Klassen: Feeder cattle remain strong despite Japanese uncertainty

Western Canadian feeder cattle prices jumped $3 to $5 per hundredweight last week. Healthy feedlot margins, along with weakness in the corn market, set a positive tone for replacement cattle. Feedlot managers are particularly interested in lightweight feeders that will be marketed in the fourth quarter. Lower beef production in the latter half of 2011 should keep fed cattle prices near record highs.

Feeder steers weighing 400 to 500 pounds brought back $170-$180/cwt last week in southern Alberta; 500- to 600-pound steers were $165-$172/cwt.

The U.S. cow slaughter has remained surprisingly strong, suggesting that herd liquidation will continue into the second quarter of 2011. Strong demand for ground beef has U.S. retail prices at record highs.

Corn prices remain under pressure due to favourable conditions in South America. U.S. corn acres could reach 92 million this spring, resulting in a larger carryout for the 2011-12 crop year. Weaker corn values will be supportive for the feeder cattle complex in the upcoming crop year.

Japan is a leading buyer of North American pork and beef. The recent earthquake will temper meat demand, resulting in additional supplies for the U.S. domestic market. We may also see an increase of Australian beef shipments to the U.S. in the short term. These two factors could weigh on the feeder market during the second quarter 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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