Klassen: Fed cattle prices supporting calf market

(Photo courtesy Canada Beef Inc.)

Alberta packers were buying fed cattle in the range of $139 to $140 last week, up $1 to $2 from seven days earlier. Strength in the nearby fed cattle market along with the recent rally in the live cattle futures has been supportive for calves under 600 pounds.  Compared to last week, Western Canadian yearling prices were steady to $3 lower, calves from 600 to 800 pounds were relatively unchanged while calves under 600 pounds appeared to trade steady to $3 higher on average.  Yearling demand is rather sluggish this time of year with most feedlots comfortable with their overall ownership. There is a risk adverse sentiment in the heavier weight categories. The potential for profitability increases moving down the weight scale because U.S. beef production will experience a year-over-year decline in the latter half of 2021.

Favorable weather over the past week in Alberta also contributed to the firmer tone for light calves. There have been some very good prices for bred heifers over the past couple weeks. It appears that the cow calf producer is optimistic for the future and the low interest rates have spurred on demand for expansion in some areas.  Major feedlots are stepping forward early for grassers because these cattle are expected to be “red hot’ next spring.

Angus blended heavier flesh steers weighing just over 1000 pounds were valued at $163 in Central Alberta last week; In Southern Alberta, mixed steers medium frame heavier flesh steers averaging 860 pounds were valued at $173 and similar quality heifers averaging 850 pounds were quoted at $163. In Central Saskatchewan, tan steers with medium flesh averaging 925 pounds were valued at $169.

The calf market was quite variable across the prairies depending on quality features. In Central Alberta, tan mixed steer semi weaned calves with full health program and age verified weighing 635 pounds reportedly sold for $196; In Manitoba, black mixed steers with limited details averaging 655 pounds were valued at $185. In Southern Alberta, a larger group of Black vaccinated age verified unweaned steers weighing 520 pounds reached up to $237 and similar quality heifers were quoted at $202. In Central Saskatchewan, Charolais blended unweaned steers averaging just over 550 pounds were valued at $220.

The feeder market is in a transition stage and 60 to 90 days from now I believe we’ll see a very different price structure. Yearlings will remain soft into January; there is no doubt about it. I believe the trade is looking for higher fed cattle prices in 2021 from July forward which will bode well for the feeder cattle market next spring.

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 or via his website at ResilCapital.com.

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