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Klassen: Feeder market enters summer doldrums

Feed grain prices seen as supportive for feeders this fall

| 2 min read

By Jerry Klassen

(Photo courtesy Canada Beef Inc.)

Compared to last week, western Canadian feeder cattle markets traded steady to $5 lower on average. Small volumes were available last week, which distorted the price structure. Many feedlot hands will rotate holidays through July; therefore, feedlot operators don’t want to bring in fresh replacements with a skeleton staff. Recent rains across Saskatchewan and Alberta have improved pasture conditions although forage supplies remain relatively tight and expensive.

The quality of feeder cattle coming on the market was quite variable. Backgrounding operations with higher-quality groups seem to bypass the auction barns these days, with direct sales to finishing feedlots. This made the yearling market hard to define. Alberta packers were buying fed cattle at $238 on a dressed basis, down $7 from last week. While nearby margins are under pressure on unhedged cattle, feedlot operators are quite aggressive in the lighter weight categories. It looks like 2020 first-quarter beef production will come in slightly lower than the first quarter of 2019. The price outlook six to eight months forward looks more positive, which is when these 600-lb. feeders will hit the fed market.

In central Alberta, a small group of black medium-frame heifers weighing just under 850 lbs. were quoted at $160; mixed medium- to larger-frame tan and mixed steers weighing 825 lbs. were valued at $180. In central Saskatchewan, a small group of Angus-blended steers weighing 710 lbs. were quoted at $195. In southern Manitoba, mixed steers weighing 535 lbs. were quoted at $216 while mixed heifers averaging 520 lbs. were reported at $190. The markets were characterized by small groups with various features.

Canadian farmers seeded 7.4 million acres of barley, according to Statistics Canada, up from the 2018 planted area of 6.5 million acres. Using an average yield of 65 bushels per acre, production has potential to finish near 9.5 million tonnes, up from 2018 output of 8.4 million. The U.S. Department of Agriculture reported corn acres at 91.7 million, above the average trade estimate of 87 million. Feed grain supplies will not be as tight as earlier anticipated. This should be supportive for feeder cattle prices this fall.

— 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.