Klassen: Feeder market showing strength in deferred positions

Compared to last week, western Canadian yearling prices were $3-$5 lower on average while calves traded steady to $4 lower. Outside central Alberta, the steer-heifer spread appeared to widen by $2-$4.

Strength in corn futures contributed to the defensive tone. Feedlot operators buying hand-to-mouth have been caught off guard with the recent jump in feed grain prices. Alberta packers were buying small volumes of fed cattle and the backlog of market-ready supplies appears to be building; therefore, some major operations were on the sidelines last week, lowering the purchasing competition. Ontario and U.S. buyers were quite aggressive on certain genetics such as Limousin and Charolais blends. Premium packages stood out from the crowd but didn’t spark spillover excitement. At this stage, feedlots are locking in all legs of the margin structure when purchasing feeder cattle. Risk tolerance is nil.

In the Lethbridge area, Charolais-based steers with limited butter weighing a shade under 900 lbs. dropped the gavel at $185; Angus-blended steers with medium to lower flesh levels weighing 810 lbs. were quoted at $193; medium-frame Hereford heifers with thicker butter averaging 800 lbs. were valued at $169. In central Alberta, Angus-based steers on light grain diet with full health records weighing 890 lbs. were purchased for $185. Northwest of Winnipeg, Simmental mixed steers weighing 835 lbs. were quoted at $184 and Charolais-based heifers weighing 808 lbs. brought in $158.

In central Saskatchewan, black steers averaging 625 lbs. were quoted at $223 and similar-quality and -weight heifers reportedly sold for $187. In the Lethbridge region, tan steers weighing 610 lbs. were quoted at $236 and tan heifers weighing 620 lbs. were valued at $200. In southern Manitoba, Limousin-blended steers weighing 565 lbs. were quoted at $253. Larger groups calves held a $2-$4 premium over average prices in Alberta. Feedlots were slightly more aggressive on local cattle.

For August and September delivery, Alberta yearlings are trading at a $10-$13 premium over nearby cash prices. Margins appear to be more favourable in the deferred positions with December 2022 and April 2023 live cattle futures back up near contract highs. Feedlot demand for calves has supported the lighter weight categories; buying interest for grasser was rather quiet last week.

— Jerry Klassen 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.