Klassen: Feeder cattle market holding value

Compared to last week, western Canadian yearling prices were steady to as much as $4 higher while calf values traded within $5 on either side of unchanged. Current feedlot margins are hovering around break-even, but profitability will improve during October and November, given the recent strength in the deferred live cattle futures. Therefore, short-keep feeders were in high demand across the Prairies with buying interest surfacing from Eastern Canada, the U.S. and Alberta feedlots.

Larger volumes of higher-quality, lower-flesh cattle are coming onto the market compared to past years. The farmer/cattle producer is selling cattle rather than backgrounding over the winter. Selling barley on the hoof is quite difficult to justify when elevator bids are hovering around $4.25 a bushel in Saskatchewan. Forage supplies are also quite snug in many areas of Western Canada.

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The recent Alberta and Saskatchewan Cattle on Feed report had August placements up 19 per cent over year-ago levels. This number was a surprise to the market. Many cow-calf producers are selling cattle directly to feedlots rather than going through the ring. Drier conditions have spread out the marketing schedule; therefore, feeder cattle supplies will likely be lower than last year’s during November and December.

In central Alberta, a smaller group of larger-frame steers reflecting medium- to lower flesh levels and averaging just under 950 lbs. sold for $189. Black mixed medium-frame heifers weighing 960 lbs. sold for $173 in the same area. In Lethbridge, a small group of higher quality steers weighing just over 800 lbs. dropped the gavel at $214; however, 800- to 825-lb. steers were actively trading hands from $200 to $207 across the Prairies.

Auction markets have experienced a surge in calf volumes over the past couple of weeks, which has caused the market to be quite variable in the lighter weight categories. In southern Alberta, red steers averaging 587 lbs. were quoted at $229; in central Alberta, Simmental-blended heifers averaging 610 lbs. sold for $197. Saskatchewan and Manitoba calf markets were trading $2-$5 below Alberta prices this week. Buyers were quite aggressive on feeders in the heavier weight categories but subdued interest was noted for calves under 700 lbs.

— Jerry Klassen manages the Canadian office of Swiss-based grain trader GAP SA Grains and Produits Ltd. and 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.

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,

Columnist

Jerry Klassen manages the Canadian office of Swiss-based grain 
trader GAP SA Grains and Produits Ltd., and is president and founder 
of Resilient Capital specializing in proprietary commodity futures trading and market analysis. Klassen consults with feedlots on risk management and writes a weekly cattle market commentary. 
He can be reached at 204-504-8339.

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