle prices. A sharp drop in fourth-quarter beef production combined with growing consumer income should lift feeder prices up to historical highs in the final quarter of 2013. Feather-lights and calves under 550 lbs. appear to be good value given the current price outlook.

— 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

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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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