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Klassen: Feeder market resumes upward trend

Feeder cattle markets in Western Canada held steady last week. The initial cold shock usually tempers buying enthusiasm, but we now find cattle buyers accustomed to the wintry conditions.

Black Angus seven-weight steers touched $128 per hundredweight. Demand for lighter cattle was also firm with 500-weight cattle trading in the range of $135 to $143; 400- to 500-pound steers were extremely precious, bringing $150 to $160. Cow-calf producers held cattle back on sales earlier in fall due to abundant forage but the snow and cold has pushed these feeder cattle to market. Good bred cows are now reaching $1,300 to $1,400 and bred heifers have exceeded $1,400. These are expansionary-type prices for cows.

The U.S. has experienced higher placements in the fall period and lower calf crops over the past three years. Therefore, feeder cattle outside feedlots in the U.S. as of Jan. 1 are expected to be historically low, which will result in tighter available supplies in the first and second quarters of 2011. Dryer conditions in the U.S. southern plains have also pushed feeder cattle into feedlots sooner. U.S. 2011 first-quarter beef production is expected to be similar to 2010’s, but then we could see a sharp drop in the second quarter enhancing feeder and fed cattle prices at this time.

Canadian feedlot inventories are forecasted to stay at five-year lows over the next two months, given the aggressive marketing pace of fed cattle. Feedlot operators will be more aggressive with feeder purchases as the April live cattle futures continue to make new contract highs at the $109 level.

— 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 204-287-8268 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.

About the author

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Jerry Klassen is president and founder of Resilient Capital, specializing in proprietary commodity futures trading and market analysis. Jerry consults with feedlots on risk management and writes a weekly cattle market commentary. He can be reached at 204-504-8339 or via his website at ResilCapital.com.

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