Klassen: Feeder market lacks buying interest

In a market profile, trader Peter Steidlmayer clarified that markets go up because there is no selling and markets go down because there is no buying. Western Canadian feeder markets were a perfect example of this market theory, as prices experienced a week-over-week decline of $10-$15.

Feedlot operators once again sat on their hands with the overall crowd in shock of current values. One can’t fault this sentiment, with losses continuing to abound in the feeding sector. Alberta packers were buying fed cattle in the range of $130-$133, approximately $10 below breakeven pen closeouts. Despite the weaker Canadian dollar, demand for yearlings was subdued, with live cattle futures dropping sharply early in the week.

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The depreciating markets were quite variable across the Prairies. Throughout the slide, genetic traits were overlooked; buyers heavily discounted flesh levels and health attributes, adding further havoc to the environment. Buyers’ remorse was common as lower prices preceded even lower values. Cattle feeders soon realized there was little competition even among larger crowds. Large-frame mixed steers with lower flesh levels averaging 900 lbs. sold for $143 in central Alberta. Farther south, 800-lb. Charolais-cross medium-flesh 800-lb. steers were quoted at $155.

Feature calf sales were noted this week. After a quiet fall, auction barns in Manitoba and Saskatchewan sprang into activity with larger numbers available. Mixed steers weighing just over 600 lbs. reached up to $172 in southern Manitoba but quality larger-frame calves weighing 550 to 600 lbs. were quoted from $162 to $168. U.S. buyers were more active this week, which was supportive in the eastern Prairie markets. Order buyers had a difficult time keeping track of values, stating that Alberta prices were a slight discount at times compared to Manitoba and Saskatchewan.

Alberta and Saskatchewan placements during September were down 19 per cent from year-ago levels. These data suggest the market has a fair amount of feeder cattle to work through over the next couple months. Unless we see improvement in the feeding margin structure, feedlot operators will continue to be reluctant buyers.

Jerry Klassen is manager of the Canadian office for Swiss-based grain trader GAP SA Grains and Produits. He is also president and founder of Resilient Capital, which specializes in proprietary commodity futures trading and commodity market analysis. Jerry owns farmland in Manitoba and Saskatchewan but grew up on a mixed farm/feedlot operation in southern Alberta, which keeps him close to the grassroots level of grain and cattle production. Jerry is a graduate of the University of Alberta. He can be reached at 204-504-8339.

About the author

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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