Klassen: Feeder cattle continue upward trend

(Photo courtesy Canada Beef Inc.)

Western Canadian feeder cattle prices traded $3-$5 above week-ago levels with higher-quality cattle as much as $8 higher. Once again, stronger fed cattle prices and healthy feedlot margins were the main factors driving the market, especially in the heavier weight categories. Feedlots have liquidated a larger amount of fed cattle over the few weeks and certain players have been holding back on purchases; however, waiting was not an option this week with the market ratcheting higher.

Southern Alberta markets traded at a small premium to the non-major feeding regions but orders were well spread across the Prairies, keeping prices fairly uniform. Many backgrounded yearlings moving direct off farm to feedlot are spoken for, so buyers had to be aggressive in the auction rings. The steer-heifer spread appeared to narrow, which is also a signal of strong demand. Feeder cattle futures were up almost every day of the week, bolstering confidence in the overall complex.

Larger-frame, medium- to lower-flesh steers weighing just under 850 lbs. sold for $170 landed in southern Alberta feedlot; in central Alberta, Simmental-cross heifers weighing just over 800 lbs. were quoted at $165. In east-central Saskatchewan, 700- to 725-lb. larger-frame steers with lower flesh reached up to $193 while in central Alberta similar-quality steers were quoted from $188 to $190. The market was well defined with variable prices noted on lighter calves under 500 lbs. Buyers seeking grassers were not afraid to pay up this week with optimal pasture conditions developing across the Prairies.

Alberta packers were buying cattle from $165 to $168, up $2-$3 from week-ago levels. Unhedged cattle are experiencing near-record margins and feedlots once again closed their eyes to the June live cattle futures trading at a $9 discount to the April contract. Wholesale values also jumped again and the cattle market appears to be incorporating a risk premium. Nearby demand is stronger than anticipated, while the U.S. weekly slaughter will only significantly increase later in April. This premium has been further enhanced by the adverse dry conditions and fires in the U.S. southern Plains.

— 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.

About the author



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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