Klassen: Feeder cattle prices strengthen

Calf prices in Western Canada were $2 to $4 higher over the past week, with 600-pound steers bringing back $129 per hundredweight (cwt). We also saw heaver yearlings weighing 950 pounds selling for $107/cwt, about $2/cwt above week-ago levels.

We are seeing a significant premium in Western Canada over central U.S. prices as basis levels moved to $0 on 800- to 850-pound steers. Strength in the Canadian dollar is having limited effect on our local feeder markets because the export volume is quite low. The Canadian feeder market is rationing demand due to the smaller calf crops over the past two years.

This opportunity in the feeder market exists because barley remains at $163 per tonne in southern Alberta. Alberta cattle feeders are not facing the same higher feed grain costs as their U.S. counterparts. We continue to see fairly aggressive farmer selling in the domestic market, despite the barley harvest moving into the final stages. Feedlot inventories in Alberta and Saskatchewan were at five-year lows at the end of summer. Many small- to medium-size feedlots held back on feeder purchases in hopes of lower prices, but now all sizes of feedlots are stepping forward to fill pens.

April live cattle futures made new contract highs on Friday, reaching pre-recession levels of $105/cwt. Improving consumer confidence, stronger retail sales and higher equity values point to stronger beef consumption in the first and second quarters of 2011.

Steady barley prices along with stronger fed cattle values in the deferred months should keep feeder cattle prices in Western Canada well supported over the next couple of months.

— 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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