Klassen: Quality calves support feeder market

They say a sudden windfall can provide a false expectation of future performance. This is definitely true of the cattle feeding business.

Western Canadian feeder cattle prices continued on a mixed volatile tone over the past week, trading $10 lower to as much as $10 higher. Feedlot operators shrugged off the sharply lower live cattle futures as if that price discovery was on another planet. The market was very sensitive to quality and buyers were extremely finicky. Preconditioned quality weaned calves traded at the higher levels, while bawlers and semi-healthy cattle were discounted, sometimes quite heavily.

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In central and northern Alberta and Saskatchewan, the market was a bit softer. Feedlot operators tended to shy away from the unknown cattle sending orders to buyers below the last week’s prices. Manitoba prices were rather hot, with strong demand noted from south of the border on all weight categories. Another bright spot was southern Alberta, where feature sales were well attended. Feedlot operators’ attendance was mandatory and they seemed to be more willing to pay up on cattle they saw firsthand. They know the ranch, along with past performance, which is a safer bet relative to unknown calves travelling farther distances in wet weather.

In central Alberta, mixed unweaned steers with no special feature averaging 525 lbs. sold for $293, whereas in the Lethbridge area, similar-weight cattle sold from $300 to $310. In southern Manitoba, mixed steers averaging just over 500 lbs. reached up to $315. In the Edmonton area, preconditioned steers averaging 700 to 725 lbs. traded from $257 to $260. Similar-weight cattle just over 700 lbs. traded from $260 to $266 in southern Manitoba. We are experiencing a diverse market where all features are considered and valued accordingly. Buyers don’t have to be anxious with the larger volumes available and the “just get ’em” orders are the way of the past.

Live cattle futures dropped sharply as the market factors in a year-over-year increase in quarterly beef production. Weaker wholesale beef prices also set a negative tone for packers, which dropped bids this week by $3 to $5 on fed cattle. Feeder cattle don’t pencil profitably; however, looking at past history, we need to see a round of significant losses before the local feeder cattle market experiences a significant drop. Backgrounders need to consider this heavily, because next spring, yearlings could be $20 to $30 below current levels.

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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