March 1 — Western Canadian feeder cattle prices remain under pressure despite strength in the slaughter cattle market. Alberta and Saskatchewan auction market volumes are running 10-12 per cent above last year’s, but with the slower export pace, supplies will remain above year ago levels into April.
As of Jan. 1, there were an additional 157,000 head above last year. For January and February, the lower export pace is adding about 50,000 head per month to the domestic market. In total, supplies of feeder cattle in Western Canada during the first quarter of 2010 will be 207,000 head above last year.
Mexican feeder exports to the U.S. during 2009 were up approximately 40 per cent; therefore, it is hard to argue mandatory U.S. country-of-origin labelling (COOL) is the main factor slowing Canadian exports. U.S. prices need to rise an additional $10 per hundredweight before Canadian exports resume back to normal. The U.S. market is expected to show a significant premium over Canadian values later in April, which will start to draw cattle south.
The feeder market has potential to go from a burdensome supply situation to a rather tight fundamental structure during the summer months. Improving margins in the finishing feedlot will also enhance demand at this time. During 2009, cow/calf producers were not rewarded for holding onto cattle or putting them in custom feedlots. However, during 2010, cow/calf producers will extract more value out of their cattle by having longer time ownership. Cow/calf producers are encouraged to pencil out putting cattle in a custom feedlot based on current deferred fed cattle prices.
— 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 Western Canada. He can be reached by email at [email protected] or by phone at 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.