Glacier FarmMedia COVID-19 & the Farm

Klassen: In review and looking forward

Feeder cattle prices in Western Canada have been trending higher throughout 2010. Last week’s prices for cattle weighing over 600 pounds are up 25 per cent in comparison to December of 2009 while lighter weight cattle are up 30-40 per cent over year-ago levels. Prices have gone from 10-year lows to historical highs within a 12-month period.

Beef production is very similar to year-ago levels but the economic recovery has been the main factor driving cattle prices higher. Consumer spending is coming back onstream to pre-recession levels, enhancing domestic beef demand, while offshore exports are also up sharply.

Looking forward, the feeder market will move through a transition stage in the latter half of 2011. Instead of demand pulling prices higher, a tighter supply equation will be the main focus as consumer spending levels off. Supply-driven rallies can be extremely volatile; therefore, cow-calf producers should not get complacent thinking these prices are going up forever. 

We are seeing light-weight feeders move off small grain pasture in the southern U.S. Plains. These cattle usually move into feedlots in late March or April. There will likely be an abnormal shortage of U.S. feeder cattle at this time. Feedlot margins look quite favourable into the second quarter and feedyard managers will want to keep lots full. These two factors should keep feeder cattle well supported over the next three to four months.

I’ve had a few inquiries in regards to purchasing cows and bred heifers. While I was recommending building up herds last year, current prices are relatively fair-looking at a long-term average. Produces need to ask themselves how long they plan to be in the business to justify current expenditures.

— 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] or 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.

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