Western Canadian feeder cattle prices were $2 per hundredweight lower to $3/cwt higher last week as thin volumes continue to characterize the market.
Fed cattle prices were $2/cwt higher, which appeared to set a positive tone in the feeder complex. Barley prices have also come off the highs, which provided some breathing room to bid higher on the feeder cattle. Feedlot operators have cautious optimism moving forward because feeder prices remain relatively high and barley stocks will drop to historically tight levels in the 2012-13 crop year.
Alberta packers bought fed cattle in the range of $110-$111/cwt last week. South of Edmonton, a small group of mixed-quality feeder steers averaging 730 pounds sold for $150/cwt; 800- to 900-lb. replacement steers traded in the range of $125-$138/cwt.
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U.S. fed cattle in the Southern Plains were $3-$5 higher, selling in the range of $118-$119/cwt. The U.S. Department of Agriculture reported a group of 265 feeder steers weighing from 700 to 750 lbs. sold for $154 at Valentine, Neb. U.S. feedlot operators are showing extreme resilience in the face of record-high corn prices. U.S. feedlot margins are negative $250 per head on cattle with no risk management program in place.
U.S. gross domestic product (GDP) came in at only 1.5 per cent during the second quarter, down from two per cent in the first quarter. The July unemployment rate also edged up to 8.3 per cent. Sluggish consumer confidence and weaker spending patterns will cause beef demand to stagnate during the third quarter as well. Wholesale choice beef was trading at $178/cwt last week, down from $198/cwt in early June.
Barley prices have dropped $18 per tonne from the highs now that the harvest has started in Western Canada. I’m forecasting a very large export program during the 2012-13 crop year and stocks could become extremely tight later in winter and during the spring of 2013. The feeder market will be extremely vulnerable during this period.
