Klassen: Feeder cattle futures near historical highs

Feeder cattle futures reached over $117 per hundredweight last week on softer corn values and strengthening fed cattle prices. Western Canadian feeder cattle weighing less than 600 pounds were steady to $2 higher last week; cattle weighing 600 to 800 pounds were $1 to $2 weaker while 8-weight feeders were down $2 on average.

Barley prices have moved up to $178, tempering the feeding margin structure. However, feedlot managers are also discounting purchases due to the higher death loss probability. Never sell feeder cattle during the first snowstorm of the year, as the market tends to punish sellers for thinking this is a good opportunity.

Alberta and Saskatchewan feedlot placements were down five per cent in October, which may reflect additional backgrounding from the cow-calf producer. The market actually encouraged producers to hold onto their calves until 800 pounds earlier in fall, but this opportunity is now eroding. Heavier feeder cattle prices are softer while lightweight cattle are strengthening.

April live cattle futures made new contract highs which could result in the Alberta fed market reaching over $102/cwt in early spring. Beef production is larger than anticipated but consumer demand has exceeded expectations. Choice wholesale beef prices are $17/cwt higher than last year and we may see additional upside as beef supplies decline in December.

U.S. cattle on feed 120 days or longer are rather tight and the fed market looks firm into the March timeframe due to strong Canadian exports. Feedlot operators have experienced positive margins for about eight months and with feedlot inventories at five-year lows, I anticipate very strong buying interest for feeder cattle in December.

— 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] or 204-287-8268 for questions or comments.

The material contained herein is for information purposes only and is not to be construed as an offer for the sale or purchase of securities, options and/or futures or futures options contracts. While the information in this publication cannot be guaranteed, it was obtained from sources believed to be reliable. The risk of loss in futures trading can be substantial. The article is an opinion only and may not be accurate about market direction in the future. Do not use this information to make buying or selling decision because adverse consequences may occur. This information may be wrong and may not be correct about current market conditions in all areas of Canada. This is an opinion only and not based on verified facts.

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