Klassen: Feeder prices slowly climb, exports improve

April 20 — Alberta feeder prices have climbed $10-$12 per hundredweight (cwt) since the first week of February. The market has done a good job of absorbing the larger supplies due to the slower export pace. Feedlot placements in Alberta and Saskatchewan during March were up 16 per cent over year-ago levels. This increase follows a 17 per cent hike in placements during February.

We are now over the hump of the burdensome supplies and available numbers will start to decrease into the summer months. This should support the current price structure into summer.

Feeder cattle futures remain in an upward trend after last week’s profit-taking selloff. Since January, U.S. feeder prices have been higher each week and there is no concrete signal that this bullish run is over. U.S. Midwest and Southern Plains markets were $2 to $4 higher again last week. The U.S. cash market is leading the futures complex higher, which is not uncommon in bullish cattle markets.

Cow/calf producers may look at taking some price protection for their fall marketings, because the futures market is still near historical highs. It was August 2008 the last time the feeder futures were at the current levels.

Feedlot margins for the deferred months are in negative territory. Given the August live cattle futures at a $6/cwt discount to the April contract, it is difficult for feedlot operators to pencil in a profit at this time. However, after the positive margin run during spring, buying enthusiasm remains very strong for replacement cattle.

Feeder cattle exports for the week ending April 2 reached 9,600 head, which is the highest weekly number since April 2009. U.S. prices are now trading at a sufficient premium to the Canadian market to encourage exports. U.S. grassers are getting tight, so buyers are looking north to fill their orders. The overall market environment feels healthy at these levels.

— 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 called Canadian Feedlot and Cattle Market Analysis for feedlot operators in Western Canada. He can be reached by email at [email protected] or at 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.

Table 1. Feeder steers, week ending April 16 (US$/cwt).

  Alta. Sask. Man. Neb. Kan.
500-600 lbs. 120 118 116 131 135
600-700 lbs. 113 109 108 122 123
700-800 lbs. 103 101 100 114 112

About the author

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Columnist

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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