Klassen: Fed cattle lead feeders higher

U.S. fed cattle prices reached $107 per hundredweight during the last week of December on tight market-ready supplies and strong domestic demand. Feeder cattle markets were rather quiet on both sides of the market due to the holiday period. However, this strength in the slaughter market should result in a $5-$10/cwt increase in feeder cattle prices over the next couple of weeks. Feedlot margins remain favourable and with western Canadian inventories down three per cent from year-ago levels, demand from major feedyards will stay strong.

Seasonally, fed prices tend to peak out in the March-April timeframe and this will also limit the upside in the feeder market in late spring. Feeder cattle will be in short supply at this time because cattle grazing on hard red winter wheat pasture have moved into feedlots sooner than normal. This could result in stronger export demand and tighten supplies in Western Canada.

Bred cows and heifers have been bringing back $1,100 to $1,400 over the past month, up from $800 to $1,000 last year for the same timeframe. Cow-calf producers are in the beginning stages of expansion; therefore, it wouldn’t surprise me to see bred heifers gain another $300 to $400 between now and summer.

The U.S. cow slaughter will start to decline over the next couple of months as the bred cow market gains strength. Available heifers for feedlot placements will be down in the latter half of 2011 in Canada and the U.S. due to the expanding U.S. cow herd.

— 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

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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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