Klassen: Yearling prices soften on record U.S. placements

Yearling prices were steady to $2 per hundredweight lower on average last week while calves were steady to $2 higher. Shortkeep steers came under pressure as the industry anticipated record-large U.S. feedlot placements during July. Feedlot demand started to subside given the uncertainty in the fed market.

However, by the end of the week, Alberta fed cattle topped out at $107/cwt, the same as seven days earlier, which stabilized replacement cattle. 

Medium/large-frame Angus steers on the Pfizer gold program and weighing 540 pounds averaged $155/cwt in southern Alberta for November delivery. A larger group of British exotic blend steers weighing 830 pounds sold for $131 in central Alberta for late September feeding. There were plenty of 900- to 1,000-pound cattle on the market in Western Canada averaging $123/cwt. This group appeared to set the price slide for lower-weight cattle. In certain cases, age-verified status brought back a $2 to $5 premium. 

The Canadian dollar has weakened nearly six per cent from the July highs of US$1.06, which has supported local feeder prices. Barley prices are also down $15 from the summer highs and feedlots are booking forward purchases. No feedyard manager wants to take the chance with corn edging toward $8 per bushel. Barley at $4 per bushel looks like a steal.

U.S. cattle on feed as of Aug. 1 totaled 10.6 million head, up eight per cent from Aug. 1, 2010. Feedlot placements during July were a record 2.153 million head, up 22 per cent in comparison to July of 2010. Placements of cattle under 600 pounds were up 50 per cent over the year-ago. The drought in the U.S. southern Plains has had a tremendous pull-forward effect on feeder cattle, which should eventually result in tighter supplies later in winter. However, third- and fourth-quarter beef production for 2011 will be higher than last year and limit the price upside for fed and feeder 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] or at 204-287-8268 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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