Klassen: Feeder cattle prices lukewarm on mixed factors

Western Canadian feeder cattle markets were steady to $2 higher compared to week-ago levels. All weight classes experienced lukewarm buying interest, despite improving margins in the feedlot sector.

Most auction barns experienced minimal numbers; cow-calf producers are holding back on sales hoping for stronger values and extreme cold temperatures hindered cattle movement, especially in the Manitoba region. Feedlot operators were rather opaque, sending orders at or slightly below the market. Order buyers would stir the embers on quality mid-weight steers but this failed to attract a crowd at the higher levels.

Feeder cattle futures reached five-month highs and the cash trade is at lofty levels compared to last fall. However, feedlots’ managers are impervious to these recent market conditions. Talk at the coffee shop suggest these players need to sell a larger volume of fed cattle to build up equity before they take on additional risk.

Calves were a bit hotter this week with 550-lb. mixed steers trading from $216 to $220 in the major feeding regions of Alberta. Prices were $2-$4 lower in Saskatchewan and Manitoba given the adverse weather. Larger-frame steers with medium flesh levels averaging 750 lbs. traded from $177 to $180 in central Alberta while similar quality 725-lb. heifers were quoted from $160 to $163. Larger-frame tan steers with medium flesh averaging 850 lbs. reached up to $178 in southern Alberta. The market for heavier feeders was firm across the Prairies, continuing the gains on lighter categories.

Alberta fed cattle prices were once again stronger trading from $268-$270 on a dressed basis, up $5 from week-ago levels; live prices were near $165.Packers are short bought for nearby positions resulting in the stronger basis.

On the flipside, wholesale beef prices slipped last week, with retail movement slowing down after the holiday season. Adverse winter conditions across North America has also curtailed restaurant traffic. If the fed market starts to falter, feedlot buyers will scatter like scared rabbits. We need to see further confirmation from the consumer to solidify the market structure.

— 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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