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Klassen: Feeder market sets new records

Western Canadian feeder cattle prices set new record highs at most auction barns last week. It appears that pen closeouts are profitable by approximately $200/head and feedlot operators are anxious to reload. Buying interest for grassers is also starting to step forward and backgrounding operators were actively buying lighter weight cattle, lifting prices for calves and feather-light categories.

Despite softer wholesale beef prices, Alberta packers were buying fed cattle at $138 per hundredweight (cwt), setting a stronger tone to the feeder complex. Canadian and U.S. year-to-date beef production is running nine per cent behind year-ago levels and the beef pipeline remains relatively thin. Until we see the slaughter pace increase, the fed market is expected to remain firm supporting the feeding margin structure and prices for replacement cattle.

A group of 110 black steers weighing 691 pounds sold for a whopping $191/cwt in southern Alberta. A similar-sized group weighing just under 850 lbs. sold for $171/cwt at the same sale. In central Alberta, Charolais-cross steers weighing 770 lbs. sold for $181/cwt. Lighter-weight mixed red and black steers weighing 550 lbs. sold for $215/cwt.

The feeder market has moved into a new price range over the past month due to the current feeding margin structure. However, the break-even prices on current replacements cattle are in the range of $135 to $138/cwt. Feedlot operators are counting on the fed market to remain stable into the summer months. This is very hard to justify given the fact that the June live cattle futures are trading at a $9 discount to the April contract.

Feed barley prices jumped late in the week to $168 per tonne in the Lethbridge area, up $10 from seven days earlier. Without going into detail, the Statistics Canada Dec. 31 stocks report suggested the 2013 barley yields may have been overstated. The barley market appears to have stabilized for the time being and costs per pound gain will be slightly higher than earlier anticipated, which will temper the upside in the feeder market.

– 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] 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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