Feedlot operators continued on a cautious path this week as western Canadian feeder cattle traded $6-$10 lower compared to seven days earlier. Heavier replacements over 800 lbs. once again led the charge lower, dipping as much as $12 below week-ago levels. Manitoba and Saskatchewan markets also came in line at a slight discount to the Alberta prices.
Feeding margins are suffering in red ink, and demand uncertainty in the deferred positions caused buyers to incorporate a risk discount in the feeder market. Cattle buyers had scale-down orders this week and were astounded that the deck was totally filled by Friday. Despite the modest bounce in the live cattle futures, the market sentiment was subdued and feedlot operators felt as if they were at a casino, playing odds that were unknown. Strength in the Canadian dollar also set a negative tone as lacklustre buying interest was noted from south of the border. Canadian exports of feeder cattle and calves to the U.S. are now running 10 per cent below year-ago levels. Wholesale beef values remain under pressure, with U.S. choice product closing at $200/cwt on Friday, down $5 from last week
A small group of Angus-cross mixed steers with medium flesh averaging just under 900 lbs. were quoted at $223 landed in southern Alberta feedlot. In central Alberta, larger-frame thin mixed steers just over 700 lbs. traded at $256. Discounts on flesh levels and quality were quite heavy, with cattle of similar weight in the same regions dipping to $248 on occasion. In central Saskatchewan, the steers averaging 700 to 725 lbs. were quoted in the range of $244 to $250. Calves under 600 lbs. were extremely variable across the Prairies. For example, steers weighing 500 to 525 lbs. traded from $270 to $285 in Alberta while similar-weight cattle were quoted from $280 to $290 in southern Manitoba.
Most auction barns are advertising feature sales through the month of October and the quality of cattle usually improves later in fall. Fed cattle are backed up in the feedlots and although there is plenty of pen space available, this environment is adding to the nervous tone. Therefore, the market is expected to remain under pressure as larger supplies come on the market. There is no signal that this downward slide has come to an end. The grain harvest is in the final stages and barley prices were a tad softer this week throughout Alberta.
— 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.