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Klassen: Extreme temperatures temper feeder demand

Dec. 15 — The U.S. feeder market was $3 to $5 lower last week; Canadian values were steady to $3 lower. Adverse weather conditions across North America set a negative tone to the feeder market.

Feedlots in Western Canada are dealing with extreme weather conditions and are not looking to bring in additional supplies at this time. Cow/calf producers who were waiting to sell prior to year-end will have to wait until the weather recovers, which will likely be in the new year with holiday season right around the corner.

Fed cattle prices in Alberta dipped to fresh yearly lows and cattle feeders are experiencing a prolonged drought in the margin structure. Feeder cattle prices need to drop by approximately $8 to $12 so that feedlots can see black ink for the spring period.

Unofficial data has November Canadian feeder exports to the U.S. at 7,500 head compared to 34,440 in November 2008. If we look at the three-month period from September through November, feeder cattle exports were 46,000 compared to 175,000 head last year. Feeder cattle placements in Alberta and Saskatchewan feedlots were very similar to year-ago levels, coming in just over 600,000 for September and October.

As we can see from the supply situation, we have larger numbers to absorb over the next couple of months. The overall environment will keep the Canadian market at a discount to the U.S. to encourage the export program. Feeder cattle numbers coming on the market in Western Canada during January and February will be 50,000 to 75,000 head above year-ago levels. This should keep the feeder market under pressure.

— Jerry Klassen is a commodity market analyst in Winnipeg and maintains an interest in the family feedlot in southern Alberta. He can be reached by e-mail at [email protected] 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 purchasing or selling decisions. Each individual should do their own research on market conditions.

About the author

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Jerry Klassen

Jerry Klassen is manager of the Canadian office for Swiss-based grain trader GAP SA Grains and Products Ltd. and also president and founder of Resilient Capital, a specialist in commodity futures trading and commodity market analysis. He can be reached at (204) 504-8339 or visit his website at www.resilcapital.com.

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