Western Canadian feeder cattle prices appear to be stabilizing with values steady to $3 higher on average last week.
A larger group of feeder heifers averaging 880 pounds sold for $104 per hundredweight (cwt) in central Alberta; 640-lb. steers sold for $149/cwt delivered to Feedlot Alley in southern Alberta.
Strength in the feeder market was led by the live cattle futures which jumped $5/cwt late in the week. Nebraska fed cattle were $4-$5/cwt higher, reaching $112/cwt. Alberta plants were buying cattle at $97/cwt on Wednesday but then increased bids to $100/cwt as the U.S. market strengthened. Western Canadian feedlot margins are hovering in red ink and adverse pen conditions continue to limit buying interest in the short term.
The drought in the U.S. southern Plains is causing many producers to cull cows and sell replacement heifers in effort to ration feed and forage supplies.
Earlier in winter, many analysts were expecting the U.S. cattle herd to start expanding in 2011 but we will likely see lower numbers on subsequent inventory reports. Texas is going through one of its worst droughts in a century and it could take a couple of years to recover. I’m expecting tighter U.S. feeder cattle supplies in the fall period.
The U.S. Department of Agriculture’s cattle on feed report was considered bullish; fed cattle marketings exceeded expectations while feeder cattle placements were smaller than pre-report estimates. The industry is expecting a sharp drop in fourth-quarter beef production, which should keep feeder cattle prices near historical highs. I’m somewhat concerned about the beef demand, but the supply equation bodes well for higher 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 at 204-287-8268 for questions or comments.