Klassen: Feeders follow fed cattle higher

Fed cattle in Alberta jumped $4 per hundredweight last week, reaching $134/cwt, which is near record highs. The weaker Canadian dollar, along with historically strong wholesale beef prices, set a positive tone for the overall live cattle complex.

It appears most pen closeouts are showing profits over $100/head, which something the industry has not experienced for a couple of years.

Feeder cattle were solidly $3 to $5/cwt higher, with lighter weights jumping as much as $8/cwt at most auction barns in Western Canada. Temperatures warmed up late in the week and the forecast shows a break in the extreme cold for the next seven days which also enhanced buying enthusiasm for replacement cattle. The industry is expecting larger sales volumes over the next few weeks and there appears to be stronger demand stepping forward now that feeding margins are comfortably in positive territory.

Red Angus medium-flesh steers weighing just over 600 pounds sold for $173/cwt in central Alberta. Mixed exotic steers with no special features averaging 750 pounds sold for $165/cwt south of Calgary.

U.S. feeder cattle prices were $10/cwt higher on average but up to $15/cwt higher in some cases. The U.S. Department of Agriculture reported higher quality 655-lb. steers sold for $211/cwt in Nebraska, so the Canadian market is clearly lagging U.S. prices, which also spurred on buying momentum in Western Canada. Nebraska fed cattle reached an all-time record high of $140/cwt on a live basis.

U.S. macro conditions appear to be favourable supporting the current price structure in the beef complex. U.S. unemployment dropped to 6.7 per cent and equity markets continue to trade at historical highs, with stronger GDP values confirming the strength in consumer spending behaviour. Wholesale choice beef prices also surged past the previous record high and nearly touched $215/cwt on Friday. USDA projected a 5.6 per cent decline in first-quarter beef production and this is the first time the market has experienced this lower supply equation while the economy has been this healthy. Feed barley and feed wheat remain under pressure in southern Alberta, with both commodities trading readily at $155 per tonne delivered Lethbridge. All factors point to steady to higher feeder cattle prices in the short term.

— 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.

About the author



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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