Klassen: Feeder market continues to soften

(Photo courtesy Canada Beef Inc.)

Compared to last week, western Canadian feeder cattle markets traded $3-$5 lower on average with some auctions down $5 to as much as $8. Alberta packers were buying fed cattle on a dressed basis at $258 delivered, down $15 from the April highs.

Feeding margins have slid into negative territory quite rapidly and could be in red in by $200 per head come summer; therefore, feedlot operators lowered bids accordingly. Most auction markets reported lower numbers this past week, which is typical for this time of year. Farmers are busy seeding and many ranchers are in the final stages of calving; however, there’s a fair amount of backgrounded cattle coming on the market and quality groups experienced limited slippage. Some buyers were scratching their heads this week because these yearlings don’t pencil out with the August live cattle futures nearing contract lows.

In central Alberta, a small group of medium- to larger-frame tan mixed steers averaging 925 lbs. with medium flesh levels brought back $174; near Lethbridge, black steers weighing 960 lbs. were valued at $170. East of Saskatoon, larger-frame black mixed steers weighing 835 lbs. were quoted at $186 while their similar-quality sisters averaged 825 lbs. and were valued at $174.

A large portion of central Saskatchewan and eastern Alberta has received less than 40 per cent of normal precipitation over the past 60 days. Many ranchers are worried that pastures will dry up earlier than usual; therefore, feedlot operators were dominating the calf markets this week. Prices were quite variable across the Prairies, with limited demand from south of the border. In southwestern Manitoba, red and black medium-frame steers averaging 575 lbs. sold for $225; red and black heifers weighing just under 550 lbs. were quoted at $195. In central Alberta, Angus-based steers weighing 650 lbs. were valued at $215 and larger-frame Simmental mixed heifers weighing 675 lbs. were quoted at $190.

The feeder market is also receiving the negative spillover effects of the Sino-U.S. trade war. Earlier in April, the media was hyping up African swine fever in China, which was going to drive up the price of North American pork and beef. Rising trade tensions these past two weeks have caused these news stories to evaporate.

— 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.

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