Klassen: Feeder cattle market remains firm

(Photo courtesy Canada Beef Inc.)

Western Canadian feeder cattle markets traded $3-$5 above week-ago levels although lighter weight categories experienced week-over-week gains of $8 to as much as $12. The fed cattle market went through a correction, with live sales quoted from $181 to $186, down from the last week average trade of $195.

This weaker live cattle trade appeared to pull the reins on the feeder cattle market, although feedlot operators continued to send “just get ’em” orders to buyers across the Prairies. Southern Alberta markets appeared to hold a premium over other regions of Western Canada but late in the week, the arbitrage opportunities were evaporating, with strong gains noted in the non-major feeding regions.

Feeder cattle supplies are dwindling this time of year, and buyers had to pay up for quality groups of yearlings in all markets. Heavier calves also surged higher as buyers looked to these groups as the second option. The farmer/cattle producer shopping for grassers had no chance with feedlot margins near record highs; the buying power was overwhelming. Cow-calf operators moving cattle this week walked away shaking their heads in unbelief how markets can change in such a short period of time.

In central Alberta, mixed steers with no special feature just over 650 lbs. reached up to $245; however, in the same region, larger-frame steers just over 600 lbs. traded in the range of $260-$265. Mixed heifers in the same region around 625 lbs. were trading from $215 to as high as $222. Larger-frame Charolais-cross medium-flesh steers just averaging 810 lbs. were quoted at $219 landed in southern Alberta; Simmental-cross heifers averaging 830 lbs. were quoted at $194 in the same region. In west-central Saskatchewan, a small group of 950-lb. steers were quoted at $182.

Feedlot operators have a higher risk tolerance now that margins have been healthy for an extended period of time. Even if fed cattle markets decline, the feeder markets have potential to ratchet higher over the next couple weeks. Feedlots will continue to scramble for available quality cattle. Weekly U.S. beef production is coming in lower than anticipated as marketing weights continue to decline. Adverse feedlot conditions due to excessive moisture continue to wreak havoc on feedlot efficiencies in the U.S. southern Plains and parts of the Midwest. Choice wholesale beef prices closed the week at US$247/cwt and are nearing the 2015 highs.

— 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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