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Klassen: Feeder cattle price momentum continues

Feeder cattle prices in southern Alberta were $3 to $4 higher for all weight categories last week. Stronger demand was noted for animals weighing 700 pounds and heavier, but good quality calves were also well bid. Calves under 400 pounds reached $175 per hundredweight (cwt); 400- to 500-pound steers sold for $150-$160/cwt; and 5-weight cattle brought back $135-$145/cwt.

The market appears to show stronger momentum every week with good buying interest coming from major feedyards in Western Canada. Margins look favourable into the spring timeframe with April live cattle futures near $110/cwt. Feedgrain prices are also ratcheting higher but this has done little to curb buying enthusiasm.

Feeder cattle in the U.S. southern Plains are moving off small grain pasture sooner than normal. These cattle are usually placed in late winter but this abnormal movement will result in tighter supplies in March and April. Canadian feeder cattle exports have been under 2,000 head per week but may improve during the second quarter of 2011. The Nebraska feeder market may move to a premium over Alberta, drawing Manitoba cattle south instead of west.

Those producers who have read my column over the past year know that the highest financial returns in cattle feeding occur when the U.S. economy is in the expansionary phase of the business cycle. Last week, we saw the Dow Jones Industrial Average (DJIA) trade above the level where Lehman Bros. collapsed, which started the recessionary process.

Consumer spending will continue to improve over the next eight-month period, which should directly result in higher fed and feeder cattle prices. Most producers watch inventory and on-feed cattle numbers, but economic data is most important when projecting future cattle and beef prices.

— 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] or 204-287-8268 for questions or comments.

The material contained herein is for information purposes only and is not to be construed as an offer for the sale or purchase of securities, options and/or futures or futures options contracts. While the information in this publication cannot be guaranteed, it was obtained from sources believed to be reliable. The risk of loss in futures trading can be substantial. The article is an opinion only and may not be accurate about market direction in the future. Do not use this information to make buying or selling decision because adverse consequences may occur. This information may be wrong and may not be correct about current market conditions in all areas of Canada. This is an opinion only and not based on verified facts.

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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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