Klassen: Feedlot backlog weighs on feeder cattle prices

Western Canadian feeder cattle prices were steady to $3 per hundredweight lower last week. Alberta feedlots are backlogged with market-ready supplies and this has slowed purchases of replacement cattle.

Carcass weights are 30 pounds heavier compared to April of 2011, and there appears to be a two-week back-up of packer purchases. Backgrounding operations are holding cattle that were purchased three weeks ago and they may have to hold them another 10 to 14 days before feedlots are ready for fresh supplies.

Buying interest at auction markets will remain sluggish until feedlots become more current with production.

Barley prices jumped another $10 per tonne last week, reaching $245 per tonne, delivered Feedlot Alley in southern Alberta.

Feeding margins are in red ink by approximately $130 per head, which is also having a negative effect on the feeder market.

Alberta slaughter prices dipped to $109/cwt last week and with break-even values above $120/cwt, feedlots are looking to bring down the price of replacements.

Wholesale beef prices remain under pressure as the "pink slime" issue continues to make headlines. Ground beef prices have softened but are still near record highs.

It’s important to note that U.S. prices of pork and poultry products are actually below year-ago levels. Disposable income for the average consumer is down in comparison to 12 months earlier, when factoring in inflation. Price-conscious buyers are switching to other lower-priced protein sources, which will continue to weigh on retail beef values.

— 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 at 204-287-8268 for questions or comments.

About the author

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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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