Klassen: Larger sales set stage for fall feeder run

Feeder cattle prices in Western Canada were steady to $2 higher last week; volumes were rather light with many auction markets still closed for summer holidays. There are not many cattle coming on the market in Western Canada, which makes it difficult to get a handle on the current price structure.

Fed cattle were selling for $90 to $93 in southern Alberta, up $7 from a month earlier, and this set a supportive tone to the feeder market.

While U.S. order buyers were still in holiday mode last week, U.S. feedyard managers were busy watching a couple of premier sales for price diwrection. Overall, U.S. prices were $2 to $4 higher on average as Superior Livestock had feeder cattle sale offering over 346,000 head. Heavy yearling steers weighing 850 to 900 pounds were selling in the range of $105 to $110. In Bassett, Neb., there were 2,600 head of 900- to 1,000-lb. yearlings that averaged $111. Fed cattle in Nebraska were $2 higher at $93, but it is hard to justify these higher prices for feeders with December live cattle futures under $94.

There appears to be considerable optimism in the fed cattle market when looking four to eight months forward. Beef production is expected to drop sharply from December through March 2011. This has caused feedlots to be more aggressive with feeder cattle purchases. Given current price relationships, I’m expecting very strong feeder cattle exports in the fall period, which will cause local prices to trend higher. U.S. feeder prices are trading at a significant premium to Alberta values, which should cause Manitoba cattle to move south, instead of west.

— 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 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.

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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