Klassen: Fed cattle lead feeders higher

The weaker Canadian dollar, along with stronger beef prices and lower market-ready supplies, caused fed cattle to jump $4 per hundredweight (cwt) last week.

Alberta packers paid up to $111/cwt in a struggle to fill nearby demand. Feeder cattle prices followed suit, edging up $2-$3/cwt on average, with lighter-weight cattle up as much as $5/cwt in some instances. Charolais-cross silver age-verified steers weighing 825 pounds were quoted at $137/cwt in central Alberta. Pfizer Gold age-verified angus cross steers averaging 528 lbs. reached $161/cwt. The market is firm, with stronger demand surfacing for heavier cattle, and feedlots looking to take advantage of shortkeep replacements.

The U.S. feeder market was also $3-$6/cwt higher on average, with stronger demand for all weight categories. Weakness in the corn market along with stronger slaughter prices set the positive tone. Large-frame steers averaging 818 lbs. sold for $137 in Nebraska; steer calves weighing 580 lbs. sold for $142 in Montana. The market structure is setting up for a surge of feeder imports from Montana into southern Alberta during November.

March 2012 feeder cattle futures continue to show a strong premium over the nearby October contract. The market structure reflects that 800-lb. steers in Western Canada could be $8-$12/cwt higher in March relative to nearby prices. Strength in the deferred feeder futures is causing lightweight cattle under 600 lbs. to be extremely precious.

Positive U.S. economic data reinforced the cattle market late in the week. Stronger retail spending, combined with a sharp drop in beef production, should bode well for the cattle complex in the first quarter of 2012.

— 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 at 204-287-8268 for questions or comments.

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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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