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Klassen: Friendly beef price outlook supports feeder market

Compared to last week, yearling prices were $2 to as much as $5 higher, while calf markets traded $3-$7 above week-ago levels. The yearling run is coming to a close and feedlots scrambled to secure yearling ownership.

Across Alberta, feature lots of high-quality 900-lb. steers were trading around $190 and this set the tone for all weight classes. Despite the adverse weather in southern Alberta early in the week, buying interest gained momentum, with strong demand surfacing on Thursday through Saturday sales. Feeder cattle exports have improved with the weaker Canadian dollar and eastern Canadian feedlots were quite aggressive in the eastern Prairie regions.

Larger-frame Charolais-cross steers with medium to lower flesh levels just over 950 lbs. sold for $188 in central Alberta while similar-quality heifers weighing 890 lbs. sold for $172. Medium- to larger-frame black medium-flesh steers averaging 860 lbs. sold for $192 in southwestern Manitoba; in east-central Saskatchewan, larger-frame tan heifers weighing around 850 lbs. were quoted at $172. Medium- to larger-frame mixed tan steers weighing 740 lbs. were quoted at $216 in southern Alberta.

Certain auction markets held pre-sort calf sales this past week and markets were extremely impressive. Feedlots were extremely aggressive on the heavier weaned and semi-weaned calves and minimal discounts were noted on unweaned bawlers. Calf prices in Manitoba and Saskatchewan appeared to trade at $3-$7 premium to Alberta markets. Red medium-frame steer calves just over 600 lbs. traded for $225 in southeastern Saskatchewan while similar calves in the Lethbridge region were quoted at $221. Larger-frame Simmental calves weighing 510 lbs. were quoted at $234 in the Lethbridge area.

Outside influences appear to be quite positive for the beef and cattle complex. Wholesale beef prices may have made their seasonal low sooner than anticipated, as demand comes in stronger than expected. U.S. equity markets made fresh record highs over the past week and consumer income levels are rising, bolstering beef demand. The potential Trump tax cuts early next year will cause wages to increase and enhance inflation. Feedlots are factoring in a $15 to $20 rally in fed cattle prices based on current feeder markets.

— 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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