Klassen: Feeder market stays firm, looks upward

The feeder cattle market is moving to levels where buyers have “ticker shock” and are becoming overwhelmed. Earlier in fall, many feedlot operators were holding back on purchases in hopes of softer values, but we now see these buyers step forward more aggressively before year-end.

This last week, we saw 5-weight steers reach $145 per hundredweight (cwt) in southern Alberta and 6-weight cattle not far behind at $132. Bred heifers are $100 higher than last week, selling for $1,500, almost twice as much as last year.

Barley prices in southern Alberta are $25 per tonne higher than a month ago, but this has done little to stem buying enthusiasm in the feeder complex. Fed cattle touched $98/cwt last week and it looks like slaughter cattle could reach higher levels next April. This would result in an additional $5-$10/cwt on top of current feeder cattle prices.

The first sign of the expansionary process will be the reduction in the U.S. cow slaughter, which is still running 4.2 per cent above last year and 16.6 per cent above the five-year average. If we start to see expansion next March, fewer heifers will come on the market, enhancing feeder prices.

Consumer spending is driving beef and cattle prices higher as beef production is very similar to year-ago levels.  There were over 200 million Americans shopping on Black Friday, which is the highest since 2004. Ground beef prices are near historical highs as Americans appear to have more disposable income. An American Express study showed ultra-affluent Americans (those who spend $7,000 on their credit cards per month) are spending 25 per cent more on fast food in comparison to last year. This is a significant change in taste from white-tablecloth restaurants, which also enhances the beef trimmings market. 

— 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 204-287-8268 for questions or comments.

The material contained herein is for information purposes only and is not to be construed as an offer for the sale or purchase of securities, options and/or futures or futures options contracts. While the information in this publication cannot be guaranteed, it was obtained from sources believed to be reliable. The risk of loss in futures trading can be substantial. The article is an opinion only and may not be accurate about market direction in the future. Do not use this information to make buying or selling decision because adverse consequences may occur. This information may be wrong and may not be correct about current market conditions in all areas of Canada. This is an opinion only and not based on verified facts.

About the author

Contributor

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.

Jerry Klassen's recent articles

explore

Stories from our other publications