Klassen: Strong beef prices spill over into feeder market

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Published: May 24, 2015

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(Canada Beef Inc. photo)

U.S. wholesale beef prices surged higher this past week as stronger retail and restaurant demand absorbed the larger beef stocks in storage. Alberta packers’ average purchase price was $202.50 and with pen break-even closeout prices near $188, the healthy margin structure renewed buying confidence in the feeder market.

All weight categories experienced a stronger tone, with cattle under 600 pounds showing the most notable increases. Supplies are limited at this time of year, which caused heifers to gain on steers in the 700-lb.-plus categories. Smaller strings of steers weighing 700 to 750 lbs. readily traded in the range of $280 to $290 in southern Alberta. Buying interest has resurfaced for grassers, with many farmers and feedlots in the final stages of seeding. In southern Manitoba, smaller batches of steers just over 500 lbs. reached up to $360. Saskatchewan values were a bit softer with many sales barns experiencing minimal numbers, making the market hard to define.

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Prices in the deferred months were slightly firmer due to the stronger October feeder cattle futures and softer Canadian dollar. Buying indications for 900-lb. steers for September delivery were hovering near $235.

Feeder cattle exports to the U.S. have slowed. For the week ending May 9, year-to-date exports were 200,074 head, up only two per cent over the same period of 2014. U.S. feedlot margins are nearing break-even, which is resulting in softer demand. Cattle feeders south of the border are counting on larger feeder cattle supplies in the fall period, given the year-over-year increase in the 2014 calf crop. This could be a major turning point in the feeder market, stemming the upward momentum.

Barley and feed wheat prices remain under pressure, which is mildly supportive for feeder cattle. Grain markets are starting to focus on crop conditions, with many regions of the Prairies experiencing dryer conditions while the U.S. Midwest has received timely rains.

Jerry Klassen is a commodity market analyst in Winnipeg and maintains an interest in the family feedlot in southern Alberta. He writes an in-depth biweekly commentary, Canadian Feedlot and Cattle Market Analysis, for feedlot operators in Canada. He can be reached by email at [email protected] for questions or comments.

About the author

Jerry Klassen

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Jerry Klassen analyzes cattle, feed grain and currency markets for Canadian cattle producers. To subscribe to his weekly market outlook or consulting services, contact him at 204-504-8339.

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