Klassen: Feeder cattle market remains vulnerable

(Photo courtesy Canada Beef Inc.)

After a firmer tone the last two weeks, feeder cattle values felt sluggish across the Prairies. Western Canadian prices were quoted from unchanged to $5 lower; smaller sales with variable quality saw prices fall as much as $10 below week-ago levels.

Feedlot operators were taken aback by the sharp decline in the live cattle futures early in the week, and by Thursday, Alberta packers dropped fed cattle bids by $5-$10. Pen closeouts are still in red ink and the inability to see profitability in the deferred positions set a negative tone. Adverse pen conditions due to recent rains also caused feedlots to incorporate a risk discount, especially in the southern regions. U.S. feeder prices were under pressure, trading $5-$8 lower, which spilled over into Western Canada. Export interest was dismal and the weaker Canadian dollar hasn’t enabled price competitiveness.

There were some bright spots in central Alberta with mixed steers just over 800 lbs. selling for $185; larger-frame medium-flesh steers averaging 855 lbs. were quoted at $175. However, in southern Alberta, similar weight cattle were about $5 below these levels. In southern Manitoba, prices remained firm with higher-quality 800- to 850-lb. steers quoted from $185 to $190, with heifers trading at a $20 discount.

Feeder cattle under 700 lbs. found support from favourable crop conditions. Lethbridge barley prices experienced a week-over-week decline of $10 per tonne, dipping to $205 by Friday. Pasture conditions have significantly improved and grassers were well bid throughout the week. Steers weighing 650 lbs. were quoted from $215 to $220 while heifers weighing 600 lbs. were selling in the range of $183-$190, which was representative of prices across the Prairies. Ideas are that the larger barley production will result in cheaper cost per pound gains longer-term, and the crop is off to a great start.

The U.S. Department of Agriculture’s recent Cattle on Feed report confirmed expectations for the 350 million-lb. year-over-year increase in third-quarter beef production. The old proverb that delayed hope makes the heart sick characterizes the buying sentiment amongst feedlot operators. Minor rallies in the fed and feeder markets have been unsustainable, and with the aggressive expansion by U.S. cow-calf producers, feeder cattle prices are expected to come under pressure during the fall period.

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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