Klassen: Fed cattle market leads feeders higher

(Photo courtesy Canada Beef Inc.)

Alberta packers were buying fed cattle in the range of $280-$282 delivered on a dressed basis, which equates to $168-$171 on a live basis. Yearlings bought last summer are bringing back $150-$180 margin, which has reinforced buying enthusiasm. Western Canadian yearlings traded $3 to as much as $8 above week-ago levels; calves were relatively unchanged although feature groups traded $2 to $5 higher.

Overall volumes were limited, but the environment prognosticates a charged atmosphere for the upcoming week. Feeder cattle are looking much better after Old Man Winter shaved off excess flesh, especially on calves. Order buyers are fielding a plethora of calls, with many feedlots just inquiring on the market dynamics. The western Canadian cash trade has divorced from feeder cattle futures, resulting in a precarious predicament for any operator looking for risk management.

In central Saskatchewan, larger-frame Charolais-cross yearlings averaging 905 lbs. were quoted at $192. In southeastern Saskatchewan a small group of larger-frame tan steers weighing just over 700 lbs. traded for $216. Black heifer calves weighing 670 lbs. were quoted at $212 in the Lethbridge area; mixed Angus steers weighing just over 700 lbs. were quoted at $220 in the same area. The heavier calves gained on the lighter weight categories. Smaller groups of feeders were discounted $4-$6 off major feature sales.

U.S. feeder cattle markets were also traded $3-$5 above week-ago levels. It appears the futures market may be lacking commercial buying activity, which has resulted in limited support as speculative funds liquidate long positions. It’s also the beginning of the year, when the funds tend to rebalance their portfolios. In any case, one cannot justify or explain every move in the futures market.

— Jerry Klassen manages the Canadian office of Swiss-based grain trader GAP SA Grains and Produits Ltd. and is president and founder of Resilient Capital, specializing in proprietary commodity futures trading and market analysis. Jerry consults with feedlots on risk management and writes a weekly cattle market commentary. He can be reached at 204-504-8339.

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