Western Canadian feeder cattle prices jumped $5-$7 per hundredweight (cwt) last week. Recent rains caused adverse pen conditions in southern Alberta, but this did little to stem buying enthusiasm.
Alberta packers were buying fed cattle at $150/cwt as tighter beef supplies continue to cause counter-seasonal market behaviour in the beef complex. In addition to firm fed cattle values, feed barley was trading at $190 per tonne in the Lethbridge area, reinforcing the margin structure. Major U.S. feeder cattle markets were also $5/cwt to as much as $10/cwt higher in comparison to last week, which led the Canadian market higher.
Most auction markets are experiencing minimal volumes at this time of year and quality cattle are hard to come by. However, a smaller group of black Angus-based steers weighing 875 pounds sold for a whopping $200/cwt in the Lethbridge area.
October live cattle futures made fresh contract highs, touching the $150 area setting the positive tone for nearby feeder cattle values.
Crop conditions are quite favourable in Canada and the U.S. and it appears feedlots are banking on cheaper feed grains during the fall period.
The U.S. Department of Agriculture revised its second-quarter beef production estimate downward given the lower year-to-date slaughter pace. Therefore, it appears the deferred live cattle futures are incorporating a risk premium due to the uncertainty in production. There is also potential for significant heifer retention this fall, further enhancing the risk premium.
Strength in the deferred live and feeder cattle values will continue to drive local markets higher in Western Canada. Feedlots appear to be on strong footing for the fall period and there is no signal this upward trend has come to an end.
— 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.