Fed cattle prices in Alberta reached record highs last week trading the range of $164/cwt to $165/cwt. Feedlot margins surged into positive territory, once again reinforcing the price structure for feeder cattle. It appears the fed cattle market is incorporating a risk premium due to the uncertainty in production.
For the week ending July 18, the weekly U.S. cattle slaughter was down 11.4 per cent compared to the same week last year while the year to date slaughter is running nearly seven per cent behind year-ago levels. The opposite trend is occurring in Western Canada; the year-to-date slaughter is running eight per cent above year-ago levels while Canadian exports of fed cattle for slaughter are down four per cent. Feedlot inventories in Alberta and Saskatchewan are at seasonal lows and the Alberta market needs to trade at premium to U.S. prices to slow export movement.
We may see the feeder market behave in a similar fashion this fall because the year-to-date feeder cattle exports are up 40 per cent over last year. Alberta feedlot operators may start to pay a premium over U.S. values to slow exports of Manitoba feeder cattle to the U.S.
Barley prices remain firm late in the crop year at $198/cwt in the Lethbridge area. New-crop buying ideas are in the range of $160/cwt to $170/cwt delivered with grain merchants offering at $180 tonne in Feedlot Alley. Needless to say there has been limited trade in new-crop positions. Feedlots are watching the corn market for price direction and at this time there is no need to step forward more aggressively for new-crop barley.
Auction market volumes were limited last week with many barns in holiday mode. The market is hard to define; however, the $7/cwt jump in fed cattle could easily add $10/cwt to $12/cwt on 800-pound steers with the yearling run right around the corner.
South of Edmonton, small groups of 700- to 800- pound steers were trading in the range of $215/cwt to $238/cwt. Another interesting feature included peewee calves under 400 pounds nearing the magical $300/cwt in southern Alberta.
– 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.