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Klassen: Feeder cattle prices slowly climbing

March 29 — Improving feedlot margins and a slight dip in the Canadian dollar caused feeder cattle prices to ratchet higher last week. Slaughter cattle prices reached yearly highs and we are seeing this strength spill over into the feeder cattle complex.

Supplies are still readily available and some cow/calf producers are liquidating cattle now due to the dryer conditions in Western Canada. There appears to be extreme concern regarding upcoming pasture conditions and feed availability in certain regions of Alberta and Saskatchewan.

This could cause further liquidation of the cow herd in Western Canada.

U.S. wholesale beef prices were trading at the highest levels in two years during mid-March and this caused Canadian slaughter cattle exports to increase. We now find domestic feedlots more current with production, with additional space to bring in replacement cattle. Despite the slower exports of feeder cattle, the local market is absorbing the larger supplies very well.

Beef demand is going through a fundamental shift with growing incomes among average consumers. U.S. unemployment is expected to drop from the current rate of 9.7 per cent to eight per cent by the end of 2010. Stronger GDP numbers, growing consumer confidence and higher retail sales suggest wholesale beef prices should stay strong into the summer months.

This will bode well for both slaughter and feeder cattle prices. I’ve mentioned in the past that the most profitable period in the cattle industry is when the U.S. economy moves into the full-fledged expansion phase.

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 Western Canada. He can be reached by email at [email protected] or by phone at 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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