Auction markets across Western Canada will start off the New Year with fairly strong momentum. Newton’s first law of physics states that an object in motion will stay in motion until acted upon by an opposite force. U.S. fed cattle prices staged a miraculous recovery last week and it now appears we could see further strength in Alberta fed market over the next month.
Healthy feedlot margins are the main force driving feeder cattle prices higher. Feedlots will be selling summer place yearlings over the next month; these major operations have a fresh round of equitable gains under their belt and this is usually when we see a significant move in the feeder cattle complex. Feeder cattle prices in the 800-pound-plus category appeared to stagnate late in November and December, but we could now see these heavier placements percolate higher in line with the lighter-weight cattle.
Outside influences will continue to temper the upside potential. There is a fair amount of uncertainty how weaker cruder oil prices will effect the overall economy at a time when food spending generally slows down during the first two months of the year. In any case, producers have become more vigilant with price protection or hedging strategies, which has enhanced confidence at the higher levels. I’m forecasting stronger barley prices later in winter, while the corn market has potential to move higher once upcoming acreage is more certain.
Most auction markets will host their first major sales of 2015 this week. The feeder market is functioning to encourage expansion while at the same time ration demand through higher prices. Bred cow and heifer values are slowly percolating higher, reflecting the expansion, but there is no signal that beef consumption is slowing down.
Wholesale beef prices rebounded in late December and all eyes will be watching retail movement and restaurant traffic moving forward to confirm the price structure for fed and feeder cattle.
– 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.