Klassen: Feeder cattle market holds value

(Photo courtesy Canada Beef Inc.)

Western Canadian feeder cattle prices were steady to $5 higher over the past week on limited volumes. Stragglers from backgrounding operations and late-blooming calves set a reserved tone amongst buyers with large price variations at different regions of the Prairies. Feedlot margins are hovering around breakeven and there appears to be solid demand underneath the feeder market.

Despite the financial turmoil over the winter, this industry is based on hope, as Charolais-based steers averaging just under 900 lbs. reached up to $189 in southern Alberta; a small group of larger-frame mixed steers weighing just over 800 lbs. sold for $199 in central Alberta. Carcass weights are coming down as feedlots move into liquidation phase on fed cattle and most operators want to carry some fresh cattle through the summer. If the fed cattle market holds at current levels, there is some profitability at these levels and no one wants to be left out when the market finally shows a reward.

Calves were hard to come by, which made the market difficult to define. Mixed steers averaging 500 to 525 lbs. were quoted from $212 to $230 while heifers of similar weight were a solid $20 discount. Feedlots are counting on lower costs per pound gain when these calves move onto full feed, which enhanced buying interest. The farmer/cattle producer was also once again quite active this week as prices are down nearly 35 per cent from last year. This buying activity caused market spurts above average price levels, especially on larger quality groups.

The Canadian barley crop could reach nine million tonnes, up from 8.2 million in 2015. Current barley prices have limited upside because on-farm stocks are larger than year-ago levels. Yields this year could rival 2013 and with limited export movement, the domestic market will have to absorb the larger supplies through lower prices. Unlike the U.S. corn market, Canadian barley has no industrial component in the demand equation and export offers are uncompetitive compared to other major exporters.

Wholesale beef prices edged higher this week while the stronger Canadian dollar caused fed cattle to remain flat near $160. Alberta packers were shopping actively for near term supplies but deferred values were slightly lower. The economies on both sides of the border appear to be running full steam and grilling season has absorbed the larger beef production. Canadian oil exports are expected to improve over the next couple of months so the Canadian dollar may continue to percolate higher.

— 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.

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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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