Klassen: Feeder market bounces off previous lows

Western Canadian feeder cattle prices traded $5-$8 above week-ago levels with quality groups of steers selling for as much as $10 higher. Renewed optimism surfaced amongst feedlot operators as feeding margins appear to be moving above break-even pen closeout values. Auction markets that only had two or three major buyers at previous sales in spring all of sudden saw a crowd of buying interest. Alberta feedlot operators were quick to send orders across the Prairies, waking up cattle buyers that were in hibernation mode over the past weeks.

Alberta packers were showing bids for fed cattle in the low $160s, $10 higher compared to seven days earlier; wholesale beef prices ended the week with choice product at US$213/cwt, a week-over-week increase of nearly US$10/cwt.

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Larger-frame well-backgrounded medium-flesh 900-lb. steers were readily trading from $173 to $176 in Alberta; quality 800-lb. steers were actively moving from $188 to $190. The steer/heifer spread narrowed in the heaver weight categories. Larger-frame heifers weighing 850 to 900 lbs. sold from $160 to $165. Quality Angus-based heifers averaging 750 lbs. were quoted at $175 in southern Alberta. A lighter group hovering at 700 lbs. was closer to $188.

Auctions in Saskatchewan and Manitoba and some in Alberta experienced a softer tone, because of the light run of smaller lower-quality groups on offer. This wasn’t representative of the overall market. The farmer-cattle producer is in the midst of seeding and marketing feeders is not a top priority. Secondly, it’s that time of year, when feeder cattle volumes seasonally decline into the summer. This caused feedlots to send the “just get ’em” orders on quality groups available.

The weaker Canadian dollar enhanced positive sentiment, and with softer crude oil prices and slower exports, there is potential for additional weakness moving forward. The industry is experiencing more retailers featuring beef this weekend, coming on the heels of favourable weather in the forecast. The U.S. also experienced constructive economic data, with higher wages and stronger retail sales, which bodes well for beef consumption longer-term.

Only time will tell if this beef complex has turned the corner, but cattle producers are longing for a reason to be hopeful of improved profitability in up coming months.

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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