Klassen: Feeder cattle ratchet higher

Feeder cattle in Western Canada were $2-$3 per hundredweight higher for the second week in a row. Strength in the deferred live cattle futures, along with stronger beef wholesale prices, set a positive tone to the feeder market.

In central Alberta, a small group of red Angus-cross steers weighing 608 pounds sold for $170/cwt; large-frame Charolais-cross steers averaging 900 lbs. reached a high of $141/cwt in southern Alberta. A group of 50 exotic medium flesh heifers weighing 795 lbs. sold for $136 in the same region.

Backgrounding operations are starting to sell their fall bought calves. Cattle that have been on a weight gain-controlled diet are brining back a $4-$6/cwt premium over animals that have been fed a 30 to 50 per cent grain ration. Feedlot operations cannot push the efficiencies on these grain-fed backgrounded cattle and the market is reflecting the appropriate discount.

The U.S. Department of Agriculture is projecting a year-over-year decline in U.S. beef production of five to eight per cent in the latter half of 2012. This is causing the deferred live cattle futures to incorporate a risk premium due to the uncertainty in production and strengthening nearby feeder cattle prices.

Alberta packers bought fed cattle in the range of $114-$117.50/cwt this week, up $3-$4/cwt from a week ago. Kansas cattle traded in the range of $128-$129/cwt while Nebraska cattle sold for $127-$128/cwt on a live basis and $200-$201/cwt on a dressed basis. Choice wholesale beef values moved above the $197/cwt level so prices are now higher than in March of 2011.

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 at 204-287-8268 for questions or comments.

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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