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Klassen: Feeder cattle prices hold value

Western Canadian feeder cattle traded steady with week-ago levels. A softer fed cattle market, along with the firmer Canadian dollar, tempered strength in the feeder complex.

Light-weight calves were in high demand as Black 480-weight steers on the Pfizer Gold program sold for $171 per hundredweight (cwt), f.o.b. the ranch in British Columbia. Simmental-Red Angus cross steers averaging 600 pounds traded for $152/cwt in southern Alberta.

Comments from the industry suggest the market felt heavy as this was the first week that buyers showed hesitation at the higher levels. April live cattle futures dipped to monthly lows, which appeared to weigh on prices for heavier calves.

Alberta packers bought fed steers at $108/cwt last week, down from the highs of $112/cwt a week earlier. Feeding margins are just above breakeven and with packers deep in red ink, feedlot operators are nervous moving forward. The breakeven sale price is sharply higher for the spring period and if barley prices continue to strengthen, we could see serious equity erosion. Prices for 500- to 600-lb. steers in southern Alberta have jumped approximately $18/cwt since the beginning of October. The upside in the feeder market may be limited; if fed cattle prices drop further, feeder cattle will also come under pressure.

Wholesale beef prices have failed to make new highs over the past month. Packers are unable to pass on the price increase of fed cattle to the grocers. U.S. gross domestic product jumped to 2.5 per cent in the third quarter, which reflects that retail spending also gained momentum. However, at home food expenditures were actually below year-ago levels earlier in fall. The market may be rationing demand in the short term; consumers are also backing away at the higher 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] 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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