Klassen: Improving margins underpin feeder market

Compared to last week, western Canadian yearlings advanced $2-$5 while calves were unchanged to $3 higher. April live cattle futures are in a bull market; I’ve had many calls from producers and all I tell them is that April live cattle futures are in a bull market. Just as important, a market will not culminate by screaming to the world that the trend is over.

In the short term, weaker corn futures, along with improving feedlot margins, reinforced buying enthusiasm. Secondly, this is the first time over the past year that all the stars have aligned in the deferred positions. Demand from the cattle feeding investor is starting to surface at this time of year, which adds another powerful player to the mix. How can I describe this feeder market — early second period, tied 2-2. There’s plenty of time left with buyers and sellers at full strength. Many auction barns will hold feature calf sales over the next couple of weeks.

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Yearlings were very precious and larger operations in southern Alberta appeared to set the tone across the Prairies. Larger-frame black Angus mixed steers weighing 810 lbs. were quoted at $210 landed in southern Alberta; similar-quality heifers averaging 824 lbs. were valued at $190. In central Alberta, medium- to larger-frame tan steers averaging just over 900 lbs. reached up to $196 while mixed heifers weighing 950 lbs. sold for $172.

Medium-weight calves also well bid. In southern Alberta, 700-lb. Simmental-cross steer calves reportedly sold for $217; in central Saskatchewan, steer calves weighing 700-730 lbs. traded hands in the range of $218-$223. Talk in the trade was that eastern Canadian and U.S. orders were quite aggressive on these cattle. This caused some pockets in Saskatchewan and Manitoba to trade at a premium to major markets in Alberta. Backgrounding operators have not surfaced in full force with the delayed harvest; larger groups of calves were relatively unchanged from last week. In southwestern Saskatchewan, mixed tan steers averaging 614 lbs. were quoted at $228 while mixed heifers weighing 640 lbs. were valued at $197.

Alberta packers were buying fed cattle at $148 on a live basis, up $2 from last week. Market-ready supplies are expected to tighten throughout October and November, which should spill over into the feeder complex.

— 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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