Klassen: Heavy rains slow feeder cattle movement

Heavy rains over the past week in southern Alberta caused most major feedlot operators to halt purchases of replacement cattle. Therefore, the market had a softer tone despite lower volumes coming on the market.

Cost per pound gain can increase by 10 to 15 per cent when pen conditions deteriorate, and it appears that feedlots will need a couple of weeks to repair and recover from recent rains.

Cattle on feed numbers tend to decline by 30 per cent from May 1 through July 1, and lower demand for feeder cattle is expected until the yearling run starts in August. The U.S. feeder market was $2 to $3 per hundredweight (cwt) higher and the Canadian dollar weakened, but this did little to spur on export buying interest in Manitoba and eastern Saskatchewan.

The fed market stayed firm, with Alberta packers buying cattle at $121/cwt last week, and feedlots were anxiously selling given the current feeding conditions.

Lighter-weight cattle appeared to be under pressure this week due to a lack of buying interest. In central Alberta, steers weighing 500 to 600 pounds averaged $155/cwt — some of the lowest values so far this year. Lightweight heifers were also considered bargain prices, struggling to trade above $140/cwt for cattle under 600 lbs. A small group of mixed steers with no special feature, weighing marginally over 800 lbs., sold for $130 just south of Edmonton. The market environment was ill defined overall due to the lack of volume.

Feed barley traded as low as $279 per tonne delivered in the Lethbridge area, down from the highs of $298 earlier in May. Barley prices are expected to trend lower into the harvest period now that the majority of the crop is developing under favourable conditions. Most feedlots are well covered into mid-July, so remaining demand for old-crop barley is limited. This should underpin the feeder market later in August.

While the U.S. fed market continues to grind lower, the weaker Canadian dollar has supported slaughter values in Alberta. Wholesale beef prices are also under pressure, so the upside in the fed market remains vulnerable, especially with Alberta feedlots aggressively selling cattle.

Weaker barley prices, a vulnerable slaughter market and adverse pen conditions will continue to weigh on the feeder cattle market over the next couple weeks.

— 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.

Related story:
Cargill’s High River beef plant closed, not flooded, June 23, 2013


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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