Klassen: Feeder cattle edge higher

Feeder cattle prices in Western Canada were steady to $2-$3 per hundredweight (cwt) higher during the first week of 2012. There is a market tendency for feeder prices to jump after the holiday season and this year was no exception.

Small, non-feature groups of feeder cattle were noted at most auction barns, which made buyers more aggressive whenever larger groups of quality animals moved through the ring. For example, a group of 100 large-frame steers averaging 610 pounds sold for $161/cwt west of Edmonton.  Heifers weighing 620 lbs. sold for $158 in central Alberta.

The U.S. Department of Agriculture reported feeder cattle $5-$10/cwt higher in comparison to two weeks earlier. A healthy group of heifers weighing 618 lbs. sold for $195/cwt in Nebraska.

Producers in the U.S. southern Plains are moving through the expansionary phase, causing feeder cattle to trade at abnormally high prices. Lightweight calves under 400 lbs. have been selling for record highs throughout the fall period but now this strength is moving into the 500- and 600-lb. categories. October feeder cattle futures made fresh all-time record highs last week, reaching over $154. Western Canada should experience larger feeder exports in January and February.

A large portion of Argentina and Brazil has experienced less than 50 per cent of normal precipitation, causing corn prices to rally. Keep in mind Western Canada has experienced above-normal temperatures and below-normal precipitation so far this winter. Feedgrains have upside potential over the next couple of months but this will do little to temper the strength in feeder cattle.

Cattle prices continue to be supported by positive economic data. The U.S. unemployment rate fell to 8.5 per cent as employers added 200,000 jobs in December. Consumer spending is expected to surge over the next quarter, which translates into higher restaurant traffic and stronger beef demand.

— 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.

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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