Klassen: Feeder market jumps on optimistic outlook

feedlot
(Photo courtesy Canada Beef Inc.)

Western Canadian yearling prices were slightly softer during the second week of July, due to the historical high weekly marketings of feeder cattle south of the border; however, the market fully recovered last week.

Feeder cattle prices tend to make a seasonal high in late July and this year is no exception. Market reports in Alberta had higher quality 900-lb. steers trading just under the psychological $200 level. Yearling prices jumped $7 to as much as $10 last week, recouping all slippage from earlier in July. There appears to be an optimistic outlook for fourth-quarter fed cattle prices, which has enhanced buying enthusiasm for shorter-keep replacements. February live cattle futures are within a stone’s throw of contract highs and the upward trend remains intact. Despite drier conditions in some pockets of Western Canada, above-average yields are expected for Canadian barley and U.S. corn crops.

Most auction barns remain in summer holiday mode and there are limited supplies coming on the market. In central Alberta, a small group of mixed steers weighing just over 900 lbs. sold for $198. Small groups of steers averaging around 850 lbs. were selling in the range of $202-$207 in the same region.

The calf market was hard to define, given the smaller numbers available. Buyers shied away from the lighter weight categories with extensive heat plaguing the Prairies. Small groups of steers weighing 500-600 lbs. in southern Manitoba were quoted from $210-$222. Angus-based steers averaging 600 lbs. were quoted at $223 landed in southern Alberta while mixed red heifers averaging around 650 lbs. were quoted at $196 in the same area.

The Canadian consumer price index experienced a year-over-year increase of 2.5 per cent during June, which was above expectations. Stronger inflation may lend credence to another interest rate hike from the Bank of Canada in September. Look for a stronger Canadian dollar over the next couple weeks, which will overhang Canadian fed and feeder cattle markets.

— 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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