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Klassen: Feeder cattle prices stay firm

Feeder cattle prices in Western Canada held firm near 10-year highs over the last week. Exotic yearling steers weighing 880 pounds brought back $116 per hundredweight (cwt) in central Alberta. Calf prices also remain near historical highs as age-verified black Angus steers weighing 600 lbs. touched $128/cwt.

There is an obvious opportunity here for cow-calf producers. Looking at the price structure, the market is telling producers to background their calves to 750 or 800 lbs. rather than sell at the lighter weight. We’ve seen this throughout the recessionary period as producers can probably put on the additional weight for less then $0.90 per pound gain as in the example above.

However, it may be difficult to profitably finish calves in a custom feedlot as you would only have $420 to put on 650 lbs., which is about 60 cents per pound gain (all costs included based on current fed prices). It’s important for cow-calf producers to pencil out all opportunities to extract the most value from the calf.

Feeder cattle exports to the U.S. continue are hovering under 4,000 head per week with the Canadian market still trading at a premium to U.S. values.

Lethbridge-area barley prices jumped up to $173 per tonne, up about $13 from a month earlier.

Next week, a new U.S. Department of Agriculture report could show a tighter fundamental corn balance sheet, which may spark another round of fireworks in the world feed grains complex.

Western Canadian feeder prices have been held up by low barley values; however, this benefit is expected to erode over the next four to six months. Barley prices are starting to catch up to other feed grain values and this will temper the upside in the feeder market, longer-term.

— 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.

About the author

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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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