Klassen: Feeder cattle market remains extremely quiet

Auction barns across Western Canada were extremely quiet last week, with many locations in holiday mode for the next couple weeks. Pastures remain in optimal conditions, given the recent rains and warm temperatures, while forage crops look very promising.

Most feedlots are content with numbers and very current with production; at the same time, Alberta’s main plants have moved to the sidelines in the cash market, leaving fed cattle prices ill-defined. U.S. fed cattle traded at $119 in the southern Plains region this week and the U.S. market remains in a downward trend in line with the seasonal tendency. Feedlot margins in southern Alberta will likely move back into red ink during July and early August, which will temper buying enthusiasm for replacement cattle.

No feature sales were noted this week in Western Canada; however, the U.S. Department of Agriculture reported 740-lb. steer calves sold for $156.25 for October delivery in Billings, Montana. Given the exchange rate and freight spread, this would make these cattle $170 per hundredweight (cwt) in the Lethbridge area. The deferred feeder market appears to be factoring in the lower cost per pound gains and stronger feed cattle prices over the winter period.

Feed barley prices for September delivery were slightly weaker this week, with some major operations buying barley at $220 per tonne, which is down from the current delivered values of $275. Producer selling of new-crop barley is expected to increase over the next couple of weeks, given the larger crop potential and favourable growing conditions. This will continue to support the feeder market for the fall period. During the harvest period, I wouldn’t be surprised to see barley trade under $200 per tonne in the Lethbridge area.

While grain markets remain in a bearish mode, positive economic data and stronger crude oil values are constructive for beef and cattle prices. USDA continues to project a sharp year-over-year decline in 2013 fourth-quarter beef production, which should bode well for the feeder cattle complex late in the year.

— 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.

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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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