Klassen: Demand for grass cattle supports feeder market

The feeder cattle market showed a mixed tone this past week. Replacement cattle over 750 pounds were $2 per hundredweight (cwt) lower to $2 higher, but lighter feeders were $2-$4/cwt higher.

Feedlots realize that available feeder cattle supplies will decrease over the next couple months. However, with feeding margins deteriorating, it is difficult to increase bids for replacement cattle.

Pasture conditions are considered excellent across Western Canada and considerable interest in grass cattle resulted in a firmer tone for lighter-weight feeders. It appears buyers have been waiting for lower prices but time is also of the essence. Alberta packers bought cattle in the range of $110/cwt to $113/cwt which was slightly higher than a week earlier.

Feedlots are still backed up with market-ready cattle, which has tempered demand for replacements. Margins are in red ink in excess of $100 per head which will continue to set a negative tone for the feeder complex. Feedlot pen conditions are expected to improve over the next 10 days, which should help feeding efficiencies, but this will do little to enhance buying enthusiasm.

Nearby feeder cattle futures have dropped $12 from the contract highs down to $149 but the October contract continues to trade near $160. Producers should probably take some price protection on their fall marketings. We have all seen how quickly the market can change and with the deferred contracts near historical highs, this is a reasonable opportunity.

— 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] for questions or comments.

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Jerry Klassen 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 or via his website at ResilCapital.com.

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