Klassen: Feeder cattle drop on cautious feedlot demand

Western Canadian feeder cattle markets traded $3 to as much as $8 below week-ago levels as feedlot managers anticipate growing beef supplies during the late spring and summer.

Heavier weight categories absorbed the brunt of the selling pressure, with backgrounding operators liquidating fall-placed calves. Certain groups of higher-quality heifers held value with the purpose of herd replacement; market reports also noted a narrowing of the heifer/steer spread. Spurts of buying interest for grass-type cattle was temporarily supportive, but failed to stem the downward momentum. Major feedlots were focusing on shorter-keep cattle rather than calves; therefore, feeder steers and heifers experienced vacuums at times with limited demand. A defensive tone was noted and no feedlot operators felt it necessary to put their heads on the block this week. There remains a need to sharpen pencils and extend this streak of positive margins.

Larger-frame medium-flesh 860-lb. tan steers were quoted at $165 in central Alberta; however, medium-frame mixed steers averaging 850 lbs. were quoted from $160 to $162 across the Prairies. Mixed heifers averaging 850 lbs. were priced from $145 to $152 across the Prairies. Larger-frame medium- to lower-flesh Angus-based heifers averaging 700 lbs. were quoted at $160 in central Alberta. In eastern Saskatchewan and Manitoba, mixed steers averaging 550 lbs. were readily selling in the range of $197 to $202 while similar-weight heifers were quoted from $170 to $175. Southern Alberta values were a slight premium this week, with finishing lots moving a fair amount of fed cattle over the past couple of weeks. A larger group of higher-quality 600-lb. steers traded for just over $200.

Alberta packers were buying fed cattle from $158 to $160 this past week and there are ideas that these cattle will move within two weeks. U.S. packers are also short-bought so the fed market has a firm tone for nearby delivery. Feedlots continue to digest last week’s U.S. Department of Agriculture report showing the surge in second-quarter beef production, so there is some fear that the positive margins situation will quickly erode at some point.

— Jerry Klassen is manager of the Canadian office for Swiss-based grain trader GAP SA Grains and Produits. He is also president and founder of Resilient Capital, which specializes in proprietary commodity futures trading and commodity market analysis. Jerry owns farmland in Manitoba and Saskatchewan but grew up on a mixed farm/feedlot operation in southern Alberta, which keeps him close to the grassroots level of grain and cattle production. Jerry is a graduate of the University of Alberta. He can be reached at 204-504-8339.

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