Feeder cattle prices in Western Canada were expected to start last week on a softer tone, due to the bearish U.S. Department of Agriculture cattle on feed report. However, replacement cattle traded $2 to $4 higher on average, with solid demand for all weight categories. Steer calves weighing just over 600 pounds brought back $148 in central Alberta, while in southern Alberta 800-lb. steers reached $126 per hundredweight.
Major feedyards continue to show strong buying enthusiasm as favourable margins are expected into the summer months. Alberta fed cattle traded $1 to $2 higher, reaching $105, and this strength spilled over into the feeder market.
The USDA cattle inventory report showed the U.S. cow-calf operator remains in a modest contraction phase. Total beef cows as of Jan. 1 were down two per cent from year-ago levels; heifers over 500 lbs. for beef cow replacement were down five per cent; heifers over 500 lbs. and expecting to calve were down seven per cent. The total 2010 calf crop came in at 35.684 million head, down a meagre one per cent or 255,000 head from 2009. Canadian live cattle and beef exports to the U.S. should increase in 2011 due to lower U.S. cattle numbers.
U.S. slaughter cow prices have gained approximately $10/cwt over the past three weeks and Canadian prices should also move higher longer-term. Bred heifers are selling for $1,000 to $1,200 and I feel this is fair value given the current environment.
Retailers and restaurants are starting to feel the pinch of stronger wholesale beef values. Certain fast food chains are talking of increasing menu prices, which is a positive signal longer-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] or 204-287-8268 for questions or comments.