Klassen: Lower available supplies bolster feeder market

A cow and new calf on May 4 near Turtle Lake, Sask., about 110 km north of North Battleford. (Lisa Guenther photo)

Western Canadian feeder cattle prices were a solid $4-$6 per hundredweight (cwt) higher last week in comparison to seven days earlier; however, certain auction barns reflected a hesitant uneven tone as the market moved higher.

Feedlot buying interest remains abnormally strong for this time of year and surging deferred live cattle futures justified the higher price structure. Short-keep cattle were well bid with fancier 800-pounders edging closer to the magical $200/cwt level in the major feeding regions. The spread between 6- and 8-weight cattle has narrowed with feedlots anxious to capture nearby margins. Fed cattle prices in Alberta were steady at $146/cwt, which is approximately $12/cwt above break-even pen closeouts. Auction market receipts were sharply lower last week while buyers readily increased bids to secure available supplies.

In southern Alberta, larger-frame medium-flesh black Angus-based steers weighing just over 770 lbs. sold for an astounding $201/cwt; a small group of exotic steers weighing 681 lbs. sold for $217/cwt in central Alberta. Quality cow-calf pairs were selling for just over $3,000 and herd dispersal sales were well attended. Feeder cattle exports to the U.S. are running 53 per cent above year-ago levels, supporting values in Manitoba and eastern Saskatchewan.

Retail beef prices continue to percolate higher as the economy rebounds from the adverse winter. Unemployment numbers dropped in April while consumer confidence edged higher, setting a positive tone for summer beef demand. Wholesale values remain firm and fed cattle values in Iowa and Nebraska were $1-$2/cwt higher. Macroeconomic factors look supportive moving forward for fed and feeder cattle prices. For example, Canadian exports of fresh and chilled beef cuts are up nearly 20 per cent over 2013.

When a market gaps higher after trading in a relatively sideways pattern, there are two possible scenarios. First, this may be the last gasp of momentum with buyers taking a final swipe at the market. The second scenario suggests another round of rejuvenated buying enthusiasm that will rally the market an additional $15-r$20/cwt. Feedlots continue to enjoy healthy feeding margins and in this pure competitive market, feeder cattle prices usually increase to the point of no margin in the long run.

— 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.

 

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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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