Klassen: U.S. feeder prices surge, Canadian prices ratchet higher

April 13 — U.S. feeder cattle are within reach of historical highs; strong feedlot competition along with tighter available supplies have resulted in prices surging $10 per hundredweight (cwt) in April.

The U.S. Department of Agriculture reported the highest prices for six-weight steers in Nebraska brought back $138/cwt. Feedlots are being more aggressive with replacement cattle due to healthier margins and an optimistic outlook for the remainder of the year. When feedlots are making money, they tend to pass on their good fortune to the cow/calf producer immediately. 

Canadian prices continue to lag U.S. values, as the domestic fundamentals continue to absorb a burdensome supply situation. March feeder cattle exports were approximately 17,000 head, compared to 58,000 head last year. Lower exports over the past six months have resulted in larger supplies moving into domestic feedlots. However, Canadian supplies are expected to tighten in late April or early May when feeder exports seasonally decline. Feeder prices in Alberta were slightly higher last week with feedlots realizing the situation south of the border.

It was only in January when many cow/calf producers thought this cattle situation would never turn around. Many ranchers are now pinching themselves; cattle buyers are flabbergasted, as feeder and live cattle futures near historical highs.

The U.S. cow slaughter is running higher than earlier projections. U.S. and Canadian cattle herds will likely shrink further in 2010. U.S. producers usually need one year of very strong prices before they are convinced to expand their herds. I’ve been encouraging Canadian producers to rebuild their herds for some time. In eight to 12 months, prices for bred heifers and healthy cows are expected to be very strong.

— 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 called Canadian Feedlot and Cattle Market Analysis for feedlot operators in Western 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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Columnist

Jerry Klassen is president and founder of Resilient Capital, specializing in proprietary commodity futures trading and market analysis. Jerry consults with feedlots on risk management and writes a weekly cattle market commentary. He can be reached at 204-504-8339 or via his website at ResilCapital.com.

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