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Klassen: feeder cattle prices continue under pressure

Feeder cattle prices remain under pressure in Western Canada due to lower fed cattle prices, negative feedlot margins and weaker deferred live cattle futures. There is little optimism in the cattle business as the Canadian dollar continues to trade near US95 cents. Canadian triple AAA prices continue to trade near two-year lows as the beef market functions to encourage demand. Lower consumer income in North America is trickling down from the packer, to the finishing feedlot, to the cow-calf producer. Fed cattle prices in Alberta dipped to $73/cwt, the lowest values so far in 2009. 

In central Alberta, feeder steers weighing 700 to 750 pounds were averaging $C95/cwt or US$90/cwt. Oklahoma steers of the same weight were selling for US$95/cwt. U.S. feeder cattle prices have climbed $2/cwt to $5/cwt over the past week.

National feeder cattle receipts were 358,900 head, up from 164,400 head the previous week. Healthy demand was waiting for these larger U.S. feeder cattle numbers.  The North American markets have now come in line and we should start to see feeder cattle from Manitoba and Eastern Saskatchewan move south rather than west.  U.S. demand will be the main price influence over the next two months. There is potential for Western Canadian feeder cattle prices to weaken by $3/cwt to $6/cwt while prices in the U.S. southern plains strengthen by the same amount.

The 2010 calf crop in Canada and the US should be down three to five per cent to from 2009. If the economy turns around as expected, we will only see heifer retention start to increase significantly during 2011 which will cause feeder supplies to increase in 2012. Feeder cattle supplies are expected to be tight in the latter half of 2010 and in 2011 at which time prices will start to trend higher.  

Jerry Klassen is a commodity market analyst in Winnipeg and maintains an interest in the family feedlot in Southern Alberta. He can be reached at [email protected] 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 purchasing or selling decisions. Each individual should do their own research on market conditions.

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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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