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Klassen: Feeder cattle remain firm

Feeder cattle prices in Western Canada were steady to slightly higher in comparison to week-ago levels. Auction market volumes or feedlot placements appear to be increasing as fall-backgrounded calves come on the market. Steers just over 500 pounds touched the $170 per hundredweight (cwt) level in southern Alberta; 6-weight cattle were also quite firm, selling in the range of $148 to $158. Cattle weighing over 800 pounds have gained nearly $5/cwt over the past couple weeks.  Fed cattle marketing weights are a whopping 31 pounds lighter than last year. Feedyards in Alberta will continue to be aggressive with purchases as on-feed numbers March 1 could be down five to eight per cent from March 1, 2010.

There is strong buying interest, given the higher values of the deferred live cattle futures. While the April live cattle futures have been trading around $115/cwt, October futures are a $5/cwt premium. Given this price structure in the fed market, feeder cattle could be $10-$12/cwt above current levels during the early summer months.

Statistics Canada estimated total inventory at 12.46 million head, down three per cent from  last year and the lowest since 1995. Beef cow numbers were down two per cent but heifers for beef cow replacement were up three per cent. This is a signal that the herd is moving into expansion. Calves under one year were down five per cent, which may result in larger feeder cattle imports during the summer and fall of 2011.

Beef demand continues to increase as consumer spending comes back on stream. U.S. grocery store spending was up 3.8 per cent in January in comparison to last year; retail and food service total was up 7.8 per cent. This is a fairly significant jump in consumption patterns. Equity markets are making new 52-week highs and the economy appears to be firing on all cylinders.

— 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.

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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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