Klassen: Feeder cattle grinding lower

Feeder cattle prices in Western Canada continue to grind lower due to softer slaughter values and rising feedgrain prices. Alberta fed cattle dropped $2 to $4 last week, with steers trading in the range of $108.50 to $111.

On Monday (April 25), cattle in Texas traded at $117, down from $119 late last week. The U.S. Department of Agriculture reported April 1 cattle on feed numbers five per cent higher than year-ago levels, which has set a negative tone to the cash trade.

Feedlot margins are under pressure and buying enthusiasm for replacement cattle has waned. U.S. fed prices need to be near $120 to break even and the feeder market feels vulnerable with corn futures ratcheting higher.

In southern Alberta, steers weighing 600 to 700 pounds brought back $130 to $140; 700- to 800-lb. cattle sold in the range of $120 to $130. Last year, weekly feeder cattle exports to the U.S. surged during April but this year, the numbers are down sharply. May feeder cattle futures are $11 from the recent highs and the stronger Canadian dollar has tempered trade south of the border.

Last week, I mentioned the feeder market had likely defined the upside potential. Looking at past history, the market usually experiences a correction before retesting the highs. The industry may be in for a period of negative U.S. feedlot margins, which will weigh on the North American feeder market. The USDA reported larger-than-expected cold storage stocks of beef, which may confirm slower retail consumption.

— 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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