Klassen: Softer barley prices support feeder market

Western Canadian feeder cattle prices traded steady to as much as $10 per hundredweight (cwt) higher on calves. Weakness in the feed grain complex offset softer fed cattle prices, which caused the stronger price structure.

Alberta packers were buying cattle at $164/cwt, down $2/cwt from seven days earlier while the bulk of trade occurred at $163/cwt in the U.S. southern Plains. Once again, U.S. choice beef jumped nearly $10/cwt, trading at $262/cwt.

Continued economic growth is needed to sustain beef prices at the higher levels. Equity markets lost the bulk of the 2014 gains this past week — the first signal that growth in disposable income levels may be tapering off. The U.S. Department of Agriculture is now forecasting a year-over-year drop of 4.5 per cent in fourth-quarter beef production; earlier in June a 5.5 per cent drop was forecast, so supplies may not be as tight as earlier anticipated.

Feed barley in southern Alberta traded at $180 per tonne delivered, which compares to $195 in mid-July. Harvest is right around the corner and barley yields appear to be better than earlier anticipated. Feed barley has potential to drop down to $155 per tonne in the Lethbridge area over the next three weeks, which will continue to support feeder cattle prices.

I’ve received many inquiries over the past month and one can feel the anxiety and cautious enthusiasm from cattle feeders moving into the fall period. There is no doubt going to be sticker shock, with non-feature mixed steers weighing just over 700 pounds touching the $240 level in the Edmonton area. Cattle buyers noted a $10/cwt surge in 5- to 6-weight animals on light volumes; top-end fancier calves weighing 525 lbs. were quoted at $275/cwt landed in the Lethbridge area. Pee-wee calves under 400 lbs. were as much as $20/cwt higher in comparison to seven days earlier trading in the range of $340-$355/cwt. There appeared to be a tendency for buyers to aggressively bid up lighter-weight cattle.

— 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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