Glacier FarmMedia COVID-19 & the Farm

Klassen: Stronger fed cattle prices support feeder market

Alberta packers were buying fed cattle in the range of $123 to $124 per hundredweight (cwt) this week, up $2 in comparison to seven days earlier.

Healthy pen closeouts and stronger April live cattle futures appeared to renew buying enthusiasm for feeder cattle. Similar to last week, heavier calves were well wanted by larger feedlot operators in an effort to sell into the spring fed market. Feedlot operators remain very sensitive to any deficient quality, demanding discounts for higher-risk calves as wet wintry-type conditions materialize. Buying interest also intensified from U.S. buyers for feeder cattle in Manitoba and eastern Saskatchewan as fed cattle in the U.S. southern Plains traded from US$131 to $132/cwt. The U.S. Department of Agriculture reported a larger group of steers weighing 653 pounds sold for $193/cwt at Green City, Mo.

A smaller group of top-quality larger-framed lighter-flesh Black Angus-based steers with all the right papers weighing just over 700 lbs. sold for $157 landed in a Calgary-area feedlot.

Our Canadian market is not reflecting the strength of the U.S. on cattle under 600 lbs., because babying these light weights adds cost with higher risk. Many small feedlots in Western Canada have closed shop over the past couple of years, given the poor margins in backgrounding cattle. Therefore, the market is encouraging cow-calf producers to background calves into the 700- to 800-pound category.

Wholesale beef prices continue to trade at 52-week highs and it is difficult to project how the consumer will respond moving forward. U.S. poultry production will reach a record high this year and next due to three-year-low feed grain values. Secondly, consumer confidence is stalling and overall spending slowed in the third quarter. Finally, beef production will finish higher than expected this year. These three factors will limit further upside in the wholesale beef market, which has been largely responsible for recent support in cattle prices.

The USDA report was considered neutral for corn and the feed grain complex. However, now that the U.S. corn harvest is wrapping up, it is not uncommon to experience a minor rally in the feed grains. This may cause a defensive tone amongst feedlot operators over the next month when purchasing replacement cattle.

— 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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