Klassen: Feeder market bounces on optimistic outlook

Feed barley remains near historical highs

Compared to last week, western Canadian yearling prices traded $2-$4 higher; prices for mid-weight calves were quoted $4-$8 above week-ago levels. Calves under 550 lbs. traded $6 to as much as $10 higher compared to seven days earlier.

Improving feedlot margins were the main factor driving the feeder market. June and August live cattle futures each made a fresh contract high last week and fed cattle basis levels for the summer months appear to be quite strong. Demand surged for all weight categories and quality yearling packages in Alberta were actually $6-$8 higher than last week. Calves were very well bid in the eastern Prairie regions with certain pockets in Manitoba trading $8-$10 above week-ago levels. Flesh discounts were not as severe last week but buyers wanted replacements on a full health program.

Cow-calf producers appear to be doing a good job of weaning or semi-weaning calves this year. Comments suggest we’re not seeing many groups straight off their mothers, which is supportive for the overall market. Sellers are not bringing vulnerable cattle to auction during adverse weather. A few minor details can make a big difference in the market structure. Buyers tend to congregate where there are better-quality cattle.

In east-central Alberta, medium-frame red mixed heifers with thicker butter on grain ration weighing 930 lbs. were quoted at $158 and larger-frame black steers weighing 950 lbs. were valued at $177. In southern Alberta, larger-frame Simmental blended steers averaging 870 lbs. were quoted at $181 landed in the feedlot. In Manitoba, Charolais-based steers weighing just over 800 lbs. were quoted at $189 and northwest of Winnipeg, mixed steers averaging 950 lbs. were quoted at $165.

In southern Alberta, Angus-based weaned steers on full health program weighing 625 lbs. were valued at $212 and similar-quality heifers averaging 650 lbs. were quoted at $188. In central Alberta, semi-weaned tan steers with health program weighing just over 500 lbs. were valued at $240. Southeast of Saskatoon, black steers averaging 540 lbs. were reported at $226 and similar-quality and -weight heifers were quoted at $193.

Alberta packers were buying fed cattle at an average price of $151 f.o.b. the feedlot, unchanged from the previous week; however, feed barley in southern Alberta is trading near historical highs with values quoted in the range of $300-$310 per tonne delivered. Break-even pen closeout prices are around $155, so finishing margins continue to hover in red ink in the short term.

— 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 or via his website at ResilCapital.com.

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,

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Jerry Klassen

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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