Klassen: Feeder cattle market has mixed tone

Western Canadian feeder cattle prices were steady to $2 per hundredweight higher last week. The weaker Canadian dollar, along with steady feedlot demand set a firmer tone. Favourable rains over the past couple weeks have also enhanced demand for grass cattle.

Feedlots are moving a large amount of fed cattle at this time of year; there is more demand for replacement cattle. Pens are in fair condition but further rains may cause feedlots to factor in a slightly higher deathloss or feeding inefficiencies.

Alberta packers were buying steers in the range of $111-$113/cwt. Packing margins are in black ink and wholesale prices are rather strong for this time of year.

In central Alberta, a small group of mixed exotic steers weighing just over 670 pounds sold for $165/cwt. Black Angus 800-lb. steers sold for $146/cwt at the same sale. A group of mixed feeder heifers weighing 880 lbs. sold for $130/cwt, landed in southern Alberta feedlot.

Lighter-weight cattle under 600 lbs. were actually a bit softer this last week, with small volumes noted at most auction markets. Feedlots don’t appear to be overly interested to bring in these lower weights at this time of year.

The industry is expecting a sharper drop in beef production in the fourth quarter of 2012 and first quarter of 2013. Barley prices are starting to soften and with the larger upcoming crop, feedgrain prices should remain under pressure. These factors should limit further downside in the feeder market and result in a steady to higher tone moving forward.

The economy in general is moving into a soft phase for the summer months. After larger consumer spending in the spring period, consumers often pull back on expenditures. This will be supportive for ground beef during the grilling season but higher-end cuts are expected to soften. Feeding margins may continue to struggle in the short term for cattle placed in late winter.

— 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] for questions or comments.

About the author

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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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