Klassen: Feeder cattle fall on rising corn

Reading Time: 2 minutes

Published: July 3, 2012

,

Thin volumes characterized last week’s feeder cattle market, with most action markets in summer holiday mode. Western Canadian prices were led lower by the U.S. market, which was under severe pressure due to stronger corn prices.

Record temperatures were recorded in over 250 U.S. cities last week and the forecast calls for above-normal temperatures and below-normal precipitation for the next 10 days. A large portion of the corn will move through the pollination stage during this time and yields are expected to be similar or below last year. There is potential for corn fundamentals to be historically tight for the third year in a row, given the drought-like conditions.

Read Also

Klassen: Feeder cattle fall on rising corn

Trump quadrupling Argentina beef tariff rate quota to 80,000 tonnes

U.S. President Donald Trump’s administration is quadrupling the tariff rate quota on Argentinian beef to 80,000 tonnes to reduce prices and protect American farmers, a White House official said on Thursday.

Canadian export feed barley offers are now higher than the domestic market for September and October. There is potential for a large export program during the fall period, which could drain western Canadian supplies and cause barley prices to surge. We may see some harvest pressure on the barley market but next spring, the market needs to ration demand by trading at a premium to the world market. This will temper the upside for feeder cattle prices.

In comparison to week-ago levels, U.S. feeder cattle under 650 pounds were $10-$15 per hundredweight (cwt) lower on average; in drier regions, prices were down as much as $20/cwt. U.S. feeder cattle are being placed earlier than usual in certain areas, which will cause beef production to be larger than expected in the fourth quarter. Western Canadian feeder prices were down $5-$6/cwt on very light trade.

Alberta packers bought fed cattle in the range of $109-$110/cwt as wholesale prices remain rather strong for this time of year. Feedlots are moving through a massive liquidation phase of fed cattle but uncertain feedgrain costs have limited demand for replacements. Secondly, grass conditions are favourable across Western Canada, limiting feeder cattle availability.

Feeder cattle prices are difficult to forecast given the feedgrain price uncertainty. We need to see fed cattle prices rally in order to turn this feeder market higher.

— 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.

About the author

Jerry Klassen

Jerry Klassen

Contributor

Jerry Klassen graduated from the University of Alberta in 1996 with a degree in Agriculture Business. He has over 25 years of commodity trading and analytical experience working with various grain companies in all aspects of international grain merchandising. From 2010 through 2019, he was manager of Canadian operations for Swiss based trading company GAP SA Grains and Products ltd. Throughout his career, he has travelled to 37 countries and from 2017-2021, he was Chairman of the Canadian Grain and Oilseed Exporter Association. Jerry has a passion for farming; he owns land in Manitoba and Saskatchewan; the family farm/feedlot is in Southern Alberta. Since 2009, he has used the analytical skills to provide cattle and feed grain market analysis for feedlot operators in Alberta and Ontario. For speaking engagements or to subscribe to the Canadian Feedlot and Cattle Market Analysis, please contact him at 204 504 8339 or see the website www.resilcapital.com.

explore

Stories from our other publications