Klassen: Feeder prices grind lower

March 8 — Cash feeder prices in Western Canada have been grinding lower over the past week despite stronger demand from the feedlot sector. The market continues to struggle due to the strength in the Canadian dollar and slower export pace.

However, exports should start to pick up later in March as the U.S. market is showing a strong enough premium to pull Canadian feeder cattle south. The U.S. feeder market incorporated a risk premium due to the adverse weather during February. The market is holding up very well now that weather conditions are more favourable and feedlot margins are showing positive numbers for the next quarter. The main feeding regions in the U.S. Midwest and the southern Plains experienced record snowfall. U.S. fed cattle were selling 15 to 20 pounds lighter than normal in February and this has caused first quarter beef production to be lower than expected.

Table 1. Feeder cattle prices, steers, week ending March 3 (US$/cwt)

Documentation regarding age verification, vaccination and premises ID data is becoming more important to enhance feeder cattle exports and satisfy U.S. buyers. Look for the feeder market to trade sideways in March, with stronger slaughter prices supporting the overall cattle complex. Corn and feedgrain values could strengthen based on seeding delays in parts of the U.S. and this will temper the upside during April.

The spring thaw in the northern half of the U.S. is going to cause problems with logistics; therefore, the feeder market could be more volatile than normal during the spring period. There is twice as much snow as last year in the U.S. northern Plains. which will limit buying interest from south of the border. Grass conditions in eastern Alberta and western Saskatchewan are forecast to be dryer during spring, limiting demand for grass cattle in this region.

— 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 Western Canada. He can be reached by email at [email protected] or by phone at 204-287-8268 for questions or comments.

The material contained herein is for information purposes only and is not to be construed as an offer for the sale or purchase of securities, options and/or futures or futures options contracts. While the information in this publication cannot be guaranteed, it was obtained from sources believed to be reliable. The risk of loss in futures trading can be substantial. The article is an opinion only and may not be accurate about market direction in the future. Do not use this information to make buying or selling decision because adverse consequences may occur. This information may be wrong and may not be correct about current market conditions in all areas of Canada. This is an opinion only and not based on verified facts.