Glacier FarmMedia COVID-19 & the Farm

Klassen: Winter weather provides chills on feeder market

Extremely cold temperatures along with adverse feedlot conditions caused feeder cattle prices to trade steady to $3 per hundredweight (cwt) lower on average last week across Western Canada.

This first blast of winter came as a shock to many feedyards, resulting in limited buying interest for fresh calves. The market was fairly choppy throughout the week but by Friday was factoring a clear risk discount due to higher potential death loss. Demand from U.S. cattle buyers was also hampered by similar conditions.

Alberta packers were buying fed cattle in the range of $126 to $126.50 per hundredweight (cwt), which is about $4 above break-even for most pen closeouts. Wholesale beef prices reached a new yearly high with U.S. choice product touching $203/cwt. The weaker Canadian dollar and stronger seasonal beef demand have supported fed cattle values but haven’t spilled over into the feeder complex.

In east-central Alberta, a group of 50 Charolais-cross steers averaging just over 600 pounds sold for $167/cwt; larger-frame Simmental steers weighing 700 lbs. sold for $150/cwt at the same sale. North of Calgary, a larger group of mixed heifers with an Angus base averaging 625 lbs. sold for $138/cwt. Feather-light calves under 400 lbs. were down as much as $10/cwt, given the wintry-type conditions.

Many feedlot operators are comfortable with their current inventory levels and the market is now sensing the lower buying interest. January and February are periods of slower beef consumption, which will likely cause fed cattle prices to soften.

This could spill over into the feeder market early in 2014 and remember, the June live cattle futures are trading at a $6/cwt discount to the April contract, so there is little incentive to be aggressive on 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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