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Klassen: Feeder cattle keep trending higher

Black steers in central Alberta weighing 550 pounds have sold for just over $130 per hundredweight (cwt) while 515-pound steers reached $142. Presorted red steers averaging 420 pounds touched $155/cwt.

Sharply higher fed cattle values were quickly passed onto the feeder market, as local auctions reported prices $2 to $4 higher than a week earlier. There is a seasonal tendency for feeder cattle supplies to peak in late October and then start declining. Feedlot inventories are at five-year lows and with fed cattle prices reaching over $96/cwt in southern Alberta, the feeder market should stay firm into the winter period.

Over the past week, we saw cow-calf producers start buying replacement heifers. This market activity is something we haven’t seen in a very long time. Whether this is for expansion or herd maintenance, it is a positive signal for the industry.

The farmer backgrounding operator is also starting to fill pens now that the grain harvest has wrapped up in Western Canada. These buyers are stepping forward later than usual, but the additional demand is fueling the positive momentum in the feeder market.

If you study feeder cattle prices over the past 40 years, the highest financial returns occur when the U.S. economy comes out of the recession and moves into full-fledged expansion.

Cow-calf producers who have been reading my articles for a while know that I recommended expanding the herd in 2009 to take advantage of the current price structure.

The U.S. cow slaughter continues to exceed expectations and it’s important to be a year or two ahead of our neighbours to the south.

— 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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