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Klassen: Feeder cattle ratchet higher

Western Canadian feeder cattle prices were steady to $2 per hundredweight (cwt) higher this week. Stronger U.S. feeder cattle prices, along with continued pressure on local barley values, were the main factors driving replacement cattle higher.

The harvest is winding down and additional demand was noted from winter backgrounding operators for cattle under 700 pounds. Alberta packers were buying fed cattle in the range of $118 to $119/cwt, which was steady with last week and slightly above break-even for most pen closeouts.

Finishing feedlot operators were a bit more aggressive this week on replacement cattle due to the stronger U.S. slaughter market. Nebraska fed cattle reached up to $200/cwt on a dressed basis.

However, the attitude amongst many cattle buyers remains cautious with the expectation for larger feeder supplies to come on the market over the next month.

A smaller group of Charolais-cross “partially weaned” steer calves averaging 570 lbs. sold for $170 landed in southern Alberta. Exotic-based medium-flesh steers weighing 700 lbs. were quoted at $165 in the same region. Similar-weight exotic heifers traded at $136 in the Calgary area. Smaller groups under 25 head of feeder cattle appeared to be trading at a discount. In northern Manitoba, the market appeared to be stronger this week with steers just over 750 lbs. averaging $150/cwt. U.S. feeder cattle prices were a full $2 to $3/cwt higher this week with certain blocks of cattle breaking all-time record highs. The U.S. Department of Agriculture reported in Valentine, Nebraska, steers averaging 767 lbs. sold just over $181/cwt.

Feedlots in the Lethbridge area were buying barley at $178 per tonne last week, the lowest prices since the 2010-11 crop year. We should see break-even prices decline in the first quarter of 2014 given current values of yearlings for southern Alberta feedlots. Deferred live cattle futures appear to be incorporating a risk premium due to the uncertainty in beef production after the September USDA cattle inventory report.

Western Canadian feeder cattle prices are lagging the U.S. market. I believe it is only a matter of time before Alberta prices catch up to Midwest. Grain markets have yet to digest the larger U.S. corn harvest and the fourth quarter of the year is a period of seasonal strong beef demand.

— 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] for questions or comments.

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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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