Glacier FarmMedia COVID-19 & the Farm

Klassen: Feeder market reveals softer tone

Western Canadian feeder cattle prices were steady to $4 per hundredweight (cwt) lower last week depending on the region.

A slightly softer U.S. feeder market has spilled over into Manitoba and eastern Saskatchewan, while major operations in Alberta are comfortable with current inventory levels, which has limited the buying interest over the past couple of weeks.

Fed cattle continue to trade near 52-week highs but feedlots are hesitant to be more aggressive on replacement cattle as they don’t know how long these positive margins will last. U.S. consumer confidence dropped to a seven-month low and wholesale beef prices are failing to move higher. Larger-than-expected placements in the recent cattle on feed report suggest beef production may be larger than expected next spring. All these factors have resulted in a very cautious attitude among feedlot operators.

A larger mixed group of steer calves averaging 670 pounds sold for $155/cwt in east-central Alberta this week. Demand for calves appears to be stalling, and with certain auction markets advertising major sales in upcoming weeks, there is little incentive to be more aggressive. Top-quality larger-frame Simmental cross steers averaging just over 760 lbs. were quoted at $150/cwt landed in a southern Alberta feedlot. Buying interest for quality replacement heifers was more apparent, but this did little to narrow the steer heifer spread.

It appears the feeder market may have topped out for the time being. We need to see a fundamental shift in the fed cattle market before higher values are realized in the feeder complex. Given the current economic situation and consumer sentiment, this doesn’t appear to be in the near future.

Barley continues to trade in the range of $180 to $185 per tonne delivered Lethbridge and the downside in the feed grain complex appears to be limited. Therefore, the market cannot justify higher values on feeders in the short term.

— 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] for questions or comments.

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