Klassen: Feeder market experiences renewed optimism

Compared to last week, yearlings traded $3-$5 higher while calf prices were $5 to as much as $10 higher in some cases. Southern Alberta yearling prices were unchanged this week after trading at premium to western Canadian markets earlier in September.

The U.S. Department of Agriculture came out on Tuesday and lowered its beef production estimates for the remainder of the year, which appeared to set positive tone in the feeder complex. Although the feeder cattle futures ended the week with marginal gains, there appeared to be renewed optimism among buyers. Many auction barns held feature sales and all were well attended. Both the finishing feedlot operator and backgrounder were active. This was the first week that calves were also featured. Demand from Eastern Canada was also quite active, enhancing prices in Manitoba and eastern Saskatchewan. Prices across the Prairies were quite even, with no noted premiums in southern Alberta.

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In central Alberta, medium-flesh, medium-frame red steers weighing just over 900 lbs. sold for $178 while similar-quality mixed tan steers averaging 850 lbs. brought back $197. Medium-frame, medium- to lower-flesh heifers averaging 885 lbs. sold for $173 in the same region. We’ve seen the deferred live cattle futures gain about US$10 over the nearby contract, enhancing the demand for yearlings. Current feeding margins are hovering around breakeven, but for next April, the margin structure is more favourable, supporting yearling prices.

Demand for calves also appeared to receive a shot of adrenaline this week. In east-central Alberta, mixed steers weighing 500 to 525 lbs. readily traded from $224 to $228 while 650-lb. mixed steers averaged $212. Calves are fairly good value compared to current yearling prices so feedlot interest was also noted in the lower weight categories.

The barley harvest has moved into the central regions of Alberta and Saskatchewan, weighing on the feed grain prices in these areas. However, in southern Alberta, barley prices have been percolating higher, reaching $200 per tonne delivered in Lethbridge. There is still a fair amount of uncertainty where barley and feed grain prices will settle this winter because there is a wide range of production estimates for both Canadian barley and U.S. corn. Trade uncertainty with the U.S. appears to have taken a back seat for the time being.

— 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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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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