Klassen: Weaker feedgrain values support feeders

Jan. 18 — The bearish U.S. Department of Agriculture corn report had a positive effect on the North American feeder cattle complex. Prices in the U.S. southern Plains were quite strong and feedlots appear to have renewed optimism. Lightweight feeder cattle under 600 pounds sold for $4-$6 per hundredweight (cwt) higher than last week.  In some areas, calves under 500 pounds were $10/cwt higher.

In Western Canada, feeder cattle were trading $2-$4 higher than last week. Barley prices were virtually unchanged but lower values were experienced for DDGS and alternate imported feed sources. Stronger feeder and live cattle futures also contributed to the firmer tone.

Demand for grass cattle is starting to come forward from regions that have sufficient hay and other forages. However, this is rather surprising, given the current time of year. Comments from the industry reflect that feedlot operators are not realizing the efficiencies on cattle that were marginally backgrounded this past fall. This is frustrating for the buyers, but the market is being more forgiving for fleshy-type cattle.

The U.S. fundamentals are tightening for feeder cattle. This past winter, U.S. prices were at a discount to the Alberta market but should change over the next couple of months. Prices in Nebraska and Iowa should increase and attract feeder cattle from Manitoba and eastern Saskatchewan. In the spring of 2008, feeder cattle exports were very strong, despite the Canadian dollar trading at a premium to the U.S. The market should move into a similar price structure, encouraging the export program.

— Jerry Klassen is a commodity market analyst in Winnipeg and maintains an interest in the family feedlot in southern Alberta. He can be reached by email at [email protected] 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 decisions 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.