Klassen: Improving margins support lightweight feeder cattle

Compared to last week, Western Canadian feeder cattle markets traded $2 to $4 on either side of unchanged; however, calves under 650 pounds were steady to as much as $5 higher. Bids from Alberta packers were sharply higher with fed cattle trading in the range of $160 to $162 on Friday, up $5 to $6 from seven days earlier.

Feedlot operators report that breakeven pen closeout values from January through March are in the range of $154 to $160.  Short keep replacements were rather firm because these cattle will come on the fed market in late winter or early spring. Calves weighing 650 to 800 pounds were quite variable. Yearling prices tend to be quite sluggish during the first quarter and beef supplies will be quite burdensome during the summer of 2020. Buyers were shy to extend length of mid weight categories and backgrounding operators are full. Pen space for backgrounding calves is at a premium; it’s very hard to find. Calves under 650 pounds with some type of preconditioning are now trading near 52 weeks highs and prices for feather light bawlers are red hot.

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In Central Alberta, larger frame fleshier Charolais blended steers weighing just over 900 pounds traded at $191 while medium to larger frame black heifers with heavier butter averaging 895 pounds were valued $173.  Supplies of yearlings are limited, especially in Manitoba and Saskatchewan so the market was hard to define; smaller groups were discounted $2 to $4. In Central Saskatchewan, mixed medium frame, fleshier steers weighing 850 were quoted at $182.    In Southern Alberta, Simmental based medium flesh steers weighing 775 pounds were quoted at $196 landed in the feedlot while angus based vaccinated 640 pound steers were quoted at $207.

In Southern Saskatchewan, red white faced steers weighing 520 pounds were valued at $230 whereas in Southern Alberta, 525 pound tan mixed steers were quoted at $237. In Southern Alberta, mixed steers weighing 490 to 510 pounds were readily selling in the range of $238 to $245. In Central Alberta, black steers weighing just over 400 pounds sold for $276 and similar quality heifers were quoted at $220.  The market for lighter weight steer calves under 500 pounds is incorporating a sharp risk premium because yearling supplies next fall will be very snug. Buyers are starting to shop for grassers early this year.

Feedlots are preparing for their holiday schedules with skeleton crews maintaining many operations over the Christmas period. Feedlots didn’t want to bring in high maintenance calves but the strong market for these lighter calves definitely attracted the crowd. We’re heading into January with firm momentum.

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.

About the author

Columnist

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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