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Klassen: Feeder cattle values edge higher

Jan. 25 — Feeder cattle prices in Western Canada were $3 to $5 higher last week; U.S. prices were also $2 to $4 higher for heavier animals, while cattle under 500 pounds were $8 to $10 higher for the second week in a row.

Despite larger numbers of feeder cattle coming on the market, values appear to be ratcheting higher due to the improved outlook for the beef complex longer-term. The Canadian dollar experienced a sharp sell-off, dropping from the highs near US98 cents to under US95 cents. This drop in the currency should theoretically add three per cent to Canadian feeder cattle values.

The feeder market is trending higher due to a positive outlook for fed cattle. Lower calf crops and tighter on-feed numbers will cause beef production to decrease this year. Secondly, demand has improved for middle cuts of beef and wholesale values are near seven-month highs.

Keep in mind there is also a very strong seasonal tendency for both live and feeder cattle to trend higher from early February to mid-March. Colder temperatures and wintry conditions across the U.S. southern plains and in Western Canada may cause beef production to be lower than expected in the short term. 

Cow prices are expected to trend higher in the later half of 2010. During 2009, we saw a sharp increase in the U.S. dairy cow slaughter due to the low milk prices and the Co-operatives Working Together program whole-herd buyouts. During 2010, we should see a sharp drop in the dairy cow slaughter and decrease in the North American beef cow slaughter.

Tighter available supplies should increase cow prices, especially in the summer months.

— Jerry Klassen is a commodity market analyst in Winnipeg and maintains an interest in the family feedlot in southern Alberta. He can be reached by email at [email protected] 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.

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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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